Lord Rennard – 2016 Parliamentary Question to the HM Treasury

The below Parliamentary question was asked by Lord Rennard on 2016-06-15.

To ask Her Majesty’s Government, further to the answer by Lord Ashton of Hyde on 14 June (HL Deb, col 1099), what action they are taking in response to the practice by some companies of supplying low-tax foreign markets with more tobacco than they are capable of consuming, thereby facilitating their products being brought back to the UK and depriving HM Revenue and Customs of revenue.

Lord O’Neill of Gatley

The UK introduced stringent rules in 2006 requiring all UK Tobacco Manufacturers (TMs) to control their supply chains. These rules required them to take steps to avoid supplying cigarettes and/or HRT (hand rolling tobacco) to persons who are likely to smuggle them into the UK or resupply them to other persons who are likely to do the same.

Tobacco manufacturers can face penalties of up to £5m for failing to comply with the rules. HMRC action, in monitoring TM’s compliance, is reflected in a reduction in supplies of UK brand cigarettes to high risk markets of 20% since 2010. At the same time, supplies to those markets of UK brand Hand Rolling Tobacco (HRT) has reduced by 36%.

Despite this success HMRC is not complacent. They continue to closely monitor the illicit market in the UK, which today is made up of a mix of unregulated brands, non UK brands, and counterfeit as well as genuine UK brands, to ensure the legislation is working. HMRC also robustly challenge TM’s supply chain policies and procedures to ensure their continued compliance with the rules.

HMRC cannot comment on the progress of individual investigations but it is a matter of public record that one manufacturer has been subject to a supply chain penalty. This penalty is currently under to appeal.