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HMRC Clampdown On ‘Sin Taxes’ Rakes in £1.63 Billion in 12 Months

Written by: Keith Tully

Reviewed: Tuesday 29th March, 2016

A clampdown on non-payment of taxes associated with cigarettes and alcohol sales has seen £1.63 billion collected by HM Revenue & Customs (HMRC) over the past 12 months.

According to the latest figures on the subject, a more proactive and tough approach towards the collection of these so-called ‘sin’ taxes has seen HMRC increase its taking from these sources by as much as 6 per cent in a single year.

The issue of cigarettes and alcohol being sold illegally and without the proper taxes being paid has risen up HMRC’s agenda in recent years as taxes associated with these products have increased above inflation.

It is now estimated that somewhere in the region of 10 per cent of all cigarettes sold around the UK are not sold through the proper channels or with the appropriate taxes being paid.

And with taxes accounting for around 80 per cent of the price of a typical packet of cigarettes, the potential scale of lost revenues resulting from this black market activity has become very significant.

“Duty on cigarettes and spirits is consistently increased well above inflation – but the production cost of the goods is low – this makes them a prime target for smuggling,” explained Roy Maugham, a tax partner with UHY Hacker Young, which put together the latest figures on HMRC’s clampdown.

“A significant number of taxpayers are disinclined to pay the full duty on alcohol and, particularly, cigarettes – which has created a thriving black market. It’s the inevitable result of heaping a heavy tax load onto any product,” he said.

Remarkably, the scale of the black market for rolling tobacco is such that it accounts for somewhere close to 40 per cent of the overall market for these products across the UK.

Meanwhile, HMRC’s efforts to prevent the illegal selling of alcoholic products of various sorts saw it seize millions of litres of beer and wine, and many thousands of litres of spirits over the course of the 2014 to 2015 tax year.

The UK’s main tax-gathering body is currently threatening to issue fines worth up to £10,000 to any company that sells alcoholic drinks to other businesses but fails to sign up to the new Alcohol Wholesale Registration Scheme before the end of March 2016. 

Keith Tully

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Keith Tully
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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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