Selling illicit tobacco could attract penalties of up to £10,000 as new powers take effect

New powers to combat illicit tobacco have come into force from today (20 July), with penalties of up to £10,000 for any businesses and individuals who sell illicit tobacco products.

HM Revenue and Customs (HMRC) said the sanctions will bolster the government’s efforts to tackle the illicit tobacco market and reduce tobacco duty fraud.

The new powers under the Finance Act 2022 will also see Local Authority Trading Standards given the ability to refer cases to HMRC for further investigation. HMRC, where appropriate, will administer the penalties and ensure the appropriate sanction is applied and enforced.

“Trade in illicit tobacco costs the Exchequer more than £2 billion in lost tax revenue each year. It also damages legitimate businesses, undermines public health and facilitates the supply of tobacco to young people,” Nis Bandara, Deputy Director for Excise and Environmental Taxes, HMRC, said.

“These sanctions build on HMRC’s enforcement of illicit tobacco controls, will strengthen our response against those involved in street level distribution, and act as a deterrent to anyone thinking that they can make a quick and easy sale and undercut their competition.”

The tax agency’s Operation CeCe, in partnership with National Trading Standards, has seen more than 27 million illicit cigarettes and 7,500kg of hand-rolling tobacco being seized in its first two years. The joint operation has been working to seize illicit tobacco since January 2021.

“We welcome this addition to our toolkit of measures to tackle illegal tobacco, ensuring that those who seek to profit from supplying these products face substantial penalties for doing so, and their ability to continue to trade is severely impacted,” Kate Pike, Lead Officer for the Chartered Trading Standards Institute, said.

Lord Michael Bichard, Chair of National Trading Standards, added: “The illegal tobacco trade harms local communities and affects honest businesses. Through Operation CeCe, we have removed 27 million illegal cigarettes and 7,500kg of hand-rolling tobacco from the supply chain and we welcome these new measures to clamp down further on the illicit tobacco trade.”

Welcoming this move, Mo Razzaq, national vice president of the Federation of Independent Retailers, said: “We welcome these new powers and penalties as illicit tobacco is a big issue for local shops which does irreparable damage to members’ businesses and to the communities that they serve. Our livelihoods are threatened, through loss of sales and increases in anti-social behaviour.”

Razzaq, who chairs the Fed’s political engagement committee, added: “Our members are responsible retailers and verify the age of their customers before selling them tobacco products. Those behind the illicit trade make no such checks, happily selling their products to young people. But that’s not our only concern. The health and safety of people who smoke counterfeit cigarettes is seriously at risk from the highly unpleasant ingredients they can contain.

“The Fed has campaigned for a number of years for more to be done to tackle this issue and we are pleased to see that tougher action will now be taken.”

The Fed’s national president Muntazir Dipoti commented: “The illicit tobacco market has a profound and damaging effect on our businesses.  But as well as undermining legitimate retailers, it costs the exchequer billions of pounds in unpaid duty.  The Fed has been at the forefront when it comes to calling for action to address these issues, so we welcome the tougher sanctions that have been introduced today.”

The new sanctions are based on detection of non-compliance with the tobacco track and trace regulations. The track and trace system, introduced in 2019, tracks legitimate tobacco products through the supply chain. The guidance on tobacco track and trace penalties can be seen on the GOV.UK page here.

HMRC will launch a new illicit tobacco strategy later in the year which will replace ‘From Leaf to Light’, which has been the guiding strategy for tackling the illicit tobacco market since 2015.