What tobacco products you need to pay Tobacco Products Duty on, how to suspend or defer your duty payment, and fiscal marking details.
Tobacco Products Duty is a duty payable to HM Revenue & Customs (HMRC) on most tobacco products manufactured in the UK or brought into the UK. There are exceptions for specific uses, such as scientific research.
This guide explains what products your business has to pay Tobacco Products Duty on if you manufacture or import tobacco products and when you need to pay it. It also explains how the various duty suspension arrangements work, and how you may be able to defer duty payments. It also tells you about the fiscal marking requirements you must meet.
What products Tobacco Products Duty is payable on
If you make or import any of the following tobacco products, you will have to pay Tobacco Products Duty:
- hand-rolling tobacco
- other smoking tobacco, eg pipe tobacco
- chewing tobacco
- cigarette rag and expanded tobacco if it can be smoked without further processing
But you don’t have to pay it on:
- nasal snuff
- herbal smoking products that do not contain tobacco or a tobacco substitute
From 1 January 2014 herbal smoking products will be treated as if they contain tobacco and will be subject to Tobacco Products Duty.
When Tobacco Products Duty isn’t payable
Provided specific conditions are met, Tobacco Products Duty is not due on:
- samples drawn for test by official bodies
- samples drawn for production or quality control
- tobacco refuse, products unfit for sale and returned products, if they are destroyed or rendered unsmokeable in an approved manner
- products used in scientific research
Tobacco Products Duty payments, records and returns
If you manufacture tobacco products in the UK, or bring them into the UK, you must make returns and pay Tobacco Products Duty to HMRC. You must also keep certain records.
You must make payments of Tobacco Products Duty to HMRC when the products become liable to the duty.
Products become liable to the duty when either of the following happens:
- they enter the UK from overseas
- they reach a smokeable condition in the course of manufacture
These events are known as ‘duty points’.
If your goods are kept in a registered warehouse, store or factory, you can use ‘duty suspension arrangements’. This means that you can pay the duty at a later stage, for example, when they leave a registered store for distribution to the UK market. See the section in this guide on duty suspension arrangements for tobacco products.
When to pay the Tobacco Products Duty following duty suspension
If duty suspension arrangements apply to your goods, then you must pay the duty to HMRC when the products reach the duty point - for example, when they leave a registered store for distribution to the UK market.
How to delay payment - duty deferment accounts
If you have a duty deferment account with HMRC, you can put off payment of Tobacco Products Duty for one calendar month after they pass a duty point. You will need to apply to HMRC to open a duty deferment account and you will have to provide financial guarantees.
If your business is liable for Tobacco Products Duty, you must keep certain financial, business and other records.
If you are a manufacturer of tobacco products, you must also keep additional records relating to products and materials.
You must make returns of Tobacco Products Duty due to HMRC using form TP 7 on any day when tobacco products are released onto the UK market, unless you have a duty deferment account and HMRC has agreed that you can submit form TP 7 on a monthly basis.
Rates of Tobacco Products Duty
Tobacco Products Duty is charged by the kilogram for cigars, hand-rolling tobacco, other smoking and chewing tobacco. Each of these product types has a specific rate.
Tobacco Products Duty on cigarettes is worked out from a percentage of the retail cost of the cigarettes, plus a specific amount per thousand cigarettes.
Tobacco Product Duty rates from 19 March 2014
Cigarettes 16.5% of the retail price plus £184.10 per thousand cigarettes
Cigars £229.65 per kilogram
Hand-rolling tobacco £180.46 per kilogram
Other smoking tobacco and chewing tobacco £100.96 per kilogram
Other tobacco products, such as shisha, gutka or blunt wraps, are also liable to Tobacco Products Duty.
HMRC intends to treat herbal smoking products such as herbal cigarettes and herbal shisha, as if they contained tobacco. A consultation document will be published shortly to help determine how this change will be introduced.
Handling rate increases for Tobacco Products Duty
When there is a rate increase, any products passing a duty point on or after midday on the day of the increase are liable to the higher rate of duty.
There are limits to how many cigarettes can be removed from duty suspension arrangements in the period before a Budget. These are known as ‘anti-forestalling’ measures.
In the restricted period, you are only permitted to remove a certain number of cigarettes from duty suspension onto the UK market - known as your ‘allocation’.
Duty suspension arrangements for tobacco products
Duty suspension allows you to pay your Tobacco Products Duty at a later stage, which may help your cashflow. If you manufacture, distribute or import tobacco products in the UK, you may store them duty-suspended in:
- your registered factory premises if you’re a manufacturer
- your own store if you have registered it as a ‘registered store’ with HMRC
- an excise warehouse if they’re intended for the UK market
If you are a manufacturer and have a registered store, you may also store other products in your registered store under duty suspension if they are:
- received from other UK manufacturers into your ownership
- brought into the UK from other countries
Using excise warehousing
You can store all tobacco products - apart from cigarettes or hand-rolling tobacco intended for the UK market - in an excise warehouse, unless they are intended for duty-free purposes, such as:
- export shops
- supply to embassies within the UK
- visiting forces
- ship or aircraft stores
Pre-Budget Day restrictions on removing cigarettes from duty suspension
There are limits to how many cigarettes can be removed from duty-suspension arrangements in the period before a Budget. These are known as ‘anti-forestalling’ measures. In the restricted period, you are only permitted to remove a certain number of cigarettes from duty suspension onto the UK market - known as your ‘allocation’.
Manufacturing tobacco products in the UK
If you wish to manufacture tobacco products in the UK, other than purely for the purpose of research or experiment, you must register your premises for the manufacture of tobacco.
If you think your intended manufacture falls within the scope of research or experiment, you should contact HMRC in writing.
In both cases, you will need to provide detailed information about your business premises and your planned operations.
You may also want to register premises as a ‘registered store’ for the duty-suspended storage of manufactured tobacco products. You can find out more about duty suspension in the section in this guide on duty suspension arrangements for tobacco products.
If you manufacture cigarettes or hand-rolling tobacco that will be released into the UK market, they will need to carry fiscal markings. Read more in the section in this guide on fiscal markings for tobacco products.
Bringing tobacco products into the UK from overseas
If you want to bring tobacco products into the UK from another country in the course of your business there are several different ways you can proceed. Which way is best for you depends on what country the products are coming from, and how often you expect to bring products into the UK.
Fiscal marking requirements
If your business imports tobacco products into the UK, you should also be aware of the legal requirements for fiscal markings on cigarettes and hand-rolling tobacco. You can find out more in the section in this guide on fiscal markings for tobacco products.
Occasional imports of tobacco in duty suspension from other EU countries
If you only import tobacco products that are in duty suspension from other EU countries on a one-off or infrequent basis, then you can apply to HMRC to become a Temporary Registered Consignee. You must do this for every consignment, and you must follow the procedures for Registered Consignees.
You will also have to pay the duty to HMRC in advance.
Regular imports of tobacco products in duty suspension from other EU countries
If you regularly bring tobacco products in duty suspension into the UK from other EU countries you can do one of the following three things:
- apply for approval as a Registered Consignee
- use the services of a Registered Consignee acting on your behalf who will import them for you
- use the services of an authorised warehousekeeper who receives goods on your behalf into duty suspension in an excise warehouse approved to receive imports
If you are a manufacturer and you have a registered store, you may also receive tobacco products from other countries into your registered store under duty suspension.
If you use a Registered Consignee, they are not allowed to store or dispatch excise goods in duty suspension. They must account for the excise duty due on the goods as soon as they are received. So if you are approved as a Registered Consignee yourself, you will also have to pay the excise duty on receipt of the goods.
Importing duty-paid tobacco products from other EU countries
If you wish to import tobacco products that have been released for consumption in another EU country (and are therefore classed as duty-paid goods) into the UK on a commercial basis, you can either:
- if you are approved as a Registered Commercial Importer, follow the appropriate procedures - duty payments can be deferred
- follow the procedures for the standard scheme for unregistered Commercial Importers to import duty-paid goods into the UK - but any UK duty liability must be paid in advance
Importing tobacco from outside the EU
If you want to import tobacco from outside the EU, it becomes liable for UK excise duty when it reaches the UK. However, the excise duty won’t be payable at that point if one of these applies:
- it is delivered to an excise warehouse approved for that purpose
- you are a registered manufacturer and you receive tobacco into your registered store
You can find out more about duty suspension in the section in this guide on duty suspension arrangements for tobacco products.
Customs Duty and VAT
For any tobacco products brought into the UK, you will also have to follow procedures regarding the payment of Customs Duty and VAT.
Fiscal markings for tobacco products
The following specified tobacco products, if imported into or manufactured in the UK, must contain a fiscal mark indicating that UK duty has been paid:
- hand-rolling tobacco (but see below for exception)
Exceptions from fiscal marking
Any hand-rolling tobacco intended for retail sale in loose form and supplied by the manufacturer or importer in packets containing 500 grams or more must not carry a fiscal mark.
Any other tobacco products must not carry a fiscal mark.
Tobacco products which are not released into the UK market must not carry a fiscal mark, such as products intended for:
- ships and aircraft stores
- sale in export shops to travellers to third countries
You can find out more about these uses in the section in this guide on tobacco products and airlines, ships, export stores and duty-free shops.
Tobacco products must not carry a fiscal mark if the rules for duty relief are followed and they are:
- imported for personal use
- for supply to entitled international organisations and diplomatic missions
- for sale to visiting forces
There are also specific exceptions for products released for use in the Isle of Man.
When the fiscal mark must be applied
If you manufacture any of the specified products in the UK and none of the exceptions apply, they must be marked when they are packaged and before they leave your registered factory.
If you import any of the specified products into the UK and none of the exceptions apply, they must be marked before they enter the UK. It’s your responsibility to ensure that your supplier understands the significance of the fiscal mark and that they ensure that any specified tobacco products sent to you carry a compliant fiscal mark.
If you are a Registered Consignee or an Occasional Importer then all the specified products you bring into the UK must be marked before they enter the UK, because you’re not allowed to keep products in duty suspension for later export.
Tobacco products and airlines, ships, export stores and duty-free shops
If you want to be involved in the sales of duty-free or duty-paid tobacco products to passengers travelling to other countries, you may need approval from HMRC and will need to follow specific rules and procedures.
Journeys between EU countries
If you operate an airline or ship that travels between EU countries, and want to sell tobacco products to passengers on board the aircraft or ship for them to take away, you must apply to HMRC to become a Registered Mobile Operator.
Generally, for sales of tobacco made after a certain point en route from the UK to another EU country, you must account for duty to the tax authority in the destination country. You will be credited with the UK duty that’s already been paid on the products.
You don’t need to register as a Registered Mobile Operator if you only supply for onboard consumption, although you can’t load tobacco products for consumption onboard an aircraft or any vessel where a no smoking policy applies.
There are also daily limits that apply to duty-free tobacco allowances for passengers and crew on board ship.
If you want to sell tobacco free of Tobacco Products Duty to passengers about to travel to a destination outside the EU, you need to be approved by HMRC to operate an ‘export shop’.
An export shop is an excise warehouse that can hold tobacco products in duty suspension for sale to passengers travelling to a destination outside the EU. It can only be sited at an HMRC-designated port or airport and is usually located in the departure lounge after security controls.
Supplying tobacco to aircraft for duty-free sales
If you want to operate an excise warehouse to supply tobacco products in duty suspension to aircraft for duty-free sales, you need approval to operate an ‘aircraft store floor’.
Duty-free aircraft stores
If you are an airline operator or agent, you can sell tobacco products free of Tobacco Products Duty to passengers or crew for them to take away on flights to destinations outside the EU. You must be supplied from an aircraft store floor and will need to follow certain rules and procedures.
Preventing smuggling of tobacco products
If you’re involved in manufacturing or supplying tobacco products in the UK, you have responsibilities to help prevent smuggling of tobacco products. These are known as your supply-chain control obligations.
When you supply tobacco products in the course of your business, you must always consider whether the size or nature of each transaction could suggest that tobacco products are being purchased for the purpose of smuggling them into the UK. You must also keep a written policy that covers your supply chain controls.