CCPG11010 - Customs law and HMRC compliance strategy: legal provisions that apply to Customs penalties

Finance Act 2003

Part 3 of Finance Act 2003 and subsequent statutory instruments make provision for a civil penalty where a person contravenes a

  • duty
  • obligation,
  • requirement, or
  • condition

imposed by or under legislation relating to any relevant tax or duty.

The Act defines a relevant tax or duty as

  • customs duty
  • union export duty union export and import duty applies to breaches on or before 31 December 2020 (except for Northern Ireland)
  • union import duty union export and import duty applies to breaches on or before 31 December 2020 (except for Northern Ireland)
  • import VAT.

Regulations

There are two sets of regulations:

  • The Customs (Contravention of a relevant rule) Regulations 2003 (as amended) [SI 2003/3113] which was originally made under the Finance Act 2003.
  • The Export (Penalty) Regulations 2003 (as amended) [SI 2003/3102] which was originally made under the European Communities Act 1972 and applies to breaches on or before 31 December 2020 (except for Northern Ireland).

They make provision for civil penalties for contravention of Customs rules that are not directly related to a relevant tax or duty.

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Schedules

The schedules that apply to the above regulations are:

  • the schedule to the Customs (Contravention of a relevant Rule) Regulations 2003 (as amended), and
  • the schedule to the Export (Penalty) Regulations 2003 (as amended).

Both of these schedules were updated in 2021 and provide details of:

  • the relevant rules which, if contravened, attract a civil penalty
  • the person(s) who is liable
  • the maximum penalty amount applicable in each case.

Our tables of contraventions mirror the schedule but has an extra column for the three digit ‘reason code’. (Please note these codes are an identifier set by HMRC and indicate the legal provision that has been contravened - they do not form part of the actual Statutory Instrument laid before Parliament.)

These civil penalty provisions cover all UK Customs law except:

  • TIR and ATA Carnets (which are international contraventions, not legal provisions)
  • prohibitions and restrictions where criminal sanctions are applied, and
  • smuggled goods subject to excise duties such as alcohol and tobacco.

Note particularly the following:

  • the provisions cover customs duty (including agricultural duties) and import VAT, but not excise duty
  • when free circulation goods in the Channel Islands and goods which originate in the Channel Islands move to the UK, import VAT should be declared and paid. The civil penalty provisions do cover contraventions regarding import VAT declarations on such movements.

Note: The Channel Islands are not part of the VAT territory of the UK. This means that movements of goods from the Channel Islands to the UK are subject to import VAT provisions. They are required to comply with Customs formalities as set out in Part 3 of the Finance Act 2003 and subsequent statutory Instruments.