Date of issue: 27th September 2004

NEW CUSTOMS CIVIL PENALTY REGIME

A Birmingham firm of chartered accountants is highlighting the introduction of a new regime of civil penalties, which has been introduced to tackle contraventions of Customs legal requirements and could result in firms being fined several times for the same mistake.

Chartered accountants Clement Keys, Birmingham says the new system of penalties, which came into force in December 2003, is similar to those already in force for VAT. It is designed to encourage importers and exporters to comply with Customs law.

"Companies involved in importing and exporting must adhere to a set of procedural requirements and submit accurate declarations and returns," says Steven Simmonds director of VAT Services at Clement Keys, Birmingham.

"Research shows that while businesses may make errors and often repeat them, these mistakes are rarely so serious as to warrant criminal proceedings. Now, H M Customs and Excise is getting tough on habitual offenders and these new measures, which are an extension of its powers, are intended to be an effective way of penalising, and so reducing, errors."

Initially, errant companies will be sent a warning letter. Then, similar and repeat contraventions will be met with a demand for payment of any duty underpaid plus interest, on top of which fines of up to £2,500 per error will be levied.

In instances where Customs and Excise believes a business is making fraudulent declarations or submitting dishonest claims for repayment of duty or relief from duty, the penalty may be equal, and in addition to, the tax or duty evaded.

Fines will be imposed for contraventions of European Community laws, UK Customs legislation or international rules such as TIR Convention rules, where deficiencies in business systems, poor compliance and serious errors constitute a breach of these regulations.

"Small and medium-sized businesses need specialist help and in particular a compliance review of their systems and procedures to identify problem areas and so help them reduce the risk of incurring a penalty," adds Steven Simmonds.

Clement Keys, Birmingham can assist by reviewing how companies prepare voluntary disclosures to Customs and so removing some potential exposure to penalties. It is also in the company's interest to challenge penalties imposed and the way Customs calculates fines and prepare mitigation arguments.

"We expect H M Customs and Excise to crack down on businesses which repeatedly contravene Customs laws and do not take due care in preparing import/export documentation," says Steven Simmonds.

"The fact that businesses could easily be fined over and over for the same error is a sobering thought, but the new system of civil penalties will certainly be an effective way of ensuring companies improve standards and submit accurate declarations."