TPD14060 - Duty credits and drawback: Evidence of entitlement to credit of duty under the "Tobacco Products Regulations 2001"

What follows applies to duty credits claimed under regulation 26(1) of the “Tobacco Products Regulations 2001” (TPR). The position in the case of duty credit under regulation 26(1) TPR is a little different from drawback claims made under the drawback regulations. Whereas the primary legislation governing drawback is section 2 Finance (No2) Act 1992 [FA(no2)92] and part x, Customs and Excise Management Act 1979 (CEMA), the primary legislation governing duty credits under TPR, is section 2 of the “Tobacco Products Duty Act 1979” (TPDA). Section2 of TPDA contains no equivalent requirements to those in CEMA section 133 and section 2 FA(no2)92. This might imply that a tobacco manufacturer is not required to provide the same degree of evidence to support each claim for duty credit as he would if making a drawback claim. However, Section 2 TPDA permits us to place such conditions on any tobacco repayment or remission as we may see fit to impose. Where a business is seeking a refund/repayment of the UK excise duty on tobacco products returned to the registered premises, our evidential requirements should mirror our general excise drawback requirements, showing that:

• UK duty has been paid on the goods (and had not been previously remitted or repaid); and
• that the event allowing a refund has actually taken place

This is to ensure that the UK manufacturers and importers of tobacco products receive equivalent treatment. Guidance on general “drawback” arrangements is contained in our public notice 207 (Drawback) and guidance: HMAG120000 Excise Duty Drawback

In the case of duty credits claimed on product returned to registered premises, the best way of proving that duty had originally been paid would be if the manufacturer could show that the returned packets had been removed to home- use on a particular TP7 (the payment return for registered premises).

In the absence of a direct audit trail from the claim for duty credit to the TP7, you should seek assurance by different means. This may involve such matters as; assuring yourself that the brands involved are manufactured or imported by your trader; the date of manufacture and the average time product spends in duty suspended storage (as a creditability check on the rate of duty claimed); the presence of fiscal marks (an indication that duty was paid on the product); and any established patterns for customer returns and the reasons given for deviations from those patterns. This list is not exhaustive and should be considered in the context of good audit practice.

Where it is not possible to establish when the duty was paid, then any credit should be based on the lowest rate chargeable in the three year period preceding the event giving rise to the claim. You may base the duty credit on the lowest duty rate in the one or two years preceding the event giving rise to the claim, if the manufacturer can show that this is appropriate.

You should discuss the evidence, which your trader can supply in support of claims under regulation 26(1), with your Control Steering Group (CSG) and the Tobacco Control Forum(TCF)