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HMRC internal manual

Tobacco Products Duty

Accounting procedures: Duty deferment: financial security

Financial security for duty deferment is required in the form of a guarantee given by anapproved bank or insurance company. The guarantor can be liable for up to twice the amountshown on the guarantee because before payment is due for the first month anothermonth’s liability can be deferred.

The amount must cover all the TPD duty likely to be deferred in one month on removals fromregistered premises where the monthly liability is £5 million or less.

Traders with a monthly liability of between £5 million and £50 million are permitted tohave a partially secured guarantee. The first £5 million is fully secured but only 10% ofthe balance between £5 million and £50 million need be secured. The following exampledemonstrates the principle.

  • Monthly average TPD liability is £200 million.
  • The first £5 million is fully secured, requiring a guarantee of £5 million.
  • 10 per cent of the liability between £5 million and £50 million (ie £50m - £5m x 10% = £4.5m) is secured, requiring a guarantee of £4.5 million.
  • No guarantee is required for the liability in excess of £50 million.
  • The total guarantee required is, therefore, £9.5 million (ie £5m + £4.5m = £9.5m).

If the trader requests, a single guarantee may cover other excise duties and customsduty. In that case part of the guarantee is allocated to each component, eg TPD, customsduty and VAT. Alternatively one guarantee may be provided for all deferrable TPDliabilities on removal from registered premises, and a separate guarantees for any otherdeferred excise duties, customs duty and VAT.

In either case where the guarantee covers the TPD due on removals from more than oneregistered premises, CDO must be notified of the liability for the individual sites.

At peak trading periods the trader may request extra cover, although an increase in theactual guarantee would only be necessary if it was for less than £50 million.

Traders must keep a separate total of each day’s duty liability and monitor therunning total against their deferment guarantee limit. They should inform you when 90% oftheir permitted monthly liability is exhausted because they will need to use one of thedirect payment methods if the limit is reached.