HCOS3650 - Tied Oils: Tied Oil systems and risk table

System: Approval
System: Stock control
System: Losses
System: Waste oil
System: UK Deliveries
System: EU Deliveries / Exports
System: EU Receipts / Imports

System: Approval

Audit Objective: To ensure that the details on the approval are correct and up to date.

Control Objectives	Risk Area	Risk Ranking	Trader Controls	Compliance Test	Substantive Test
Regulatory	Trader is operating outside the conditions of approval, eg new categories of oil not notified, changes in premises not notified.	Medium	Trader should notify any changes in the business, which affect the approval to the Mineral Oil Reliefs Centre (MORC) - this approval work is moving to BT Ops Glasgow from mid to late 2018.	Ensure details on the approval are up to date and consistent with the trader’s business activities	Confirm the legal entity, confirm that details of all premises at which tied oils are received, stored and/or used are listed on the approval, confirm that all oil received is in categories listed on the approval.

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System: Stock control

Audit Objective: To ensure that the trader exercises adequate stock control and accounts for duty on oil put to ineligible use.

Control Objectives	Risk Area	Risk Ranking	Trader Controls	Compliance Test	Substantive Test
Completeness, Measurement, Disclosure and Occurrence	Tied oil is sold on for use, or is used by the trader as motor/ heating fuel without prior payment of duty.	High, but dependent on oil type ie suitability for misuse.	Trader must hold sufficient stocks of duty paid oil to meet their needs. Trader must maintain accurate records of receipts and dispatches of tied oil and stock held, and must submit HO34 returns as required. Duty must be accounted for where tied oil is put to an ineligible use.	Check that the trader maintains accurate stock records and accounts for the duty on any oil put to ineligible use.	Examine receipt/purchase records and compare to sales / dispatch / production records and stock on hand to identify any discrepancies, undertake physical stock challenges, examine sales/disposals records to identify any ineligible deliveries. Confirm duty has been accounted for on those oils.

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System: Losses

Audit Objective: To ensure that losses of tied oil are accounted for.

Control Objectives	Risk Area	Risk Ranking	Trader Controls	Compliance Test	Substantive Test
Measurement, Disclosure and Occurrence	Losses of tied oil are in excess of acceptable allowances (see Notice 184A for the guidelines).	High	Trader should have a system in place to identify and account for losses.	Ensure that the traders stock control system brings losses to account and that duty is paid on any unexplained losses outside the acceptable parameters.	Examine receipt, dispatch and stock records to identify discrepancies. Examine payments records to ensure that duty has been paid on any unacceptable losses.

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System: Waste oil

Audit Objective: To ensure that disposals of waste oil are accounted for.

Control Objectives	Risk Area	Risk Ranking	Trader Controls	Compliance Test	Substantive Test
Measurement, Disclosure and Occurrence	Duty not accounted for on disposals of waste oils	High	Trader must keep accurate records of disposals of waste tied oils and account for duty where due in accordance with N184A Section 11.	Confirm that the trader keeps accurate records of disposals of waste oils and accounts for duty where due.	Examine stock, purchase and sales records to identify disposals of waste oil and check that tied oils have been destroyed in accordance with N184A S11.2 item 5, distributed for eligible use in accordance with N184A S11.2 item 1,2 or 3, disposed of and duty accounted for, disposed of to a Duty Suspended Installation in accordance with N184A S11.2 item 6, burned as furnace fuel by the trader, or disposed of to a waste dealer for subsequent use as a furnace fuel in accordance with N184A S11.2 Item 4.

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System: UK Deliveries

Audit Objective: To verify deliveries are made only to approved traders.

Control
Objectives	Risk Area	Risk Ranking	Trader Controls	Compliance Test	Substantive Test
Regulatory	Trader supplies tied oil to traders not approved to receive it, and may put it to ineligible use.	High/medium	Trader must have in place, a system for checking customers’ entitlement to receive the requested tied oil at the address requested. Trader must obtain the customer approval number with the order. Initial and regular checks must be made using the HMR&C internet look up service or the Helpline.	Confirm trader holds record of trader approval numbers. Confirm trader undertakes sufficient checks to confirm the eligibility of their customers to receive the product they request.	Examine sales/customer records for evidence that customer approval numbers have been obtained before supplies made. Evidence that checks have been made on the customers’ approvals. Select a sample of customers to check that the approval is valid and correct and complete excise references for issue to the local risk and assurance staff for the customer to verify that the oil is put to an eligible use.

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System: EU Deliveries / Exports

Guidance below regarding EU deliveries relates only to Northern Ireland. For GB, all deliveries (EU and ROW) are treated as exports, as are exports from NI to non EU countries.

Audit Objective: To ensure Holding and Movements documentation and procedures are in place for all intra EU disposals / Exports.

Control
Objectives	Risk Area	Risk Ranking	Trader Controls	Compliance Test	Substantive Test
Regulatory	Diversion of oil despatched under duty suspension to misuse as road or heating fuel. Diversion of oil declared as exported diverted to misuse as road or heating fuel. Exports by class approved trader (not permitted)	High/Medium	Northern Ireland Trader must be approved as an excise and/or tax warehouse for movements of oil to an EU state in accordance with Holding and Movements rules and in accordance with Notice 184A. NI Trader must hold evidence of export for deliveries of tied oil outside the EU. GB Trader must hold evidence of export for deliveries of tied oil outside the UK.	Confirm that all despatches of oil from NI to EU states comply with Holding and Movements regulations. Confirm that NI trader holds evidence of export for all movements of oil to countries outside the EU. Confirm that GB trader holds evidence of export for all movements of oil to countries outside the UK.	Examine traders sales records to establish that, all EU deliveries from NI are made through excise warehouse or that the trader has the necessary tied oils approvals in place. Check e-AD documents returned from the receiving country. Check that the Intra EU movement guarantee is commensurate with the revenue at risk and check documentation for exports to non-EU destinations.

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System: EU Receipts / Imports

Guidance below regarding EU receipts relates only to Northern Ireland. For GB, all receipts (EU and ROW) are treated as imports, as are imports to NI from non EU countries.

Audit Objective: To ensure Holding and Movements documentation and procedures are in place for all intra EU receipts / imports.

Control Objectives	Risk Area	Risk Ranking	Trader Controls	Compliance Test	Substantive Test
Regulatory	Diversion of oils received under duty suspension to use as road fuel or heating fuel	High/Medium	Oil received in NI from an EU state must be received into an excise or tax warehouse under the correct Holding and Movements procedures and documentation in accordance with Notice 184A.	Confirm that the NI trader has the correct approvals in place and that receipts from an EU state comply with the Holding and Movements requirements.	Examine Purchase records to check that e-AD documents are held for EU Receipts. Check that imports are properly accounted for and the correct documentation is held and examine trader records to ensure that they have the appropriate approvals in place for both intra-EU movements and imports.