8. Contraventions and Civil Penalties (CPs)
Explains where civil penalties apply and actions for contraventions to the Customs Transit Convention (CTC).
This section explains where civil penalties apply and actions for contraventions to CTC.
Under CTC agreements Customs are obliged to promote compliance with CTC provisions and to have arrangements in place to tackle non-compliance. Civil penalties operate in VAT and excise, as well as in direct taxation, and are seen as an appropriate sanction in most customs cases.
Civil penalty provisions cover:
- civil evasion - offences involving dishonesty
- contravention of the law – such as breaches of regulations, failure to comply with the conditions of an authorisation and mis-declaration
The civil penalty provisions cover all CTC, EU and UK customs law except:
- TIR and ATA Carnets
- prohibitions and restrictions
- smuggled goods subject to excise duty
- trade with the Channel Islands
When free circulation goods and goods originating in the Channel Islands move to the UK, import VAT should be declared and paid. The civil penalty provisions do cover any contraventions regarding import VAT declarations on such movements.
The civil penalty provisions cover customs duty (including agricultural duties) and import VAT but not excise duty.
The law governing the use of Civil Penalties is contained in:
Voluntary compliance can be encouraged, via education or amendment/withdrawal of authorisations. Civil penalties including civil penalty warning letters are an additional method of dealing with non-compliance.
Customs are very unlikely to issue penalties where a trader voluntarily discloses a contravention.
Customs cannot issue a civil penalty more than:
- 3 years after the contravention occurred
- 2 years after HMRC became aware of the facts
Unless a first contravention involves serious error or when written instructions from Customs have not been complied with, they will not issue a penalty without first having sent a warning letter to the trader. If Customs send a warning letter to a trader, it should specify the measures that they should take to improve their level of compliance. Should a second similar contravention occur within the time period set by the letter Customs may issue a civil penalty.
Customs will not issue a warning letter/civil penalty until they have established which particular legal provision has been breached. Where a trader is not complying with a condition of their authorisation, Customs must confirm that the condition is clearly stated in the authorisation letter.
The contravention must be listed in the Statutory Instrument’s Schedule of Contraventions. If it is not there, it cannot be subject to a civil penalty.
Minimum penalty is £250 moving upwards to a maximum of £1,000 or £2,500 (depending on the applicable Statutory Instrument schedules).
Penalties are charged via a Demand Notice. The Demand Notice will contain a penalty amount and a further warning.
A warning letter and a demand notice can only be issued to the ‘legal entity responsible for the contravention’. In the case of CTC Transit this could either be the holder of the procedure, the carrier or the recipient of the goods. The Statutory Instrument Schedules state who can be liable for a penalty for each contravention.
All warning letters issued are subject to reasonable excuse. Civil penalties issued are subject to reasonable excuse or mitigation.
Officers will maintain a complete audit trail of decisions in case of statutory review or appeal.
Borders & Trade Group recommends that trader education is more appropriate than civil penalty action in the case of a first contravention of the Transit regulations. The person concerned should receive an educational letter or visit from a compliance officer advising that a contravention has occurred and setting out the action that needs to be taken to improve compliance with the regulations. Civil penalties may then be appropriate if the person concerned continues to repeat the contravention despite a previous educational letter or visit.
Further information on civil penalties can be found in Civil penalties for contraventions of customs law (Customs Notice 301).
1st Contravention
Where a contravention of the Transit procedure is identified an educational letter should be issued to the holder of the procedure, carrier and/or recipient of the goods.
The letter should advise that, if the contravention is repeated a second time, then civil penalty action may be taken.
2nd Contravention
In the case of a repeated contravention by the same person, a Civil Penalty warning letter should be issued.
3rd Contravention
The relevant papers will be referred to HMRC’s Civil Penalties Team for consideration of the issue of a penalty.
Records to be retained
Customs will set up a local detailed database to record all Transit ‘escapes’ and retain copies of all educational and warning letters issued so that a full audit trail is in place if it becomes necessary to take civil penalty action.
Foreign holders of the procedure and Carriers
If staff at offices of destination or officers on audit visits to traders’ premises find that a particular foreign holder of the procedure or haulage company is regularly non-compliant, they will advise Borders & Trade Group who will then write to the appropriate overseas customs authority.
Roles and Responsibilities of Customs officers
- HMRC/Border Force staff investigate and issue civil evasion penalties (involving dishonesty).
- Large Business Services, National Compliance officers and Law Enforcement officers will decide how to deal with a contravention of the law, issue warning letters and report further contraventions to a Civil Penalty Officer.
- Civil Penalty Officers will consider reports from officers, decide whether a penalty should be charged, and the demand notice will be issued accordingly.
- Borders & Trade Group devises the civil penalty framework and advises on the provisions that may have been breached. It is the contact point for operational queries. It devises civil penalty procedures, monitors compliance standards and maintains the civil penalty records.
- Penalties and Debt Management Team formulate, evaluate, assure and implement civil penalty policy.