Monday, May 20, 2013

Road Haulage and Warehouse Operators Beware HMRC Penalties for Duty Scams on Freight

TT Club and UKWA Warn Innocent Parties of Hidden Liabilities
Shipping News Feature

UK – The TT Club has commented on recent problems in which the Customs authorities have acted against freight, road haulage and warehouse interests which have been unwittingly caught up and held to account in cases where Excise Duty has been avoided by third parties. Anyone involved in the storage or movement of goods on which the proper duties have not been paid is liable to be fined as HMRC clamps down on the offences. Standard terms such as those recommended by the British International Freight Association (BIFA) allow for the recovery of such penalties after they have been imposed but this is of little use when a customer has disappeared or simply folded.

While the legal authority to impose wrong-doing penalties has been available to the UK’s HM Revenue & Customs (HMRC) since April 2010, the United Kingdom Warehousing Association (UKWA) has recently warned warehouse keepers and hauliers that they need to increase their vigilance. Recently UKWA has seen evidence of an increased focus by HMRC on excise goods supply chains and also an increased willingness by the authority to impose wrong-doing penalties on storage companies and others. This is usually occurring in circumstances where HMRC is unable to recover the Excise Duty from those who own the goods and have evaded the duty, because those parties cannot be located.

HMRC has the authority to impose penalties on individuals and companies which handle goods on which Excise Duty has not been paid or deferred, or which have otherwise been improperly diverted from bonded storage. Such ‘handling of goods’ is deemed to include carrying, removing, depositing or keeping the goods and therefore extends to warehouse operators, hauliers and other parties in the supply chain who don't own the goods, but do have physical possession of them.

As a result, anyone who holds excise goods (such as alcohol or tobacco) on which duty has not been paid is potentially liable to a penalty of up to 100% of the unpaid Excise Duty. The actual amount of the penalty will be calculated by examining all of the circumstances, including whether the wrong-doing was deliberate, and whether any disclosure has been made to HMRC.

Warehouse operators, hauliers and other suppliers of third party logistics services may have a hold harmless or indemnity provision in their contract with their customer, which in theory allows them to recover fines and duty from the customer where the customer is at fault but when the guilty party is absent and a fine has been imposed on the innocent logistics provider, this is of little or no use.

The TT Club, UKWA etc. recommend extra vigilance when dealing with goods on which duty could possibly be avoided. The signs to watch for include stock offered via unsolicited e mails or fliers showing little or no verifiable information as to the identity, status or location of the supplier. Extremely low prices and deals conducted in cash plus incorrect or a lack of documentation such as purchase invoices, duty stamps and fiscal marks should also set alarm bells ringing.

In addition, there are specific steps which service providers should take. Warehouse operators who have non-excise warehouses should obtain evidence that duty has been paid whenever they receive goods. They should consider obtaining a signed declaration from their customer that the Excise Duty has been paid and/or include a warranty to this effect in their terms and conditions.

In the case of hauliers who are asked to move excise goods, the advised actions will depend on the origin and destination point. If the goods are being moved from an excise warehouse to another location, hauliers should ask for evidence that the Excise Duty has been paid and the goods have legitimately left the duty suspension regime. As with warehouse operators, hauliers should also consider obtaining a signed declaration from the customer that the Excise Duty has been paid and/or include a warranty to the same effect in their terms and conditions.

If the goods are being moved from an excise warehouse to another location and the haulier is told that duty is not payable, they should ask for evidence of the movement guarantee and the supporting documents. They should also consider whether the destination point is an excise warehouse which is known to them, and whether there are legitimate commercial reasons to explain why such a movement was required. If there is any doubt about the legitimacy of the movement, or the movement guarantee, operators should contact HMRC.

If goods are being collected from a small warehouse, or the movement is to what appears to be non-commercial premises, the haulier should take particular care to ensure that they obtain evidence that all Excise Duty has been paid.

As long as the Member acts reasonably, TT Club says it will insure its Members for this type of demand from HMRC, subject to the terms and any sub-limits in individual policies. The Club will also normally pay the costs of recovery from the Member’s customer, or any other party which appears liable. The responsibility remains with the supply chain provider however to ensure all is as it should be. Once again the old adage applies – if the deal looks too good to be true – it probably is.