Tobacco products duty

Foreword

This notice cancels and replaces Notice 476 (May 2009). Details of any changes to the previous version can be found in paragraph 1.2 of this notice.

Certain sections of this Notice have force of law under the Tobacco Products Regulations 2001, Regulation 7(5). These paragraphs are indicated by being placed in a box.

Example:

Further help and advice

If you need general advice or more copies of HM Revenue & Customs notices, please phone the Helpline on 0845 010 9000. You can call between 8.00 am and 8.00 pm, Monday to Friday.

If you have hearing difficulties, please phone the Textphone service on 0845 000 0200.

For email enquiries about VAT, excise and other duties Enquiries.estn@hmrc.gsi.gov.uk.

If you would like to speak to someone in Welsh, please phone 0845 010 0300, between 8.00 am and 6.00 pm, Monday to Friday.

All calls are charged at the local rate within the UK. Charges may differ for mobile phones.

Other notices on this or related subjects

85C Anti-forestalling restrictions: cigarettes

477 Tobacco Products Duty: Control of supply chains

206 Revenue Trader’s Records

197 Excise Goods: Receipt into and removal from an excise warehouse of excise goods

1. General information

1.1 What is this notice about?

This notice is about tobacco products duty and the fiscal marking requirements for tobacco products. It is primarily of interest to tobacco manufacturers and importers of tobacco products.

This notice deals with the:

• registration of tobacco factories and stores
• records and returns required for registered factories and stores
• payment and repayment of tobacco products duty
• destruction of tobacco products, and
• requirements for the fiscal marking of cigarettes and hand-rolling tobacco.

1.2 What has changed?

A new section 3 contains information on tobacco products which are outside the mainstream tobacco products as detailed in section 2 but are still generally liable to tobacco products duty.

1.3 Who should read this notice?

It is primarily intended for anyone who manufactures or imports tobacco products. However, anyone holding, transporting, selling or dealing in tobacco products should read section 12 and Annex 1.

1.4 What law covers this notice?

The law specifically concerned with tobacco products duty and fiscal marks is the:

• Tobacco Products Duty Act 1979 (as amended by the Finance Act 2006)
• Tobacco Products Regulations 2001 (as amended by the Tobacco Products (Amendment) Regulations 2006) and the Tobacco Products and Excise Goods (Amendment) Regulations 2006 and
• Tobacco Products (Descriptions of Products) Order 2003.

You should also be aware of your responsibilities under the Revenue Traders (Accounts and Records) Regulations 1992.

This notice explains how we interpret the law. Where appropriate, sections of this notice contain a reference to the relevant law. Sometimes the law says that detailed rules on a particular matter will be set out in a notice published by the Commissioners of HM Revenue & Customs, rather than in a statutory instrument. Parts of this notice contain certain requirements which are mandatory. They have legal force and supplement the law. These parts are indicated by being highlighted in boxes as having the ‘force of law’. They have the force of law by virtue of regulation 7(5) of the Tobacco Products Regulations 2001 unless some other provision is mentioned as giving them that effect.

This notice does not deal in any detail with procedures concerning imported tobacco products, which are cleared at the place of importation, warehoused in an excise warehouse or imported by REDS or Occasional Importers. If you import or warehouse tobacco products you should read:

• Notice 197 Excise Goods: Receipt into and removal from an excise warehouse of excise goods
• Notice 203 Registered Excise Dealers and Shippers and
• Notice 204 Occasional Importers – EU trade in excise goods

A list of relevant notices can also be found at the front of this notice.

'Duty' means tobacco products duty unless other duties are named.

1.5 Who should I ask for advice?

If you do not already have existing formal arrangements for contacting HM Revenue & Customs (HMRC) you should, in the first instance, contact the Helpline on 0845 010 9000. If you have documents to lodge you should contact your nearest HMRC office (see under 'HMRC' in your phone book).

1.6 Who is responsible for the health labelling and tar content of cigarettes?

These are matters dealt with by the Department of Health. Current Regulations for which they are responsible include the Tobacco Products (Manufacture, Presentation and Sale) (Safety) Regulations 2002.

These cover the health labelling requirements on tobacco packaging and the maximum permitted yields of tar, nicotine and carbon monoxide. You can find further information on the Department of Health website.

1.7 Do I have any special health and safety duties towards your Officers?

The Health and Safety at Work etc. Act 1974 imposes general duties on employers towards their employees and towards persons other than their employees. The latter category of persons includes any of our Officers who may be visiting your premises on official business. You must indicate any hazards which we may encounter during the course of our official duties. If you are asked by one of our Officers to cease any activity for the purposes of inspection, you must indicate any residual hazards which may remain after you have ceased the particular activity.

2. Liability to/payment of duty

2.1 What goods bear tobacco products duty?

The following goods are all liable to tobacco products duty if they are made wholly or partly from tobacco or from any substance used as a substitute for tobacco:

• cigarettes
• cigars
• hand-rolling tobacco
• other smoking tobacco (which includes pipe tobacco), and
• chewing tobacco.

Duty is not charged on snuff and herbal smoking products. Oral snuff is not liable to tobacco products duty but its sale in the UK is prohibited under the Tobacco for Oral Use (Safety) Regulations 1992.

Cigarette rag and expanded tobacco which can be smoked without further processing are also liable to duty if they pass a duty point (see paragraph 2.17).

You can find detailed descriptions of all of these products in the glossary.

2.2 How is the duty controlled?

Anyone manufacturing, importing or storing tobacco products in duty-suspension must comply with certain legal requirements and directions made by the Commissioners of HMRC. The following requirements are central to the control and collection of tobacco products duty:

• tobacco products may be manufactured only in registered factories
• UK manufactured tobacco products intended for home use may be stored, without payment of duty, only in a registered store
• UK manufactured tobacco products intended for export or other duty free purpose may be stored, without payment of duty, only in a registered store or an excise warehouse
• imported tobacco products may be stored, without payment of excise duty, in a registered store or an excise warehouse, and
• specified tobacco products intended for home use must bear a fiscal mark. (See section 12 and Annex 1.)

The rest of this notice sets out in detail the requirements to be observed, particularly in respect of registered premises. These requirements may sometimes be supplemented or varied as necessary to secure the revenue or to reflect a trader's particular circumstances. Where this happens, we will notify you in writing. Notice 197 Excise Goods: Receipt into and removal from an excise warehouse of excise goods, sets out the requirements and conditions for the receipt and holding of tobacco products in excise warehouses.

2.3 How is the duty on cigarettes calculated?

The duty on cigarettes has two elements:

• an ad valorem component which is a percentage of the retail price, and
• a specific component which is a set amount of money per 1,000 cigarettes.

The current rates of duty are shown in Volume 1, Part 12 of the Tariff (see glossary). They can also be obtained from the Helpline on 0845 010 9000 or from our website www.hmrc.gov.uk.

2.4 What is meant by the 'retail' price?

The retail price is usually taken as the manufacturer's or importer's recommended retail selling price in force at the time the cigarettes become chargeable with duty. That price must include all duties and taxes. No deduction from the price may be made for:

• any token, coupon, card, etc., in a packet, or
• any special offer or reduction unless this applies to all cigarettes of that description and we are satisfied that it constitutes a genuine change in the recommended selling price.

If, at the time they are removed to home use, the cigarettes bear a ‘flashed’ price which is higher than the current recommended retail price, duty must be calculated and paid on the basis of the higher 'flash marked' price. If there is no recommended retail price, duty must be calculated on the highest retail price at which cigarettes of that description are normally sold by retail in the United Kingdom. If you manufacture or import a brand of cigarettes which do not have a recommended retail price, you should contact us for advice.

2.5 On what price is the ad valorem element of the duty based if a brand of cigarettes is sold in more than one pack size?

The duty is normally based on the retail price for packets of 20 cigarettes. A brand may, however, also be sold in packets containing a different number of cigarettes (for example, vending packets). In such a case the ad valorem element of the duty is still calculated by reference to the retail price for 20 cigarettes. The retail price for a standard packet of 20 cigarettes of the brand in question is applied, pro rata, to the number of cigarettes in the non-standard packet. If a brand of cigarettes is not sold in packets of 20 you should contact us for advice.

2.6 Does the length of a cigarette affect the duty?

Any cigarette more than 9cm long (excluding filter or mouthpiece) is treated for duty purposes as if each 9cm length and any remaining part is a separate cigarette. For example, if a cigarette is 12cm long (excluding filter or mouthpiece) it is to be regarded as two cigarettes. The duty payable is reckoned by taking the current percentage of the retail price in the normal way but calculating the specific duty on the equivalent of two cigarettes.

2.7 What brand, price and other information am I required to provide?

Regulation 15 of the Tobacco Products Regulations 2001 requires both manufacturers and importers of tobacco products to provide HMRC with certain information about their brands. The following list details the information that you are required to provide but is not a reproduction of Regulation 15. You must provide the following:

• a list of the brand names of every tobacco product that you manufacture or import
• the retail pack sizes (that is, number of cigarettes per packet, net weight for hand-rolling tobacco and other smoking tobacco, and both the number per pack and net weight for cigars) for each brand
• the retail price that you recommend for each brand, and
• details of any brand and/or pack of tobacco product that you manufacture or import and for which you do not recommend a retail-selling price.

You must advise any changes, deletions or additions to that list or details as soon as possible and always before the changes or additions take effect. We would normally expect you to provide this information in the form of your recommended price list. If you do not have a recommended price list then you can forward the information to us on letter headed paper. Manufacturers should, as part of the premises registration procedure, make arrangements to supply this information at the relevant time to us. Importers can forward the information to us on letter headed paper. Pricing information should be sent to:

HM Revenue & Customs
Tobacco Team
Excise, Stamps & Money Businesses
3W Ralli Quays
3 Stanley Street
Salford
M60 9LA

2.8 How is the duty on other tobacco products calculated?

For all tobacco products, except cigarettes, the duty is based on the weight of the product. The current rates of duty are shown in Volume 1, Part 12 of the Tariff. They can also be obtained from the Helpline on 0845 010 9000 or from our website.

2.9 Must private individuals pay duty on tobacco products made from tobacco which they grow themselves?

Yes. A private individual must pay the duty on any tobacco products that they make from tobacco which they have grown. This applies whether the tobacco products are intended for sale or solely for the grower’s own consumption. Anyone intending to manufacture tobacco products must comply with the conditions set out in this notice. You must register the premises which you use to make tobacco and complete form TP7A to account for all tobacco products that you have manufactured for your own consumption and on which duty is due.

2.10 Must I pay duty on tobacco products used in scientific or technical research?

No. Provided that you meet certain conditions you do not have to pay duty on tobacco products used in, for example, scientific or medical research or other experimental work involving tobacco products. If you wish to use tobacco products without paying duty, you must apply in writing to HMRC well before you intend to obtain the tobacco products concerned. (You can find information on how to contact us in paragraph 1.5 of this notice.) Your application must include details of:

• the tobacco products involved
• the purpose of the research or experiment, and
• the premises to be used.

If we approve your application we will advise you in writing of:

• any special conditions to be met
• the records to be kept, and
• any financial security that may be required.

2.11 Must I pay duty on samples drawn for test by official bodies?

No. Duty is not payable on samples of tobacco products drawn in registered premises for tar, nicotine or other tests required by the Department of Health. You can draw samples in similar quantities without payment of duty for use in your own parallel tests on the premises, provided that the conditions in paragraph 2.12 are met. Duty is not payable on samples drawn for HMRC purposes.

2.12 Must I pay duty on samples drawn for production or quality control?

No. You can draw samples of chargeable products free of duty for production control purposes in the factory. You should apply in writing to us stating your intentions. You must then comply with the conditions we set. In particular:

• you must give prior notice
• quantities must be limited to those essential for the tests
• the tests must relate to commercial production or quality control
• people must not smoke the products
• samples must not be sold, given away or used for any unauthorised purpose
• we must have access to the places to which the samples are removed and where the tests are conducted, and
• samples not used up in the tests must be returned to the production line or destroyed. (You can find further information on destructions in paragraph 11.5.)

These conditions will be imposed under powers granted to the Commissioners by paragraph 2(2) of the Tobacco Products Duty Act 1979 and can be the subject of an appeal if you disagree. (See section 13.)

2.13 Is tobacco refuse liable to duty?

While tobacco refuse remains smokeable it is liable to duty and subject to official control. Our interest in the refuse ceases when we are satisfied that the refuse has been rendered unsmokeable. Tobacco products which become unfit for sale prior to removal from registered premises may be treated in the same way as other tobacco refuse and sent for destruction (see paragraph 11.5.)

2.14 What should I do if I suspect that a brand of pipe tobacco, that I manufacture or import, is being used for making into cigarettes?

The definition of hand-rolling tobacco in article 6 of the Tobacco Products (Description of Products) Order 2003 includes tobacco 'that is of a kind used for making into cigarettes'. If you know or suspect that any of your pipe tobacco is so used, you should contact us to discuss the situation. (You can find information on how to contact us in paragraph 1.5 of this notice.) This is because pipe tobacco used for making cigarettes could attract duty at the rate appropriate for hand-rolling tobacco. We will investigate where we suspect that a brand of pipe tobacco is being used for making into cigarettes, even though it is being sold as pipe tobacco and meets the particle width criteria for pipe tobacco (see definitions in the glossary at the end of this notice). If we consider that the evidence of use renders the tobacco liable to duty at the hand-rolling rate, we will discuss the matter with you as the manufacturer or importer of the brand concerned. We may then advise you that the duty on future removals/clearances of that brand should be paid at the rate appropriate for hand-rolling tobacco.

2.15 When does the product become liable to tobacco products duty?

Liability to the duty arises when the tobacco products:

• enter the UK, or
• reach a smokeable condition in the course of manufacture (whether or not they have been packaged or entered into the production account).

You are potentially liable to pay the duty on any products being processed, stored or transported in a duty-free regime.

Tobacco which can be smoked without further industrial processing is considered to be smokeable, even if it is not considered suitable for retail sale. This includes cigarette rag and expanded tobacco.

2.16 When must the duty be paid?

Regulation 14 of the Tobacco Products Regulations 2001 requires that the duty be paid at or before the excise duty point, unless deferment arrangements apply. Further details on duty deferment may be found at section 10.

2.17 What are the excise duty points for tobacco products?

Unless duty suspension arrangements apply, the excise duty point for tobacco products is the time when the tobacco products are charged with excise duty (that is, the time of their manufacture or importation into the UK). Where duty suspension arrangements apply the duty point is the earlier of the time:

• of removal from registered premises for home use
• of consumption
• of any contravention, or failure to comply with, duty suspension arrangements
• when the contravention of, or failure to comply with, duty suspension arrangements first came to the attention of the Commissioners
• of receipt by a REDS
• of receipt by a person who arranged for a REDS to account for the duty
• of receipt by an occasional importer
• when the tobacco products are charged with the duty, in the case of tobacco products which fail to reach the person or place to which they are consigned
• when registered premises cease to be registered, and
• when tobacco products are found to be missing from registered premises.

Where duty suspension arrangements do not apply to chewing tobacco which is imported into the UK, having been consigned from another Member State, the excise duty point is the time the chewing tobacco is received by the importer, owner or other person beneficially interested in it.

If tobacco products are relieved from payment of duty and there is a contravention of any conditions attaching to that relief, the duty point is either the time of that contravention or (if that time cannot be readily ascertained) the time when that contravention first came to the attention of the Commissioners.

2.18 What happens when the rate of duty changes?

If the rate of duty changes, the new rate will apply to any product which passes the duty point when or after the new rate comes into effect. Tobacco product which is removed from a registered store after 11.59 am on a day upon which the duty rate is increased, will be deemed to have been removed after the increase took effect. Similarly, tobacco product which is removed from an excise warehouse after 11.59 am on a day upon which the duty rate is increased, will be deemed to have been removed after the increase took effect. Where shortages of tobacco products cannot be satisfactorily explained, duty must be paid at the rate in force when the shortage was first discovered.

2.19 When must I account for and pay duty on tobacco products imported from outside the EU?

Tobacco products duty, together with any customs duty and import VAT, is payable at the time of importation unless the goods are:

• removed from the place of importation to registered premises (see paragraph 8.11)
• removed from the place of importation to an excise warehouse (see Notice 197 Excise Goods: Receipt into and removal from an excise warehouse of excise goods for details), or
• imported under any other duty-suspension or duty free regime.

You can find information on import procedures, and how to pay any duties and VAT due, in the Tariff, by contacting our Helpline on 0845 010 9000 or from our website.

2.20 Who is liable to pay the duty?

The person liable to pay the duty is the person holding the tobacco products at the duty point but other persons may be jointly and severally liable to pay the duty. These persons are:

• the occupier of registered premises where the tobacco products were last held before the duty point (unless the tobacco was lawfully removed from those premises and some other person provided the security for that lawful removal, for in such a case the person who provided the security is jointly and severally liable to pay the duty)
• any REDS to whom the tobacco products were consigned
• any person who arranged for a REDS to account for the duty
• any occasional importer to whom the tobacco products were consigned, and
• any person who caused the tobacco products to reach an excise duty point.

An individual employee may be jointly and severally liable if it was through his actions that the duty became payable, for example, if he participated in a theft of tobacco products.

3. Classification of unusual tobacco products

Tobacco products duty described in section 2 of this notice deals with the mainstream tobacco products, namely cigarettes, cigars, hand-rolling tobacco, other smoking tobacco and chewing tobacco. The aim of this section is to highlight the products which are outside of the mainstream and may cause confusion.

3.1 The law

Many unusual tobacco products are imported into the UK rather than being manufactured here. Often when these goods are imported the Customs Tariff is consulted to categorise the goods and calculate any customs duty which may be payable. The Tariff is an internationally agreed system of naming products and although it may give an indication of whether excise duty is payable it does not dictate whether excise duty is due.

Tobacco products duty is charged by Section 2 of the Tobacco Products Duty Act 1979. The products which are liable to duty are listed in section 1 and further defined in the Tobacco Products (Descriptions of Products Order) 2003.

3.2 Products

The table below is not exhaustive but shows some of the products that might need specific clarification in terms of liability to tobacco products duty.

As a general rule, if a product contains tobacco and is smoked or chewed it is liable to tobacco products duty.

3.3 How tobacco products duty is charged

With the exception of cigarettes, tobacco products are subject to duty according to the net weight of the product, that is the product without its packaging. The rate of duty is determined by the classification of the product. Most products will be liable to the rate of duty for other smoking tobacco or chewing tobacco. The duty is applied to the net weight of the whole product, not just the tobacco element. Products made wholly or partly from tobacco, or any substance used as a substitute for tobacco, are liable to duty.

3.4 Exceptions

Generally speaking if the products do not contain tobacco or tobacco substitutes they are not liable to tobacco products duty. For example, herbal smoking products, containing no tobacco at all are not liable to duty.

However, if we suspect that products which are described as herbal actually contain tobacco substitutes, we may need to have the products analysed before we can confirm their duty liability.

Nasal snuff is not subject to tobacco products duty in the UK.

As with all these products, if you are in any doubt about their liability to duty you should contact us and provide full details of the product.

3.5 Contact

If you wish to manufacture or import tobacco products in the UK and are unsure about the liability please contact the Helpline on 0845 010 9000.

4. Registered premises – general information

4.1 What are registered premises?

Premises used for the manufacture or safe storage of tobacco products must be registered under Regulation 4 or 5 of the Tobacco Products Regulations 2001. Registered premises is the collective term used to describe both registered factories and registered stores.

Registered factories and stores are covered in more detail in sections 4 and 5. The section covers general information which applies to both types of registered premises.

4.2 How do I apply for registration?

If you wish to open a new tobacco factory or store you should write to us. If you already manufacture tobacco products in the UK you will have an established contact point. If you are opening manufacturing premises for the first time your first point of contact should be:

HM Revenue & Customs
National Registration Unit
Portcullis House
21 India Street
Glasgow
Strathclyde
G2 4PZ.

You must include the following information in your letter:

• the address, purpose, and intended production or storage capacity, of the premises
• a detailed plan of the premises showing the areas where you intend to manufacture tobacco products or process refuse or store tobacco products (see paragraphs 4.7 and 4.8)
• whether the tobacco products to be manufactured or stored are intended for home use, export, or both
• the security arrangements for the premises concerned (see section 7)
• the hours during which the premises will be open
• details of the accounting arrangements including any request for electronic removal (see section 9)
• the definition of your bulk unit (see paragraph 6.8)
• a statement of whether or not you wish to break bulk in the registered store (see paragraph 6.8), and
• a request, if appropriate, that the registered store be approved for 'import account' (see paragraph 8.11).

Once we are satisfied that the required conditions (see paragraph 4.4) have been met you will be issued with a registration letter. The registration letter will contain details of the premises registered and any particular conditions applying to those premises.

4.3 Can HMRC revoke the registration of my premises?

Under powers granted by Regulation 6 of the Tobacco Products Regulations 2001, we may revoke the registration of premises where there has been failure to comply with or contravention of any:

• condition or requirement attaching to the registration, or
• requirement imposed by this notice which has the force of law (see paragraph 1.4) or for any other reasonable cause.

Under powers granted by Regulation 10 of the Tobacco Products Regulations 2001, we may revoke an approval for 'electronic removal' in a registered store (see section 9).

Where we revoke your approval we will normally give you not less than three months’ notice. However, if, in exceptional circumstances, we consider it necessary for the protection of the revenue, we may give less than three months’ notice.

4.4 What conditions must be met before HMRC will register premises as a factory or store?

Before we register any premises as a factory or store you must satisfy the following conditions:

• the premises to be registered, as outlined on your plan, must be physically secure (see also paragraph 7.1)
• there must be adequate and acceptable arrangements for the control of goods, persons (including company personnel, visitors, maintenance contractors, refuse collectors and any other persons having authorised access to the premises), and vehicles entering or leaving the premises
• you must be able to provide any financial security (for example, a guarantee) which we may require (see section 7)
• your records and accounting systems must be adequate and acceptable to us and should include

– the arrangements for submitting the TP7 and accounting for duty (see paragraph 8.7 and section 10)

– details of whether or not a separate TP7 return is required for each of the registered premises from which tobacco product is removed to home use

– details whether the TP7 is required for daily removals or removals over a longer period (usually the accounting period for duty deferment purposes)

– provision of access by us to your computer systems in relation to your business as a revenue trader

– the arrangements whereby you notify us of any serious problems, such as a computer failure, must have been agreed by us

– the arrangements for monitoring any deferred payment facilities, which may have been granted, must have been agreed by us and

– in the case of a factory, the point and time in the production process at which the tobacco product is entered into the production account.

Failure to comply with these conditions may result in a refusal to register the premises concerned.

4.5 What conditions apply to registered premises in general?

The following general conditions apply to registered premises:

• registered tobacco premises must only be occupied by one manufacturer of tobacco products
• tobacco products must not be sold, to persons other than tobacco manufacturers, before removal from registered premises unless the goods are not eligible for removal to home use
• all tobacco products deposited in a registered store must be in packages identified by legible and permanent markings, and
• all tobacco products deposited in a registered store must be produced without delay on request by us.

HMRC can impose additional conditions if they consider it necessary for the protection of the revenue.

4.6 What does 'occupied' mean?

We consider premises to be occupied by a manufacturer if:

• they are registered in the name of the manufacturer whose product is going to be manufactured or stored in the premises concerned
• the tobacco product remains the property of the manufacturer (or the responsibility of the manufacturer, in the case of imported product where the manufacturer does not own the goods but takes control as the sole UK agent for the product)
• the manufacturer pays or accounts for any duty due upon the removal of the tobacco product, and
• the manufacturer gives any premises guarantee that may be required.

4.7 What physical area does the registration of a factory or store cover?

The registration will always clearly define the area within which, provided that all the conditions are met, tobacco products may be manufactured or stored. When you apply for registration you must submit a plan of the premises which you wish to register as a factory or store. It is possible for the registered factory or store to cover only part of the commercial premises. Tobacco products duty must have been paid, secured or otherwise accounted for on any tobacco products outside registered premises (except as may be allowed in exceptional circumstances by us).

4.8 Do registered premises have to be a building?

'Premises' do not have to be a building but do have to be an enclosed area of ground. As a manufacturer you can apply to register, as a store, an area of ground instead of a building or part of a building. We refer to registered stores which are not buildings as 'open-air' stores. They are acceptable in principle provided that all other conditions or requirements concerning the registration of a store can be met. These conditions are set out in paragraph 6.6 of this notice.

4.9 What conditions apply to the use of computer records for stock control and/or accounting purposes?

Specific software packages are not endorsed by HMRC. Your obligations regarding stock control, duty payment, etc., are the same whether you have manual or computer systems. Software packages which have been accepted for use in some warehouses or registered premises may not be appropriate for use in others. If you wish to use computer records you should apply to us sufficiently in advance to allow our requirements to be incorporated into your proposal. Details must be provided of the system that you intend to adopt. Any existing manual system must be maintained until such time as we permit the use of a computer system. You may also apply to us for permission to use computer generated versions of official forms. You should include specimens of the computer generated forms with your application, so that we can check that they meet official requirements. Where we approve the use of computer records, conditions will usually be imposed under section 118A of the Customs and Excise Management Act 1979. The conditions will require:

• the right of access by us to the computer systems and their documentation (including financial and management systems) in relation to your business as a revenue trader
• the provision of any necessary assistance to us during audits of the systems
• the provision of print facilities for the information accessed
• the inclusion of the computer system in your annual audit (and the auditor’s report being made available to us)
• adequate security, fallback and recovery systems, and
• advance notice of any proposed changes to the system. (Such changes must not be introduced without our approval.)

Failure to comply with these requirements may result in a refusal to register the premises concerned or lead to the revocation of the registration. You must ensure that safeguards exist to protect your system from inadvertent corruption whilst being viewed by us. We suggest that you:

• provide a terminal for official use which is capable only of accessing the system and displaying information on the VDU, and
• allocate a unique password to us which will allow the system to be accessed on a 'read only' basis.

Please remember that additional conditions apply to 'electronic removal' which is dealt with in section 9.

4.10 What notification must I give if I want to alter or extend the structure of my registered premises, the security arrangements or working hours?

Unless you already have alternative arrangements in place with us, you must write to the National Registration Unit in Glasgow (the full address is at paragraph 4.2) if, at any time after the premises have been registered, you intend to extend or reduce the premises or alter the security arrangements. You must give at least 30 days notice of your intentions. You must also give 7 days notice of alterations to the times when the premises are open. You should also advise us well in advance of any other intended changes, for example, to your computer systems, which may affect the registration of the premises.

4.11 When can I receive imported tobacco products into my registered premises without payment of duty?

You may receive imported tobacco products, from other EU Member States or third countries, into your registered premises either direct from the place of importation or via an excise warehouse, without payment of tobacco products duty provided that any customs duty has been paid or accounted for (that is, the payment has been deferred under duty deferment arrangements agreed with HMRC).

In the case of tobacco products in free circulation, the appropriate arrangements for the receipt of such goods will apply. (See Notice 197 Excise Goods: Receipt into and removal from an excise warehouse of excise goods for details.)

In the case of tobacco products entered for free circulation at the port or airport of importation or in a customs and excise warehouse, any examination and account for excise duty purposes may be done at:

• the place of importation, or
• any other place, including registered premises, which has been approved for this purpose.

4.12 What are the procedures for exports of tobacco products from registered premises to other Member States?

Current procedures and instructions for consigning goods to other EU Member States are contained in Notice 197 Excise Goods: Receipt into and removal from an excise warehouse of excise goods.

4.13 What are the procedures for exports from registered premises to countries outside the EU?

Full details for exports to destinations outside the EU are contained in Notice 197 Excise Goods: Receipt into and removal from an excise warehouse of excise goods.

4.14 Can dispatches of goods to other EU Member States from registered premises be consolidated prior to leaving the UK?

Yes, provided that the conditions in Notice 197 Excise Goods: Receipt into and removal from an excise warehouse of excise goods are satisfied. Those conditions, applying at the date of this notice, are that:

• the movement takes place under a single transport contract for the goods
• the original copies 2, 3 and 4 of the AAD always accompany the goods to which they relate
• the journey time stated in box 17 of the AAD allows for the groupage process
• the movement is not unduly delayed by groupage
• changes to the transporter are recorded in box 11 of the AAD
• the transporter notifies the consignor of any identified losses, and
• if you group duty-suspended and duty-paid goods, you must ensure that you load the duty-paid goods before the duty-suspended goods.

You should always check the latest edition of Notice 197 Excise Goods: Receipt into and removal from an excise warehouse of excise goods in case there are any changes to the requirements listed above.

4.15 Can removals from registered premises, for export to non-EU countries, be consolidated at unauthorised premises within the UK?

The same general principles apply as for exports from excise warehouses (see Notice 197 Excise Goods: Receipt into and removal from an excise warehouse of excise goods. Consolidation of duty-suspended and other goods at unauthorised premises (within the UK) may be allowed under the following conditions:

• you must not store excise goods in unapproved premises
• the movement takes place under a single transport contract for the goods
• you cannot regroup full container loads
• if you group duty-suspended and duty-paid goods, you must ensure that you load the duty-paid goods before the duty-suspended goods
• you must not interfere with the goods
• you must produce the container for examination at shipment
• you must record full details of pre- and post- groupage transport on the accompanying paperwork, and
• you must notify us of any losses identified at groupage.

You should make a written formal request to us for this facility.

5. Registered Factories

5.1 Do I have to register my factory premises?

You must apply for registration of any premises in which you intend to manufacture tobacco products for purposes other than research or experiment. The manufacture of tobacco products other than in registered factories is illegal unless the products are to be used for the purposes of research or experiment. You should contact us if you think that your intended manufacture falls within the scope of research or experiment. See paragraph 4.2 for details of how to apply for registration.

5.2 Can I store tobacco products in my registered factory?

You must remove all tobacco products from your registered factory by the end of the first business day following the day of manufacture. We may allow you to dispense with this condition in exceptional circumstances but you should contact us as soon as possible if you feel that this is necessary. For the purposes of this requirement, the tobacco product is considered to have been manufactured once it crosses the Production Account Point (see paragraph 5.4). This should mean that, in practice, the day of manufacture will be the day the tobacco product is recorded in the production account (see paragraph 8.2).

5.3 Can I remove tobacco products direct from my registered factory to home use?

Subject to any fiscal marking (see section 12 and Annex 1) or other requirements, you may remove tobacco products from your registered factory to home use on payment of the duty. This amounts to a 'factory gate' duty point and you should discuss the implications with us.

5.4 What is the Production Account Point?

This is the precise, clearly defined physical point through which all tobacco products are channelled after manufacture, but before they enter a registered store, where the production account is raised

6. Registered stores

6.1 What storage premises can be registered?

We may register premises for the safe storage of tobacco products without payment of duty, provided that they are:

• secure
• under your direct control
• properly operated, and
• covered by your accounting system using documentation and an audit trail acceptable to us.

6.2 Who can apply for a registered store?

Only a manufacturer who occupies a registered factory can apply for a registered store. The definition of 'manufacturer' is that given in Regulation 3 of the Tobacco Products Regulations 2001 (see glossary).

6.3 Will you register, as a store, storage facilities which I lease rather than own?

Yes. Manufacturers can lease a facility, which is owned and operated by an unrelated storage company, provided that the:

• store is registered in the name of the manufacturer whose product is going to be stored in the premises concerned
• tobacco product remains the property of the manufacturer (or the responsibility of the manufacturer, in the case of imported product where the manufacturer does not own the goods but takes control as the sole UK agent for the product)
• manufacturer pays or accounts for any duty due upon the removal of the tobacco product and
• manufacturer gives any premises guarantee that may be required.

6.4 Can part of an excise warehouse also be registered as a store?

No. The same area of a building cannot be both an excise warehouse and a registered store. It is, however, possible for a registered store to be physically part of a larger building and for the rest of the building to be an excise warehouse. Where the registered store is physically attached to an excise warehouse all of the following conditions apply:

• entrances and exits are to the outside and not through the excise warehouse
• there is no access through the registered store to any other building or part of the building
• any dividing wall between the registered store and any other building or part building, whether or not under HMRC control, should preferably be a solid wall of brick or concrete block
• such a dividing wall may, however, consist of heavy gauge metal grid provided that it is permanent, immovable, extends from floor to ceiling or roof, is of a small enough mesh to prevent the removal of tobacco products and be as proof against forced entry or accidental impact as the rest of the store walls, and
• there should be no uncertainty as to the extent or separate nature of the registered store and any adjoining building, whether or not any adjoining building is under HMRC control.

Failure to comply with these conditions may result in a refusal to register or the revocation of the registration of the premises concerned.

6.5 Can I store my tobacco product in an excise warehouse instead of a registered store?

Tobacco product that has been manufactured in the UK and which is intended for home use may only be stored in duty-suspension in a registered store. UK manufactured tobacco product which is intended for export or any other duty-free purpose may be stored in an excise warehouse but may not be removed to home use from the excise warehouse. Imported tobacco products which are intended for removal to home use in the UK can be stored in an excise warehouse.

6.6 Are there other conditions that apply to the registration of 'open air' stores as described in paragraph 4.8?

Yes. The following additional conditions also apply to premises that are to be registered as an open air store:

• the store must be secure
• accurate records are kept of the tobacco product received into, stored within and removed from the store
• the tobacco product must be identifiable against the records for the purposes of stock checking
• all conditions pertaining to electronic removal must be met (if approval for electronic removal is requested)
• a detailed plan of the premises to be registered as an open-air store must be provided to the National Registration Unit
• the premises to be registered as an open air store must be on land that is occupied by the manufacturer, although there need not be a registered factory on the same land
• the premises that are to constitute an open-air store must be enclosed by a wall or a fence at least three metres tall
• the boundary wall or fence demarcating the store must be robust, fixed into the ground and secure enough to prevent cases of tobacco product from being passed over, under or through or it
• any fence must consist of a heavy gauge metal grid/mesh small enough to prevent the removal of anything larger than individual retail packs of tobacco products
• the wall or fence demarcating the open-air registered store may, if necessary, also form part of the site perimeter fence provided that we consider the particular premises to be secure and suitable for the safe storage of tobacco products. Any common wall or fence that both demarcates the open-air store and also forms part of the perimeter of the manufacturers whole site must be as high as the perimeter wall/fence if that is higher than three metres and may be required to be more substantial than the rest of the fence enclosing the store
• in addition, CCTV or other surveillance should allow detection of illicit entry or removal of tobacco products at any time of day or night
• access and egress, to and from the registered store, must be controlled by the manufacturer
• the open-air store can only be used for the storage of tobacco products in road/rail/sea transport containers, unless additionally approved for the storage of innocent goods (see paragraph 6.10)
• tobacco products must be kept in uniquely identified transport containers within the registered open-air store
• the transport containers must be parked or placed within clearly and permanently marked locations within the open-air store
• the location of each transport container must be shown in the store records
• the pallets within the transport containers must be individually identified
• the contents of each separately identified transport container must be recorded in the store records down to pallet and case level, and
• tobacco product, which your records show as being held in the open-air registered store, should not be held anywhere other than in that store.

6.7 Can I re-pack tobacco products in a registered store?

Yes. You can re-pack tobacco products in a registered store provided that you give us reasonable notice of your intentions. We would normally expect the period of notice to be at least 24 hours, not including weekends and public holidays. If you intend to carry out continuous or regular re-packing you may agree standing arrangements with us.

Your re-packing operations may affect your registration conditions relating to 'breaking bulk' and 'offsetting' (see paragraphs 6.8 and 8.10). You should discuss this with us.

6.8 What does 'breaking bulk' in a registered store mean?

'Bulk' in this context means the bulk production unit (for example a stock case or tray) in which the products have passed the Production Account Point, as distinct from the smaller units (for example, 20 or 200 cigarettes) in which they are normally put up for retail sale. You must agree what is to be regarded as the 'bulk unit' with us. Breaking bulk, means opening bulk units to remove internal packages. 'Offsetting' (see paragraph 8.10) may be allowed only if you have elected not to break bulk within the registered store. If the terms of your premises registration permit you to break bulk within the registered store, you will be expected to account for the duty on all stock deficiencies and not take credit for any surpluses that might otherwise be offset.

See section 9 for particular conditions applying to registered stores which are approved to use 'electronic removal'.

6.9 Must I put imported tobacco products into my registered store?

No. If you do not wish to put imported tobacco products into your registered store there are a number of alternatives available to you. For information about importations to warehouses or by REDS etc., you should read Notice 197 Excise Goods: Receipt into and removal from an excise warehouse of excise goods, Notice 203 Registered Excise Dealers and Shippers and Notice 204 Occasional Importers, or consult the Helpline on 0845 010 9000.

6.10 Can I store 'innocent goods' (goods that are not subject to excise duty) in my registered store?

If you wish to store innocent goods in your registered store, you should make a written request to us. Your request should be made either when applying for the registration of the store, or later as a request for variation of the conditions of the registration.

You should consider the following points before you request this facility:

• stores are registered for the safe storage of tobacco products without payment of duty. It follows that, wherever possible, you should request the de-registration of premises or part-premises which are to be used for the storage of goods other than tobacco products
• where such de-registration is not practicable, you may request a variation to the registration of the store concerned, to allow the storage of innocent goods therein
• any particular conditions relating to such storage will be stated in the registration letter for the premises concerned
• innocent goods must be physically segregated within the store, unless the store’s (electronic removal) computer stock record system is capable of recording and tracking the movement of the innocent goods into, within and out of the store concerned
• any customs duty or import/acquisition VAT due on the innocent goods must be paid or accounted for before the goods enter the registered store
• you will not be permitted to store other exciseable goods (goods containing alcohol or oil products) in your registered store, and
• the storage of innocent goods within registered factories will not be permitted.

6.11 Can I receive back into my registered store tobacco product that I inadvertently removed to an excise warehouse?

Yes, subject to the following conditions:

• the product was removed to an excise warehouse for export in accordance with Regulation 9 of the Tobacco Products Regulations 2001
• the product was not fiscally marked and was not intended for home-use
• that we allow the goods to be removed from warehouse under regulation 16(1)(e) of the Excise Warehousing (Etc.) Regulations 1988, and
• you have retained ownership of the goods, or take ownership of the goods before you receive them back into your registered store.

6.12 When can I remove tobacco products from my registered store without payment of duty?

Subject to any fiscal marking (see section 12 and Annex 1) or other requirements, you may remove tobacco products from your registered store without payment of duty for any of the following purposes:

• removal to other registered premises
• warehousing in an excise warehouse for any purpose other than home use
• exportation, removal to the Isle of Man or shipment as stores
• destruction or other disposal to the satisfaction of the Commissioners, or
• such other purpose (except home use) as the Commissioners may permit.

6.13 Can I put tobacco products manufactured by other UK manufacturers in my registered store?

Yes. You can store tobacco products which were produced by another manufacturer in your registered store provided that you take ownership of them.

6.14 Can I, as a wholesaler or retailer, store UK manufactured tobacco products in duty suspension?

No. UK manufactured tobacco product, which is intended for home use and on which duty has not been paid, can be stored only in a registered store. Such storage is limited to the companies involved in the manufacture of tobacco products.

7. Security – physical and financial: information for manufacturers

7.1 What are my responsibilities for the physical security of my registered premises?

You are responsible for protecting tobacco products in your registered premises from improper interference or abstraction. This responsibility is not reduced by our official checks or presence. You should pay special attention to your security arrangements between the stage at which raw material is first made into a smokeable product and the point at which the Production Account is raised.

The structural security of your premises and the control of goods, persons having authorised access to the premises, and vehicles entering or leaving your premises are your responsibility. We can, however, require you to make improvements in your arrangements if we think that the registered premises have become unsatisfactory for the purpose for which they are registered.

You should also ensure that all persons on your registered premises are aware that:

• duty may not have been paid on the tobacco products on your premises, and
• illicit removal is a revenue offence for which they may be prosecuted.

Our warning Notice 70 is available for display throughout your premises but you can use your own form of notice if it carries a similar warning. You can obtain copies of Notice 70 by contacting us.

7.2 Do I need to provide financial security?

It is compulsory to provide financial security for goods which are in transit in the UK. Additionally, we can, if we deem it necessary for the protection of the revenue, require you to provide security for the duty on tobacco products which is chargeable but has not yet been paid or accounted for. This applies to:

• products in registered premises, and
• products used for research or experiment in approved premises.

7.3 Can you enter and inspect registered premises?

Our Officers have powers:

• of entry to your premises at any reasonable hour
• to inspect vehicles on, entering or leaving your premises
• to require the production of documents relating to the tobacco products, and
• to require access to your computer systems in relation to your business as a revenue trader.

8. Records and returns: information for manufacturers

8.1 What records of materials must I keep for a registered factory?

8.2 What record of production must I keep for a registered factory?

Under Regulation 14(3) of the Tobacco Products Regulations 2001 you are required to keep a Production Account. This is a continuous daily account of the quantity of tobacco products made in the factory.

For each tobacco product the Production Account must show:

• the quantity produced
• the type, brand and size of retail packet, and
• the date of production and entry into that account.

The Production Account need not show any products intended for immediate recycling in the same factory.

The Production Account will normally be based on the number of retail packs per bulk unit, for example, stock case or tray (see paragraph 6.8) in which the products are to be stored. The point at which the Production Account is raised is the accounting point for establishing the daily quantity of tobacco products that you manufacture. It must be based on accurate physical counting of all products made.

The point at which the account is raised must be before the product is removed from the factory. The time at which the Production Account is raised may be when the tobacco products are first put into a state suitable for consumption, or put into a state suitable for removal, or packed for delivery. The point and time at which the Production Account is raised, as agreed with us, will be detailed in the registration letter for the premises concerned. If you wish to alter the Production Account Point you must obtain approval from us.

You are required to preserve the Production Account for not less than six years, unless we allow otherwise.

8.3 What record of materials reconciliation must I keep?

You should reconcile the quantities of materials received into your factory with the quantities of tobacco products that you manufacture.

Under Section 8(1) of the Tobacco Products Duty Act 1979 you may be required to provide a written statement or return accounting for tobacco products, or materials for their manufacture, which are or have been in your possession or under your control. The length of the period covered by the statement or return must be agreed with us. This period can be suited to the size and nature of operations and the accounting arrangements at the factory, but it will not normally exceed three months. Your own reconciliation procedures will normally form the basis for the statement/return and will be subject to audits and checks by us.

8.4 What records must I keep of tobacco products removed from a registered factory?

As the occupier of a registered factory you must keep an account of all tobacco products removed from the factory. You must keep each such account at the registered factory unless we advise you in writing that you may do otherwise.

Each account must contain the following details for tobacco products which have been removed from the registered factory:

• the date
• the type of tobacco product
• the brand
• the size of retail pack
• whether or not the packs bear a fiscal mark
• the quantity of tobacco products in each outer package or carton and the number and distinguishing marks of such packages or cartons, and
• the date of the entry in the production account or the number and date of the delivery document.

These must be preserved for a period of six years, or such lesser period as we may allow.

8.5 What accounts and records must I keep for a registered store?

As the occupier of a registered store you must keep stock accounts of all tobacco products received into the store, operated upon within the store and removed from the store. You must keep each account at the registered store unless we advise you in writing that you may do otherwise.

These records must be preserved for a period of six years, or such lesser period as we may allow.

Each account must be balanced and reconciled with stock held in the store on a regular basis as agreed with us.

8.6 What records must I maintain concerning the receipt of tobacco products from other registered premises?

Tobacco products received from other registered premises must be entered in the store records in the usual manner. These will be subject to inspection and audit by us.

8.7 What return must I make if I remove tobacco products to home use?

Duty is payable on all removals to home use.

If you remove product to home use from registered premises you are required to submit a return (TP7) showing the quantities of products delivered to home use and the amount of duty due. A TP7 return must be submitted daily unless you are approved for duty deferment. In that case you may be permitted to submit the TP7 on a monthly basis. The submission of a monthly TP7 must be agreed by us.

8.8 What returns or records must I, as the occupier make or keep for tobacco products removed without payment of duty from registered premises?

You will not normally be required to complete an official return for removals for purposes other than home use. In most cases the records that you are required to keep and your commercial documentation, which accompanies the tobacco products, will be sufficient. We must agree your record systems and be satisfied that your commercial documents are sufficient for our purposes.

The requirement to keep store and factory records and keep and preserve consignment notes and invoices is imposed under powers granted to the Commissioners by the Revenue Traders (Accounts and Records) Regulations 1992. The records required must be preserved for a period of six years, or such lesser period as we may allow.

The following requirements are imposed under powers granted to the Commissioners by Regulation 6 of the Revenue Traders (Accounts and Records) Regulations 1992.

The requirement for any customs entries, transit documents or other official forms (for example, C88, AAD, C426 or C185) is additional to the records and commercial documentation listed above.

8.9 What should I do about stock discrepancies?

You are required to notify us without delay of any discrepancy you find between the quantities shown in your stock records and those actually held in the store. You are potentially liable to pay duty on:

• any deficiencies found in the physical stock, and/or
• any surplus quantities not properly recorded in your stock accounts.

8.10 Can I offset deficiencies of stock against surpluses of stock?

Minor picking errors may occur from time to time resulting in discrepancies, (surpluses or deficiencies), in the stock records which cancel each other out over the monthly accounting period. In other cases it may be possible to show that individual deficiencies and surpluses result from related bookkeeping errors, rather than from actual changes in the physical stocks.

As a concession you may be allowed to offset individual deficiencies and excesses provided that:

• you do not break bulk within the registered store (see paragraph 6.8)
• you notify us of any discrepancies as soon as you discover them (or at such other times as agreed with us)
• you can provide the necessary evidence to satisfy us that the individual discrepancies represent no more than bookkeeping or simple picking errors
• the errors involve packets of the same brand and retail price and do not result in any actual deficiency or surplus of stock
• all offsetting arrangements must be agreed with us
• any offsetting arrangements are without prejudice to the fiscal marking requirements and Regulations, and
• a request to 'offset' stock in this manner constitutes a claim that duty has been paid or secured on the discrepancies. The burden of proof for this lies with you as the occupier of the registered store concerned.

If the errors are not self-balancing within the monthly accounting period, you may be allowed to carry a surplus forward to the following month. This will only be allowed if a compensating error is expected to cancel out the apparent surplus. A surplus cannot be carried forward for more than one accounting period. Deficiencies cannot be carried forward. Duty must be paid on any unresolved deficiencies within the accounting period.

8.11 What is the procedure for receiving tobacco products imported from a third country (that is, not in free circulation)?

The procedures are the same as those shown in Notice 197 Excise Goods: Receipt into and removal from an excise warehouse of excise goods, for excise goods imported to an excise warehouse. Note that any customs duty must have been paid or accounted for before the tobacco product is received into the registered store.

8.11.1 Import account raised at the registered store

Tobacco products may be removed from the port of importation to the registered store for examination, provided that they are:

• entered correctly for deposit in registered premises, and
• imported in secure containers containing no other goods.

Approval for the first account of the goods (the 'import account') to be taken at the registered store must be contained in the registration letter referred to in paragraph 4.2. You may also apply in writing at a later date to us.

8.11.2 Containers selected for examination at the port

Imported tobacco products may be selected for examination, and an import account raised, at the port of importation. You may, with our prior agreement, request that the goods be examined at your registered store. In such cases the goods will be officially sealed before leaving the port and you must not break the seals until authorised by us. In order to minimise delays you should notify us in good time of the expected arrival of containers under official seal.

8.11.3 Containers cleared at the port

Imported tobacco products cleared at the port will not be officially sealed. The tobacco products may be taken into your registered store but you must tell us immediately if there is any discrepancy between the goods actually received and what is shown on the import declaration.

8.11.4 Single Administration Document (Form C88)

A photocopy of the C88 must accompany the tobacco product from the port of importation to the registered store. You will need to take a further copy for retention in the store records for at least six years.

9. Electronic removal in registered stores: information for manufacturers

9.1 What is electronic removal?

This is an optional and additional facility to:

• allow, in suitably approved registered stores, tobacco products to be 'removed' to home use on payment of tobacco products duty without physically leaving the registered store, and
• permit the continued storage of such duty-paid tobacco products within the registered store.

Electronic removal amounts to a change from duty-suspended to duty-paid status in the records kept on a computer or other electronic system and is an irreversible transaction. Your computer/electronic system must preclude the possibility of any deliberate or accidental reversal from duty-paid to duty-suspended status.

You should note that any specific requirements concerning electronic removal are in addition to the other conditions applying to registered stores.

9.2 How do I apply for approval to operate electronic removal in my registered store?

You must apply to us for approval to operate electronic removal in a particular store. Before we grant approval, we will examine the computer system that you propose to use, and will advise you of any modifications which are necessary. You should, therefore, approach us as early as possible in the planning stage.

9.3 What does my computer system have to be capable of?

We will advise you of all the requirements for the system, but these will include the following:

• tracing and recording all movements of tobacco products, as well as any changes in duty status, within the registered store (this includes freezing of stock, changes of location, sampling and stock adjustments)
• uniquely identifying stocks, in order to facilitate physical stock checking
• preventing unauthorised access to, and changes to, file data
• an internal clock showing the correct date and time
• accurate calculation of any duty due
• allowing, at any time, authorised alterations to:

– the current duty rate held on file

– the recommended retail prices of all brands of cigarettes stored, and

– production of reports of amendments and cancellations, so that these can be investigated.

Failure to comply with these requirements may result in a refusal to register, or lead to the revocation of the registration concerned.

9.4 Can I use both physical removal and electronic removal in the same registered store?

No. Only one type of removal may be used for determining the change of status of tobacco products from duty-suspended to duty-paid, within the physical area designated as the registered store. The registration may be altered to allow physical removal in exceptional circumstances and for the period of time that the electronic removal system is inoperable. You should contact us for advice in such circumstances.

9.5 What are the rules on 'breaking bulk' in a store where I operate electronic removal?

In order to operate a break bulk/mixed picking area, the bulk units must first be electronically removed, then physically transported to a physically demarcated duty paid location. You should discuss your proposals and our detailed requirements with us.

Should you wish to break down bulk units that have been electronically removed but which are still located within the mixed storage area, you should contact us immediately for advice.

9.6 How long do records of electronic removals have to be kept?

The records required must be preserved for a period of six years, or such lesser period as we may allow.

If you want to keep records on a medium other than paper (for instance, microfilm or microfiche), you also need our approval. See Notice 206 Revenue traders’ records for further details.

9.7 What should I do in the event of a computer breakdown?

You should follow the procedures as set out in your registration letter and any instruction or advice that you subsequently receive from us.

9.8 Do any special conditions apply on Budget Day?

Yes. Regulation 9(6) of the Tobacco Products Regulations 2001 also applies in the case of electronic removal. This means that any electronic removal of tobacco product after 11.59 am on a day upon which the duty rate is increased, will be deemed to have been removed after the increase took effect. (See also paragraph 2.18.)

10. Duty payment and duty deferment: information for manufacturers

10.1 How do I pay the duty?

Unless you are approved to pay duty under duty deferment arrangements, payment is required on a daily basis before the tobacco products are removed to home use. You should contact us to make the necessary arrangements.

10.2 What is duty deferment?

Duty deferment is a system whereby the duty liability on goods removed to home use is accumulated during an accounting period and payment is made usually about two weeks after the end of the accounting period. Full details can be found in Notice 101 Deferring duty, VAT and other charges.

10.3 What is the duty deferment period?

The deferment accounting period for tobacco products duty, on removals to home use from registered premises, is the calendar month. Payment day is the 15th day of the month following the accounting period. If the 15th falls on a non-business day, payment must be made on the next business day.

10.4 How must I pay?

Under the deferment system, payment is made by direct debit. If an emergency affects the direct debit method of payment in any period you will have to pay by some other means. We will contact you if this happens.

10.5 How do I apply for duty deferment?

If you want to apply to defer excise duty (tobacco products duty), you should follow the procedures set out in Notice 101 Deferring duty, VAT and other charges. Notice 702 Imports has additional information about deferral of VAT. Notice 232 Customs warehousing also gives guidance on deferment of customs duty.

When you return the completed forms, please make it clear that you are seeking approval for deferment of tobacco products duty on tobacco products removed from registered premises and quote 'Notice 476'.

10.6 What financial security must I give?

You will normally be required to provide financial security in the form of a guarantee given by a financial institution approved by us for that purpose. This deferment guarantee is additional to and separate from any other security we require (for example, a guarantee to cover the excise duty on tobacco products moving between EU Member States).

The guarantee must fully cover the first £5 million of your monthly duty liability. Any additional monthly duty liability of between £5 million and £50 million need be only partly secured. This means that you will have to provide security for the first £5 million plus 10% of your duty liability between £5 million and £50 million.

If, for example, your monthly duty liability were £50 million, your guarantee would be £9.5 million that is, £5 million (for the first £5 million of the total liability) + £4.5 million (that is, 10% of the remaining £45 million of the total liability).

The maximum guarantee that you may be required to provide is £9.5 million. This is because no extra guarantee is required for monthly liabilities above £50 million. Your guarantor can be liable for up to twice the amount shown on the guarantee. This is because you can defer up to your guarantee limit in one month and then again in the next month before you have paid for the first month.

If your extra liabilities in peak periods exceed your existing guarantee you must provide supplementary guarantees. Notice 101 Deferring duty, VAT and other charges provides further details.

10.7 Am I able to defer payments of excise duty without a guarantee?

Yes. Under the Excise Payment Security System (EPSS) you can apply for authorisation to defer payments of excise duty without providing a guarantee. If you are authorised you can benefit from a reduction in your deferment guarantee by not providing security for your deferred payments of excise duty. If you want to apply for authorisation you should follow the action set out in Notice 101 Deferring duty, VAT and other charges.

10.8 What is the duty deferment procedure each month?

You request deferment on the duty return (form TP7). You should complete two copies of the return with details of the duty liability in the agreed accounting period and present it to us within the agreed time limit. This will normally be within four working days of the end of the calendar month. Before each payment day you will receive from our Central Deferment Office an advice of the amount that will be debited on payment day.

10.9 What happens if I exceed my deferment limit?

You must pay cash using form TP7. As soon as you exceed or think that you may exceed your deferment limit, you should contact us. If you are refused deferment facilities, either permanently or for the remainder of a month in which you exceed your guarantee limit, you will be allowed to remove tobacco products only against pre-payment of the duty in cash or by guaranteed cheque on a daily basis. That is why it is important for you to get your guarantee level right and operate the approved arrangements properly. You should therefore:

• keep a separate running total of each day's duty liability
• monitor the running total against your deferment guarantee limit, and
• tell us when 90 per cent of the guarantee limit for the calendar month has been exhausted.

10.10 Must I give notice of any changed circumstances?

Yes. Notify our Central Deferment Office (see Notice 101 Deferring duty, VAT and other charges) immediately if:

• you cease trading
• your business name or address is changed, or
• you wish to make any other change in the details declared in your application for deferment approval.

11. Repayment/offsetting of duty on customer returns

11.1 Can I, as a manufacturer, reclaim duty on tobacco products returned to registered premises?

You should claim a repayment of duty under the terms of Regulation 26 of the Tobacco Products Regulations 2001. Subject to certain conditions we will allow a credit for the duty paid on products returned from customers to registered premises, and on products previously removed to your own duty-paid storage but not delivered to customers and returned to registered premises. The tobacco products must, with our agreement, have been:

• recycled
• repackaged, or
• destroyed by a method acceptable to us, and
• any fiscal marks must have been obliterated or destroyed.

'Recycling' and 'repackaging' have special meanings for duty credit purposes. Credit will be allowed only if the recycling or repackaging of the returned products is within the meaning of either word as given in the Regulation 3 of the Tobacco Products Regulations 2001.

Credit of duty will not be permitted on tobacco products that were removed to home use more than three years before the date of the claim.

11.2 Can I, as an importer, reclaim the duty on imported tobacco products returned by customers?

You can claim a repayment of duty under the terms of the Excise Goods (Drawback) Regulations 1995. You can find further information in Notice 207 Excise duty: Drawback or from the Helpline on 0845 010 9000. It is a condition of drawback is that any fiscal marks carried by the tobacco products are obliterated or destroyed before a claim is made. (See section 12 and Annex 1 for more information.)

11.3 Under what circumstances can I not reclaim duty on tobacco products returned to registered premises?

Duty credit will not be given on returned products which are in saleable condition and which are intended for re-issue without undergoing recycling or repackaging. Such products cannot be returned to duty-suspended stock in registered premises. This applies also to products that are returned for repair or replacement of external packaging (the 'stock-case', for example). Minor re-packing operations like this do not attract duty credit.

11.4 What records must I keep of returned products?

11.5 Do any special conditions apply to the disposal of the returned product?

Yes. Any fiscal marks carried by the products must be destroyed or permanently obliterated.

Responsibility for destruction of the goods remains with the manufacturer or importer. Methods of destruction include incineration, grinding or denaturing. It is essential that all the product is destroyed or rendered unsmokeable. You should agree the particular destruction method(s) to be used and the notification procedure with us.

Destructions are subject to the same official controls and audits as the rest of the manufacturing and storage process. Any destruction authorised for revenue purposes does not affect your legal responsibilities under the Control of Pollution Act 1974 or any other relevant legislation. Any such or similar concerns should be resolved with the appropriate authorities before you submit your proposed method of destruction for our approval.

11.6 How is the repayment calculated?

Duty will be credited or repaid at the rate(s) of duty in force at the time(s) when the products were originally removed to home use as shown on the TP7, commercial dispatch document, import entry or W6/W6D.

For cigars, hand-rolling tobacco, pipe tobacco, and chewing tobacco duty will be repaid on the net weight of the products returned to the registered premises, provided that this does not exceed the weight on which duty was originally paid.

For cigarettes the amount of repayment will be determined by the actual number of cigarettes returned to the registered premises and by the retail-selling price in force for that brand at the time when they were originally removed to home use. For cigars, hand-rolling tobacco, pipe tobacco and chewing tobacco duty will be repaid on the net weight of the tobacco product, provided that this does not exceed the weight on which duty was originally paid.

If you cannot determine the date that returned goods were removed to home use you should contact us for advice.

12. Fiscal marks: information for manufacturers, importers and anyone concerned with the distribution or sale of tobacco products

12.1 Do the fiscal marking requirements apply to me?

If you manufacture, import, hold, move, or sell cigarettes or hand-rolling tobacco you will need to be aware of and comply with the fiscal marking requirements. You can find more details in this section and Annex 1 of this notice.

12.2 What legislation governs fiscal marks?

The Tobacco Products Duty Act 1979 sets out the framework for fiscal marks. The detailed requirements of the scheme are contained in the Tobacco Products Regulations 2001 and this notice.

12.3 What is a fiscal mark?

A fiscal mark is a mark that must be carried on 'specified tobacco products' indicating that UK duty has been paid.

The specification of the fiscal mark is contained in Annex 1 of this Notice. Annex 1 contains two specifications for the fiscal mark on packets of HRT. HRT packs produced on or after 1 October 2008 must bear a mark which complies with the positioning requirements set out in sections 8, 9 or 10 of the annex as appropriate.

Specified tobacco products manufactured in or imported into the UK must carry a fiscal mark unless specifically excluded from the scheme.

Specified tobacco products that are required to carry a fiscal mark and which are held by a person who is a revenue trader, must carry a compliant fiscal mark irrespective of the date they were manufactured, imported or removed to home use.

12.4 Can I start to produce packets of HRT bearing the revised fiscal mark before 1 October 2008?

Yes. Packs produced before 1 October 2008 can bear a mark which complies with either the pre-1 October 2008 specification or the post-1 October 2008 specification.

12.5 How long can retailers continue to sell HRT packs which bear the pre-1 October 2008 fiscal mark?

Whilst there is no time limit after which HRT packs bearing a fiscal mark which meets the pre-October 2008 specification can no longer be sold, the Department of Health have placed limitations on the length of time for which all tobacco products which do not bear a picture health warning can continue to be supplied. Further information on these time limits can be obtained from the Department of Health.

12.6 What are 'specified tobacco products'?

Specified tobacco products are those tobacco products listed in Regulation 21(2) of the Tobacco Products Regulations 2001. Those products are:

• cigarettes, and
• hand-rolling tobacco (with the exception of hand-rolling tobacco which is intended for retail sale in loose form and is supplied by the manufacturer or importer in packets containing 500 grams or more).

12.7 What tobacco products are not specified tobacco products?

The following tobacco products are not specified tobacco products and are not required to carry a fiscal mark:

• cigars
• cigarillos
• hand-rolling tobacco which is intended for retail sale in loose form that is supplied by the manufacturer or importer in packets that each contain 500 grams or more
• other smoking tobacco, and
• chewing tobacco.

12.8 Are there any exceptions to the requirement that specified tobacco products must carry the fiscal mark?

Under Regulation 23(3) of the Tobacco Products Regulations 2001, specified tobacco products that are not required to carry a fiscal mark must not carry a fiscal mark.

Specified tobacco products are not required to and must not carry a fiscal mark if they are:

• for ships and aircraft stores
• for export, or
• for sale in export shops to travellers to third countries

and they are not delivered to home use or otherwise made available for home use.

Specified tobacco products are also not required to and must not carry a fiscal mark if they are:

• imported for personal use
• for supply to entitled international organisations and diplomatic missions, or
• for sale to visiting forces

and any conditions attaching to the relief from duty in those circumstances are complied with.

Specified tobacco products which have been removed to home use in the Isle of Man are not required to and must not carry a fiscal mark if:

• excise duty has been paid on removal to home use in the Isle of Man
• they carry a mark for fiscal purposes as required by the law in the Isle of Man, and
• the excise duty paid in the Isle of Man has not been and will not be repaid, remitted or drawn back.

Further information concerning tobacco products removed to or consigned from the Isle of Man can be found in paragraphs 12.20 – 12.22.

12.9 When must the fiscal mark be applied?

Packs of cigarettes and hand-rolling tobacco which are manufactured in the UK and which are required to carry a fiscal mark must be marked when they are packaged. In practice this will be before they leave the registered factory.

Packs of cigarettes and hand-rolling tobacco which are imported into the UK and which are required to carry a fiscal mark must be marked before they enter the UK.

12.10 Can I remove unmarked specified tobacco products from registered premises?

Unmarked specified tobacco products may only be removed from registered premises for approved purposes. In most cases these are uses which do not involve the payment of duty. They are listed in Regulation 9(4) of the Tobacco Products Regulations 2001. In summary the approved purposes are:

• removal to other registered premises
• warehousing in an excise warehouse for any purpose other than home use
• exportation, removal to the Isle of Man or shipment as stores
• destruction or other disposal to the satisfaction of the Commissioners
• removal to unregistered premises, after duty has been paid or accounted for, for the purpose of familiarisation, and demonstration to sales and other staff
• removal to unregistered premises, after duty has been paid or accounted for, for the purpose of testing quality or testing products that are being developed, or
• any other purpose (except home use) as we may permit.

12.11 Can I remove imported marked specified tobacco products from registered premises without payment of duty?

Specified tobacco products, which carry a fiscal mark and which are in registered premises, may be removed without payment of duty for the following purposes:

• transfer from a registered factory to a registered store
• transfer from a registered store to another registered store
• destruction or disposal to the satisfaction of the Commissioners, or
• recycling or repackaging with the consent of the Commissioners.

You must also comply with any conditions attached to such duty-free removals.

12.12 Can I remove marked product from an excise warehouse without payment of duty?

Specified tobacco products, which carry a fiscal mark and are in an excise warehouse, may be removed without payment of duty for the following purposes:

• removal to a registered store under duty-suspension arrangements
• removal to another excise warehouse under duty-suspension arrangements, or
• destruction or exportation following the obliteration or destruction of the fiscal mark to the satisfaction of the Commissioners.

12.13 Can I claim drawback on marked product?

Yes, provided that you obliterate the fiscal mark to our satisfaction and meet the requirements set out in Notice 207 Excise Duty: Drawback.

12.14 What is the penalty for not marking products?

Manufacturers or importers who remove to home use specified tobacco products that do not carry a compliant fiscal mark will be liable to forfeiture of the products in question and to a civil penalty.

12.15 What happens if my pack mark does not comply with the specification for the fiscal mark?

Packaging that does not comply with the fiscal mark specification will be non-compliant. The manufacturer or importer responsible for the non-compliant product will be liable to a civil penalty and the product in question will be liable to forfeiture.

12.16 Is it an offence to supply or sell unmarked specified tobacco products?

It is a criminal offence to possess, transport, display, sell, offer for sale or otherwise deal in unmarked products (that is, specified tobacco products that are required to carry a fiscal mark, but do not).

12.17 Can I overprint or alter the fiscal mark?

No. If you alter or overprint, or cause a mark to be altered or overprinted, you will be liable to a civil penalty and the product in question will be liable to forfeiture.

12.18 Will I be committing an offence if I allow my premises to be used for the sale of unmarked specified tobacco products?

It is a criminal offence for the manager of premises to suffer the premises to be used for the sale of unmarked specified tobacco products that are required to carry a mark.

The term 'suffer' requires actual or constructive knowledge that the activity is taking place but does not require active connivance. For example, if you manage premises such as a public house, club, shop and you turn a blind eye to the fact that unmarked specified tobacco product is being sold on those premises, you will be guilty of an offence.

In this context a person is a manager of premises if he or she is:

• entitled to control their use
• entrusted with their management, or
• in charge of them.

This means that a person who merely lets premises on a commercial basis and does not exercise day-to-day control over those premises will not be guilty of an offence.

If convicted of the offence, you will be liable to a fine and the Court may also make an order prohibiting the use of the premises in question for the sale of tobacco products for a period of up to six months. Failure to comply with such an order is a criminal offence.

12.19 What should REDS or Occasional Importers do if they discover that a consignment of cigarettes or hand-rolling tobacco is not fiscally marked or bears an incorrect fiscal mark?

Imported specified tobacco products, intended for home use, which do not bear a fiscal mark applied before importation will be non-compliant with Regulation 22(3) of the Tobacco Products Regulations 2001. This contravention of the Regulations may attract civil penalties under Sections 8E(1)-(3) of the Tobacco Products Duty Act 1979.

If you receive unmarked product, which should bear a fiscal mark you should keep the consignment on your premises and immediately notify us. Details of how to contact us are given in paragraph 1.5 of this Notice.

It is your responsibility to ensure that your supplier understands the significance of the fiscal mark and ensures that any specified tobacco products which are consigned to you bear a compliant fiscal mark.

It is a criminal offence to possess, transport, display, sell, offer for sale or otherwise deal in unmarked tobacco products, which are required to carry a fiscal mark. If you are a REDS or Occasional Importer, importing unmarked tobacco products, you could be committing such an offence since neither are permitted to hold tobacco products in duty-suspension.

12.20 What are the fiscal marking requirements in the Isle of Man?

The Isle of Man has introduced equivalent legislation to the UK on fiscal marking.

12.21 Should tobacco products removed to the Isle of Man be fiscally marked?

Specified tobacco products moving in duty-suspension to the Isle of Man must not bear a compliant UK fiscal mark.

Specified tobacco products moving in duty-suspension to the Isle of Man must comply with the relevant legislation in the Isle of Man.

UK duty-paid specified tobacco products transported to the Isle of Man will already have been removed to home use in the UK and must, therefore, bear a compliant UK fiscal mark.

12.22 Should tobacco products consigned from the Isle of Man be fiscally marked?

Specified tobacco products consigned in duty-suspension from the Isle of Man, for home use in the UK, must bear a compliant UK fiscal mark. The mark must have been applied before the goods enter the UK.

Duty paid specified tobacco products transported from the Isle of Man to the UK should bear a fiscal mark in conformity with Isle of Man legislation. Provided that they do bear such a fiscal mark and that the excise duty paid in the Isle of Man has not been and will not be repaid, remitted or drawn back the products may be transported and sold in the UK.

13. Reviews and Appeals

13.1 What if you refuse to register my premises or I disagree with the registration conditions?

If you do not agree with the registration conditions set out in the registration letter, or any refusal to register premises, or the revocation of registration, you can ask for a review.

You have three options. Within 30 days you can:

• send new information or arguments to the officer you have been dealing with
• have your case reviewed by a different officer, or
• have your case heard by an independent tribunal

You can also have a review and then appeal to tribunal if you disagree with the outcome. If you want to appeal you must write directly to the tribunal.

13.2 Is there a time limit to ask for a review?

Yes. If you want us to review a decision, you must write to the person who issued the decision letter, within 30 days of the date of that letter.

13.3 What should I include in my request for review?

Your request should set out clearly the full details of your case, the reasons why you disagree with us and provide any supporting documentation. You should also state what result you expect from our review.

13.4 What if I do not want a review?

If you do not want a review you may appeal to the independent tribunal. You need to send your appeal to the tribunal within 30 days of the date on the decision letter.

13.5 Where can I get more information?

You can find further information about reviews and appeals in fact sheet HMRC1 HMRC Decisions – What to do if you disagree.You can get this fact sheet by:

• downloading it from our website at HMRC1, or
• Web guidance "What to do if you disagree with an HMRC decision"
• phoning the Orderline on 0845 900 0404.

You can also find more information about how to appeal on the Tribunals Service website at Tribunals Service website or by phoning 0845 223 8080.

13.6 What if I disagree with an assessment of tobacco products duty?

If you do not agree with an assessment of tobacco products duty you have the same options as described in section 13.1 above and follow the sections through to 13.5.

14. Glossary of terms

Annex 1 – Specification of the fiscal mark

Do you have any comments or suggestions?

We would be pleased to receive any comments or suggestions you may have about this notice. Please write to:

HM Revenue & Customs
Excise, Stamps and Money Businesses
Tobacco Team
Ralli Quays
3 Stanley Street
Salford
M60 9LA

Please note this address is not for general enquiries. For general enquiries please phone the Helpline on 0845 010 9000.

Putting things right

If you are not satisfied with our service, please let the person dealing with your affairs know what is wrong. We will work as quickly as possible to put things right and settle your complaint. If you are still unhappy, ask for your complaint to be referred to the Complaints Manager.

For further information about our complaints procedures go to www.hmrc.gov.uk and under ‘quick links’ select ‘Complaints’.

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