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HMRC internal manual

Tobacco Products Duty

Manufacture: Production Account

Tobacco products are liable to duty from the moment that they become smokeable. Cigarette rag, for example, is potentially liable to duty even although it is an intermediate product. It is, however, not practicable to make an accurate record of production until after the products have been packed into their final state.

The Production Account Point (PAP) is a precise, clearly defined physical point through which all products must be channelled before they can be removed from the factory. It is the point at which the tobacco products are physically counted and accurately recorded in the production account. Once product has passed the PAP it is deemed to be liable to the duty and is subject to all the conditions and requirements concerning the storage and removal of tobacco products. It follows that tobacco product which has passed the PAP cannot be returned to the production side of the factory.

At a large factory there may be more than one PAP.

The position(s) of the PAP(s) must be identified in the Registration letter. When considering the positioning of the PAP, you should remember tobacco products are very vulnerable to pilferage from the end of the ‘primary process’ onwards. Please also note that completed tobacco product may not be stored before it passes the PAP.

If product disappears prior to being included in the production account, you may have difficulty not only in substantiating a demand for duty but even in establishing the fact of production. You do have powers to demand duty on product calculated to have been produced from materials that were in the manufacturers’ possession (section TPD6070 below refers). This is, however, a very blunt instrument intended for use only in the final resort and where evidence is held that the product involved has been delivered into consumption.

An accurate and complete Production Account can only be achieved if the physical security arrangements in this vulnerable area are fully effective in preventing diversions and in ensuring that all products are channelled past the PAP.

All the above requirements are emphasised because precision at the Production Account stage is fundamental to the whole tobacco products duty control and is the most effective single preventive measure that can be applied. All manufacturers should pay special attention to these requirements and ensure that they are complied with strictly at all times.

The control and accounting arrangements at the PAP are to be agreed with the manufacturer prior to Registration. Any agreed alteration must be confirmed in writing.