HMAG30130 - Registration and approval: revocation

Powers and reasons for revoking an approval for an approved person

Where revenue trader approvals are made under Section 100G CEMA (this includes those made under WOWGR and HMDP regulations including Warehouse-keeper, Registered Consignor approvals etc.) revocation should be considered where the approved person is no longer fit and proper to carry out an approved activity. The power to revoke the registration is contained in Section 100G (5) CEMA. This states, 'the Commissioners may at any time for reasonable cause revoke or vary the terms of their approval or registration of any person under this section'. Immediate revocation should only be considered where there is a serious risk of significant immediate revenue loss usually because the business is either linked to or involved in fraud). 

Reasons for revoking a revenue trader approval include that the approved person or key employees have:

  • been involved in significant revenue non-compliance or fraud in excise or other HMRC regimes, or have unspent convictions for fraud,
  • provided false information with the intention to deceive,
  • failed to improve compliance following a warning letter where revocation was threated,
  • a proven link with other known non-compliant or fraudulent businesses,
  • used the approval to facilitate fraud,
  • a business which is not credible or commercially viable (care is needed when evidencing this point),
  • no genuine business need for the approval,
  • significant outstanding debts with HMRC but are not meeting time to pay agreements.

Powers to revoke a CEMA s92 excise premises approval

Revocation of premises approvals should be considered for a reasonable cause - this could include that they are not fit for purpose, present a significant risk or there is no genuine business need for them. Powers to revoke a CEMA s92 approval are contained in CEMA s92(7), which states: 'The Commissioners may at any time for reasonable cause revoke or vary the terms of their approval of any warehouse under this section'. Immediate revocation cannot be applied. The winding down of the warehouse activity must be carried out in accordance with CEMA s98 (this is discussed further in this guidance). 

Reasons for revoking a warehouse premises approval include:

  • the premises are not secure,
  • there are significant health & safety risks with the premises,
  • there is no genuine trade need for the warehouse,
  • premises have become unsuitable for the intended trade need/operations,
  • if a general storage and distribution warehouse, there is no longer convincing evidence of an economic need for it,
  • financial security (when required) is not provided,
  • record, accounting, and other Information Technology systems required do not meet an acceptable standard,
  • key persons involved in the management of the premises represent an unacceptable revenue risk or have provided false information with the intention to deceive.

Before taking revocation action

Revocation action should only be taken when it is proportionate and reasonable to the concerns identified. The decision to revoke an approval should not be taken lightly. Normally, the business should be given an opportunity to change its behaviour via a warning letter and being educated on what need to improve. Also, as an alternative to revocation, consideration should be given to whether adding conditions or restrictions to address concerns or to issue financial penalties for non-compliance identified was a more proportionate action. Where it is decided to place conditions on the approval as an alternative to revocation, these should be reviewed on a regular basis to establish whether the business still poses a risk and whether the conditions placed on the business are being complied with and have sufficiently reduced the risk originally identified.

Strong admissible evidence must be held to support a revocation decision, it must be disclosable to both the business being revoked and a Tribunal Court. We cannot revoke an approval simply on suspicion of wrongdoing or gut feeling.

Revocation due to a lack of credibility or viability

Whilst revocation may be appropriate where a business activity is not credible and/or commercially viable we must be careful in this type of decision.

We should establish with evidence how and why the business is not meeting its original business plan and consider if recovery is possible. In some cases, the plan may indicate that the business will run at a loss until it becomes established. This may be due to initial start-up overheads, but once trade is established income may start to exceed out goings. If the business has customers who have failed to pay, how is it pursuing its debts, what is the likelihood of recovery? Does the business have other customers relying on it? Does it have a plan to promote itself to gain new custom? What is the risk of the business itself going insolvent/bankrupt?

 In some cases, there may be contingent discount agreements with suppliers to provide a discount when a certain volume of purchases is reached which the business may rely on in the early days of trading.

 We should consider all aspects of the trade, for example, if the business is dealing in excise goods what is the supply route for these? Excise goods during their lifetime will attract a variety of costs at each point in their journey including, storage, handling, and transport costs. At each point of sale there will normally be a markup on the value so that the seller at each stage makes a profit on their purchase when the goods are sold on. Tax adds a further considerable cost on the final sale to the consumer. If we suspect a longish supply chain, consideration should be given to the business’s pricing structure for example, is it realistic? Is it sufficient to trade in direct competition with businesses with more direct (shorter) supply routes from the point of production?

In all cases we should carefully consider the business’s explanation for any lack of credibility/viability and consider the business’s recovery plan and the risk of revenue loss. Each case should carefully be considered on its own merits, with advice sought from a departmental accountant in complex cases.

Minded-to-revoke letters

A 'minded to-revoke' letter should be issued where serious or significant non-compliance is identified, and when we believe that the business cannot or will not improve their behaviours, making revocation appropriate. Its purpose is to advise the approval holder that we intend revoking their approval. It provides the trader with an opportunity to challenge the factual basis on which the intention to revoke is made and to draw to our attention relevant detail we may not be aware of, overlooked or not fully appreciated.  This helps ensure that we take all relevant matters into account before revoking the approval.

The letter should be issued promptly to reduce the risk of revenue loss. It should not offer the business an opportunity to improve, which is the purpose of the warning letter.

When issuing a 'minded to-revoke' letter the business should be given a reasonable time to respond. This should normally be 10 working days from the date of the letter, but longer periods may be allowed if a good reason to extend the response time exists. The letter must fully explain the reasons why we believe the business’s approval should be revoked and include:

A 'minded to-revoke' letter is not required if immediate revocation is required, for example, where there is a serious risk of significant immediate revenue loss or where evidence indicates that the business is no longer trading. Instead, an immediate revocation decision letter should be issued. An immediate revocation letter does not give the business opportunity to challenge the decision before it is made.

Issuing warning and minded to-revoke letters

A warning and 'minded to-revoke' letter should not be issued to a business at the same time for the same reason. If a warning letter has previously been issued, then a 'minded-to-revoke' letter should not be issued until the time set in the warning letter for the business to improve its behaviours has passed (and where after that time the business has not improved to the required standard).  

If warning letters have been issued previously and the business has failed to improve to an acceptable standard, but attempts to improve were still made, the ‘minded to-revoke’ letter should take account of this, explaining why these improvements were not sufficient and why we are not prepared to allow a further improvement period. Likewise, if no attempts to improve were made, the ‘minded-to-revoke’ letter should also take account of this.

Action after the minded to revoke letter is issued

If the business provides additional information to support remaining approved, this should be carefully considered against the facts previously gathered. This may require further assurance action to test this information. Whilst reconsidering the original decision consideration should be given to revenue risks and adding conditions and restrictions to the approval to mitigate these until a final decision can be made. 

Where revocation is no longer appropriate, consideration should be given to whether different sanctions should now be applied or continue to be applied (such as bespoke conditions or restrictions on the approval).  The business should be notified of any decision in writing, and where revocation is not being pursued the business should be advised that whilst we will not be pursuing revocation at this time this does not preclude revocation action being taken in the future, should further evidence become known which demonstrates that the business/person is no longer fit to be approved.

If, after considering the information, revocation is still the best course of action a notice of revocation should be issued. Where the business provided information following a minded to revoke letter it should be explained to the business in writing why the information was not sufficient to change our decision and provide a full reason for the revocation action, re-iterating the points raised in the ‘minded to-revoke’ letter and detail any new supportive evidence. Our letter should also fully address any arguments put forward by the trader to mitigate concerns or challenge the decision to revoke, explaining why we still consider revocation appropriate. Our response should clearly explain why the approved person can no longer remain approved.

Where a business fails to respond to our 'minded to-revoke' letter we should normally issue a notice of revocation no later than five days following the deadline set in our 'minded-to-revoke' letter.

The business requests cancellation of approval

Where a business requests cancellation of its approval, we should issue a decision letter confirming cancellation explaining that the cancelation was at the request of the business (this is because technically the business have a right to appeal the decision). To cancel the approval, the general steps in this guidance should be followed, including providing a notice of revocation for when the cancellation becomes effective and adding conditions to protect the revenue during the notice of revocation period if they are needed.

Period of notice prior to the actual revocation date

Where revocation remains the only option, we should normally notify the business in advance of the date the revocation will take effect. The exception to this is where the approval is not for an excise warehouse premises and immediate revocation is required because there is an immediate risk of significant revenue loss (for example, because of fraud).

This 'period of notice' of the impending revocation date is necessary to enable a business facing revocation to wind down its approved activities and meet its revenue obligations (for example, to pay duty due to avoid the goods becoming liable to forfeiture or to be able to sell the goods on, or, where permitted, supply them under duty suspension arrangements). The length of notice will depend on the type of approval. These are as follows:

Type of approval Period of notice
Warehouse premises A mandatory three months (required by section 98 CEMA). This must always be applied.
Warehouse-keeper Normally one month (unless immediate revocation is required). To provide the business opportunity to arrange another authorised warehouse-keeper to take over the day to day running of the warehouse, necessary to prevent disruption and logistical problems resulting from duty becoming chargeable on warehoused goods if no warehouse-keeper occupies the warehouse.
Registered Consignors
NI Registered Consignees
NI Temporary Registered Consignees
NI Certified Consignors		 Normally 10 working days (unless immediate revocation is required). Where necessary, a longer period of no more than one month in total may be given.

Conditions during period of notice prior to the actual revocation date

Reasonable and proportionate conditions should be considered and where necessary added to the business’s approval during the period of notice. The aim of the condition is to mitigate risk, and further control the movement of goods under suspension such as restricting where they can be sent or whether they can only be removed on payment of duty. In some cases, it may be necessary to place conditions on other businesses connected to the one being revoked.

Notifying revocation decisions

All letters notifying a period of notice/decision to revoke an approval must fully explain the reasons why we believe the business’s approval must be revoked, including:

  • detail of irregularities identified and when these were originally notified to the approved person/company,
  • detail of assessments or penalties which have influenced the revocation decision and what links this detail to the approval if sanctions to third parties were involved,
  • our analysis to any response the business may have given to the ‘minded to-revoke’ letter if one was sent,
  • what effect revocation will have on the business, for example, if the warehouse-keeper approval they can no longer occupy an excise warehouse,
  • impact on other regimes the business is still approved to operate,
  • right of appeal,
  • the period of notice given and the date on which the authorisation/approval expires,
  • any new conditions of approval which apply during the period of notice, and
  • what the business may do during the period of notice to prevent goods they either own or are responsible for becoming liable to forfeiture.

Where the approvals being revoked are for a warehouse-keeper and warehouse premises we should normally issue the notices of revocation for both approvals at the same time to the warehouse-keeper. When the warehouse-keeper is given notice of premises revocation it is deemed to have been provided to all persons holding goods in the warehouse (CEMA Section 98(2) refers).

After the period of notice has expired

Where an approval is revoked, the risk of related businesses carrying on the same trade, or the original business carrying on the trade under a new name should be considered.

Where the revoked approval was a revenue trader approval such as a registered consignor then once the revocation date is passed the business is treated as unregistered. Where revocation creates a duty point then duty should be collected via assessments and goods liable to forfeiture secured.

If the revoked approval was for an excise warehouse premises (Section 92 CEMA refers) any duty suspended goods remaining on the premises after the revocation date may be taken to a Queen’s Warehouse. As an alternative to removing the goods, the goods may remain in the former warehouse for one month as if they were in a Queen’s Warehouse. During this one-month period the financial security for the premises, warehousing regulations and any condition imposed by or under CEMA continue to have effect as if the warehouse were still approved (Section 98 CEMA refers). If after one month from the date of revocation the goods are either still in the Queen’s Warehouse or in the former warehouse they may be sold or destroyed. Once the one-month period has expired premises securities should be lapsed.