Civil penalties for contraventions of customs law (Customs Notice 301)
How HMRC calculates and notifies UK-based businesses about customs civil penalties for contraventions of EU and national legal requirements.
This guidance cancels and replaces Notice 301 (September 2020).
1. Introduction
1.1 What this guidance is about
You must comply with EU and national legal requirements if you engage in:
- international trade in goods
- the import or export of goods privately
This guidance explains how we calculate and notify customs civil penalties for contraventions of those legal requirements. This penalty system is specifically designed to encourage accurate declarations and compliance with the law.
The guidance also explains how you can appeal against:
- any warning letter issued
- the liability to penalty
- the amount of penalty
Unlike the civil evasion penalty, these penalties do not imply any dishonesty or any intention to evade duty.
You can find out about imports and exports by contacting Imports and exports: general enquiries.
1.2 What the law is
Sections 24 to 41 of the Finance Act 2003 provide for 2 types of civil penalty, the:
- civil evasion penalty, which is dealt with separately in Notice 300: customs civil investigation of suspected evasion
- civil penalty for contraventions of customs rules relating to certain specified taxes and duties
The Act defines these taxes and duties as:
- Customs Duty
- Community Export Duty
- Community Import Duty
- import VAT
- Customs Duty of a preferential Tariff country
The Customs (Contravention of a Relevant Rule) Regulations 2003 were made under powers conferred in the Finance Act 2003. They include a schedule which lists the:
- contraventions that may be penalised
- person who may be liable
- maximum penalty that may be imposed
The Export (Penalty) Regulations 2003 make provision for civil penalties for contraventions of customs rules that may not be directly related to a relevant tax or duty. They include a schedule of export contraventions that may be penalised.
These Regulations were made under powers conferred by the European Communities Act 1972. The schedule lists the:
- contraventions that may be penalised
- person who may be penalised
- maximum penalty that may be imposed
Both sets of regulations have been amended several times since they were first introduced.
Further amendments have been introduced by The Customs (Contravention of a Relevant Rule) (Amendment) (EU Exit) Regulations 2019 as a result of the UK’s withdrawal from the EU.
Find out more about customs civil penalties.
This guidance is not the law. It is our view of what the law says and nothing in this guidance takes the place of the law.
2. Background
2.1 Why we have civil penalties
Customs civil penalties are used to encourage compliance with customs law. We are obliged under both EU and national law to promote compliance with legislative provisions and to have arrangements in place to counter non-compliance. Civil penalties are seen as an appropriate sanction in most cases but civil evasion penalties and prosecution remain an option in certain circumstances.
2.2 What the maximum customs civil penalty limits are
The maximum penalties provided in law are £2,500 per contravention for the more significant irregularities and £1,000 per contravention for others, as indicated in the statutory schedules referred to in paragraph 1.2.
2.3 What customs civil penalty action is and when it would apply to me
There are 2 types of customs civil penalty action, a:
- warning letter
- financial penalty
When you contravene a duty, obligation, requirement or condition imposed by or under EU or national customs legislation or under international rules (such as those provided in international agreements on tariff preferences) you may become subject to customs civil penalty action.
The schedules mentioned in paragraph 1.2 cover most contraventions of customs rules. These relate to the import, export and holding or processing of imported goods under customs supervision, Customs Duty (including duties on agricultural goods) and import VAT.
Excluded are provisions relating to:
- prohibitions and restrictions (such as licensing requirements) – contraventions will continue to be dealt with under existing criminal provisions, including seizure
- smuggled goods such as tobacco and alcohol
Reasonable excuse
If we or an independent tribunal agree that there is a reasonable excuse for your lack of compliance, you will not be liable to a penalty. A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet. You can find out more about reasonable excuse in section 4.
2.4 When will HMRC use customs civil penalty action
HMRC is committed to helping customers who need assistance while pursuing those who ignore, bend or break the rules. Education is a key tool in encouraging customer compliance and where errors occur we will always consider whether education is the most appropriate response. In cases where we conclude that education is not the best way forward customs civil penalty action is likely.
When faced with continued non-compliance, we will consider all the circumstances and select the most appropriate course of action. In most cases, we will take customs civil penalty action. However, where you have an authorisation in place, we may as an alternative consider amending or revoking that authorisation.
We will use customs civil penalty action and amendments to or revocations of authorisations only in appropriate circumstances. We will carefully consider your situation before deciding what is appropriate in each case to encourage your future compliance.
2.5 Warning before a penalty charge
For the majority of contraventions, we will not charge a penalty unless we have issued a warning letter, for a broadly similar irregularity, within the last 2 years. Examples of ‘broadly similar irregularities’ might be:
- a further serious error in a declaration (see paragraph 3.1) irrespective of the reason for the misdeclaration
- any further failures to abide by Customs Freight Simplified Procedure (CFSP) approval conditions whether or not it is the same condition that is being infringed
The warning letter will detail the contravention and specifically warn that a further similar contravention within 2 years of the issue of that letter may result in a civil penalty being charged. Any further similar contravention after the 2 year period has expired will usually attract a new warning letter.
Warning letters for deficiencies in systems will explain what you need to do to correct those deficiencies and will set a time limit within which you have to correct those deficiencies. If you fail to comply with those instructions you may be liable to a civil penalty.
Exceptions
In the following specific circumstances, if appropriate, we may issue a penalty notice for a first contravention:
- for serious errors which have a serious detrimental effect on the revenue or physical control of the goods
- where a C18 demand note has been issued for a customs debt which is £10,000 or more
- where traders or third-party declarants who have been given written instructions or guidance by HMRC on how to comply with their legal obligations, fail to adhere to those instructions
- where a trader fails to comply with the conditions of an authorisation
If you do not agree with the warning letter or penalty notice you can appeal to the Tribunal Service. You also have the right to a review of your case and if you are still not satisfied you will still have the right to appeal to the Tribunal Service.
3. Calculating and notifying penalties
3.1 How penalties are calculated
As stated in paragraph 2.2 the maximum penalty provided for in law is £2,500 per contravention for the more significant irregularities and £1,000 per contravention for others.
We have a minimum penalty of £250, which will usually be the first penalty you would receive. However, this is dependant on how serious the contravention is.
We will issue penalties for subsequent similar contraventions in progressively larger amounts until the maximum is reached. The normal progression will be £250, £500, £1,000, with additional steps of £2,000 and £2,500 for the higher maximum.
However, HMRC will ultimately determine the monetary amount of the penalty based on the individual circumstances of the case.
Where we discover several errors for the same contravention and the total of those errors is serious, we will penalise each contraventions separately but at the same rate. (The definition of what amounts to a serious error can be found in paragraph 3.2.)
Several errors for the same contravention which do not amount to a serious error and where precisely the same mistake has been made several times, will be treated as a single error.
We may increase the normal penalty where a contravention is particularly serious.
For example:
- if the amount of undeclared Customs Duty or import VAT (or both) exceeds £50,000, we may charge at a rate 2 steps higher than indicated — for example £1,000 as a first penalty
- where an underdeclaration exceeds £100,000 we may charge the maximum penalty irrespective of whether it is a first or subsequent penalty
Penalties may be reduced where there are mitigating circumstances. You can find more about mitigation in section 5.
3.2 What is a serious error
A serious error is a contravention that either:
- potentially results in the non-payment of significant amounts of Customs Duty and import VAT (see examples in the table)
- goods have been removed from customs control
| In the case of | it is regarded as a serious error where the amount of duty and or import VAT exceeds |
|---|---|
| incorrect declarations, or a failure to provide declarations required by an authorisation unauthorised incorrect use of Customs Procedure and Economic Impact (CPEI), for example incorrect drawback claims, and so on |
£10,000 Where a series of identical errors are discovered, the total should be used to determine whether the matter is serious |
| declarations delayed so that the payment falls in a later period. (This may occur with CFSP or inward processing diversions) | £25,000 |
| errors which have detrimental effect on the physical control of the goods | No monetary limit applies for this type of serious error |
3.3 If I discover a contravention myself
You will not receive a penalty if you discover and disclose a contravention voluntarily.
For a disclosure to be voluntary, it must be made in writing and at a time when you had no reason to believe that enquiries were being made by HMRC in relation to any Customs Duty issues.
It is essential if you make a voluntary disclosure, that you maintain a record of all the actions you take.
See Annex 1 for details of how you tell us about a voluntary disclosure.
3.4 What the time limits are for issuing a penalty
If we decide to issue a penalty we must do so within:
- three years from the date on which the contravention took place
- two years from the day on which we became aware of the facts, sufficient in our opinion to justify a penalty
3.5 The right to be heard before a decision is issued
The officer dealing with your case will tell you if they are considering issuing a penalty. They will give you the opportunity to explain if:
- you believe you have a reasonable excuse or you have further information that may not have been taken into account – you can find more details about reasonable excuse in section 4
- there are mitigating circumstances that warrant reduction of any penalty (section 5) that the officer may not know
3.6 Being notified of a penalty
The compliance officer who dealt with the case will:
- consider the facts of the case
- consider grounds for reasonable excuse or mitigation
- consider any representations you make
- decide whether issuing a penalty is the appropriate course of action
The compliance officer will decide the amount of any penalty and issue a penalty notice. This will include a remittance advice. It will show the alternative methods of payment and where to send your remittance.
4. Reasonable excuse
4.1 What reasonable excuse means
If we or an independent tribunal agree that there is a reasonable excuse for your lack of compliance, you will not be liable to a penalty.
There is no legal definition of what constitutes a reasonable excuse, but it is normally an unexpected or unusual event that is either unforeseeable or beyond your control. We will look closely at the circumstances of each case.
If you can show that your conduct, which led to the contravention, was that of a reasonable business person, who accepted the need to comply with legal requirements, then there may be a reasonable excuse.
4.2 Circumstances that constitute a reasonable excuse
The following examples show where you might have a reasonable excuse for non-compliance:
- compassionate circumstances where you are totally responsible for running a small business and you or a member of your immediate family was seriously ill, or recovering from such an illness
- computer breakdown where records essential to the declaration or procedure at issue are held on computer and it breaks down at a critical point, however you must have taken reasonable steps to correct the fault
- loss of key personnel where the person responsible for completing declarations or applying a particular procedure leaves your employment at short notice and there is no one else to assume that person’s responsibilities at that time
- loss of records where your records are stolen or destroyed preventing you from making declarations or following a procedure on time – you must notify the loss of records to your local HMRC business centre immediately
Your claim of reasonable excuse will not necessarily be accepted just because it seems to fit one of the categories. Any decision to accept reasonable excuse will be based on all the circumstances of your individual case.
4.3 What is not considered as a reasonable excuse
The law specifically does not allow the following as a reasonable excuse.
The fact that you:
- cannot afford to pay any relevant tax or duty or any penalty due
- relied on another person to perform the task for you, and that the contravention was attributable in whole or part to the conduct of that other person you relied on to perform the task for you
4.4 Factors that will be taken into account when considering a reasonable excuse
We will consider all the circumstances of your individual case so it’s important that you provide us with as much information as you can to support your case. We will take into account whether you:
- could have foreseen the circumstances that led to the contravention, and if so the steps you took to avoid it
- contacted us to ask for help or advice
- gave sufficient priority to completing any returns or declarations
Genuine mistakes, honesty and acting in good faith are not reasonable excuses and the law provides specifically that you do not have a reasonable excuse if you:
- cannot afford to pay (whilst this is not in itself a ‘reasonable excuse’ we will look at the underlying cause of your inability to pay – in exceptional circumstances this underlying cause may be a ‘reasonable excuse’)
- relied on someone else:
- to act on your behalf
- and it is their conduct which led to the contravention
5. Mitigation
5.1 What mitigation means
As outlined at paragraph 3.1 we have the discretion to reduce a penalty as we see fit if there are mitigating circumstances that fall short of a reasonable excuse. The law allows us to reduce a penalty to nil but such cases will be extremely rare.
5.2 Circumstances that warrant reduction of a penalty
The law does not define the grounds for mitigation so we will look at all the facts of your case.
We will give due consideration to the circumstances which contributed to the contravention. We will take into account your previous compliance history. We may also recognise and acknowledge the degree of co-operation given to our officers once your liability to a penalty has been established, along with any remedial action taken to prevent similar contraventions in the future
Mitigation is subjective and the amount allowed will depend on the specific circumstances of your case.
5.3 What is not considered a mitigation factor
The law specifically does not allow the following to be considered in mitigation:
- your lack of funds to pay any tax, duty or penalty due
- the fact little or no tax or duty has been lost
- the fact you acted in good faith
6. Reviews and appeals
6.1 Disagreeing with the issue of a warning letter, liability or amount of the civil penalty
You can ask for an officer not previously involved in the decision to review your case or you can appeal to an independent tribunal if you do not agree with:
- the warning letter
- your liability for a penalty
- the amount of the penalty
It is important that you send your request for a review to the correct address. If you do not send it to the correct address, there could be a delay in HMRC or Border Force dealing with your review.
If you want a review of a decision issued by HMRC, you should write to the issuing officer within 30 days of the date of the warning letter or penalty notice. You must state why you disagree with the decision you have been given.
If a decision has been issued by Border Force and you would like a review of that decision, you must write to them within 30 days of the date of the warning letter or penalty notice. You must state why you disagree with the decision you have been given. The address to write to is:
Border Force Reviews and Appeals
Westpoint
Ebrington Street
Plymouth
PL4 9LT
If you do not want a review by HMRC or Border Force and would like to challenge a decision they have made, you can appeal to the tax tribunal.
If you want to appeal against a non-declaration of cash, you can send a letter of appeal to:
Fraud Investigation Service
FIS POC Operations – Cash Declaration Penalty Team
S0079
Newcastle
NE98 1ZZ
Contact the Tax tribunal helpline if you have any questions about making an appeal.
6.2 When I am dissatisfied with the outcome of the review
If you are not satisfied with the outcome of the HMRC review, you can appeal to the independent tribunal.
Your rights and obligations
Your Charter explains what you can expect from us and what we can expect from you. For more information go to Your charter.
Putting things right
If you are unhappy with our service, please contact the person or office you have been dealing with. They will try to put things right. If you are still unhappy, they will tell you how to complain.
How we use your information
HMRC is a Data Controller under the Data Protection Act 1998. We hold information for the purposes specified in our notification to the Information Commissioner, including the assessment and collection of tax and duties, the payment of benefits and the prevention and detection of crime, and may use this information for any of them.
We may get information about you from others, or we may give information to them. If we do, it will only be as the law permits to:
- check the accuracy of information
- prevent or detect crime
- protect public funds
We may check information we receive about you with what is already in our records. This can include information provided by you, as well as by others, such as other government departments or agencies and overseas tax and customs authorities. We will not give information to anyone outside HMRC unless the law permits us to do so.
Annex 1 – How to submit a voluntary disclosure
If, after you have made a declaration, you discover that you have made an error which has resulted in an underdeclaration of import duty and, or import VAT, you should inform the:
C18 Team
National Clearance Hub
Ralli Quays
3 Stanley Street
Salford
M60 9HL
Make sure you retain a copy of all correspondence relating to any action taken.
If you make an error on a supplementary declaration when you are authorised to operate one of the CFSP then depending on the circumstances you should take the following action:
| In the case of… | send a… |
|---|---|
| an overpayment of duty and, or import VAT |
completed C285 and forward it to: National Duty Repayment Centre – Salford Ralli Quays 3 Stanley Street Salford M60 9HL |
| an underpayment of duty and, or import VAT | letter of explanation to: CFSP National Assurance Team Peter Bennett House West Park Ring Road Leeds LS16 6RQ |
| a non-monetary error | letter of explanation and if required a manual C88 (substitute entry) to: CFSP National Assurance Team Peter Bennett House West Park Ring Road Leeds LS16 6RQ |
If you discover that you have not been adhering to your approval conditions, you should inform the office which issued the approval and advise them of what action you have taken or propose to take.