New penalties target duty cheats

New penalties for illegally selling cigarettes, alcohol and fuel come into effect from 1 April.

People who buy cigarettes or alcohol on holiday are often unaware that it is illegal to sell them on to friends, family or others without paying the proper excise duty.

And it is also illegal to use red diesel - which has a lower rate of duty and is only for off-road use in farming, fishing and construction - in road vehicles to avoid paying a higher rate of excise duty.

But from 1 April, HM Revenue & Customs (HMRC) will introduce new penalties to prevent abuse of the excise tax system.

Sarah McCarthy-Fry, Exchequer Secretary to the Treasury, said: "Defrauding excise is not worth the risk. The changes we are introducing this week make the tax system fairer because they help us crack down on those who try to avoid paying tax."

The new penalties apply to the public, anyone registered to pay excise duties and anyone who should be registered to pay excise duties. These duties are charged on alcohol, oil products such as petrol and diesel, and tobacco.

The penalties will apply where someone:

Handles goods on which excise duty has neither been paid nor deferred;

Uses a product in a way that means more excise duty should have been paid; or

Supplies a product at a lower rate of excise duty knowing that it will be used in a way that means a higher rate of duty should be paid.

If someone is caught, the new penalty will be a percentage of the potential lost revenue to the Exchequer. Penalties will range from 10 per cent of the possible lost revenue to 100 per cent.

In addition, anyone running a business selling goods that have excise duty on them can be penalised if an employee or advisor commits a "wrongdoing". The penalty can be avoided if the business can show that it has taken reasonable care to avoid this by, for example, setting up systems and procedures to prevent the wrongdoing.

And under the new penalties, company directors and secretaries can also become liable for a penalty if, for example, they gain personally from a deliberate wrongdoing by an employee.