CLAUSE 14: FISCAL MARKS ON TOBACCO PRODUCTS
1. Clause 14 inserts new sections 8A to 8J after section 8 of the Tobacco Products Duty Act 1979 to provide for the introduction of compulsory fiscal marking for specified tobacco products (cigarettes and hand-rolling tobacco). It introduces associated criminal offences for possessing, selling, dealing etc. in unmarked tobacco.
DETAILS OF THE CLAUSE
2. Section 8A lists the categories of tobacco product to which fiscal marking applies (ie, cigarettes and hand-rolling tobacco).
3. Section 8B (1) allows the Commissioners, by Order, to extend or reduce the list of categories of tobacco products to which fiscal marking applies.
4. Section 8B(2) allows the Commissioners, by regulation, to exempt sub-categories of tobacco products from the fiscal-mark scheme (for example, hand-rolling tobacco sold loose by retailers).
5. Section 8B(3) provides that an order that amends section 8A so as to apply fiscal marking to additional tobacco products shall be subject to the affirmative procedure, ie it must be laid in draft and approved by both Houses of Parliament.
6. Section 8B(4) provides that an order that amends section 8A but that is not subject to the procedure required by section 8B(3) shall be subject to the negative resolution procedure.
7. Section 8C(1) provides the Commissioners with power regulate:
(a) to require the tobacco products listed in Section 8A to bear fiscal marks; and
(b) such matters relating to fiscal marks as appear to the Commissioners to be necessary or expedient.
8. Section 8C(2) defines a fiscal mark in terms of what that mark may indicate. For example, the mark may indicate duty payment or place time-limiting restrictions on the sale of marked products.
9. Section 8C(3) allows the Commissioners, by regulation, to prescribe the essential features of the fiscal mark: its content, appearance, position and when the mark must be carried.
10. Section 8C(4) allows the Commissioners, by regulation, to make different provisions relating to the mark in certain circumstances. For example, the Commissioners may allow size of the mark to differ depending upon the size or nature of the packaging.
11. Section 8D(1) authorises the Commissioners to regulate the content, appearance and position of the mark by notice. This will enable the Commissioners to make changes to these elements of the scheme quickly.
12. Section 8D(2) provides that the Commissioners may, by notice, modify the effect of regulations made under section 8C(3).
13. Section 8D(3) allows the Commissioners, by notice, to make different provision relating to the mark in certain circumstances.
14. Section 8E(1) applies section 8E to cases where a person fails to comply with any requirement imposed by or under regulations made under section 8C or a notice published under section 8D.
15. Section 8E(2) provides that where a person fails to comply with a requirement to which this section applies the article will be liable to forfeiture. For example, products that have not been marked in conformity with regulations or the requirements specified in a notice would be liable to forfeiture.
16. Section 8E(3) provides that where a person fails to comply with a requirement to which this section applies his failure will attract a civil penalty under section 9 of the Finance Act 1994. Except in cases where the penalty is calculated by reference to an amount of excise duty the penalty will be £250. If a person failed to comply with a requirement in regulations to mark tobacco products his conduct would attract a penalty.
17. Section 8E(4) provides power to make regulations about the calculation of civil penalties in a case where the failure involves post-dating of tobacco products. It defines post-dating for this purpose. There cannot be post-dating unless tobacco products carry a period of sale mark.
18. Section 8E(5) provides that where regulations are made under subsection (4) they may provide for the civil penalty to be calculated by reference to the duty currently charged on the products. Consequently such a civil penalty will be £250 or 5% of the duty, whichever is the greater.
19. Section 8F(1) limits application of Section 8F to products bearing a mark incorporating "a period of sale".
20. Section 8F(2) defines the term period of sale mark and "prohibited time".
21. Section 8F(3) provides that retail sale or exposure to retail sale of tobacco products that bear a period of sale mark at a prohibited time attracts a civil penalty of £250 (s9, FA94) with the tobacco products involved liable to forfeiture. A prohibited time is a time when, according to the period of sale mark, such sales are not permitted.
22. Section 8G(1) defines "unmarked products" as products which are required to carry a duty-paid fiscal mark but do not carry a compliant duty-paid fiscal mark.
23. Section 8G(2) defines a "duty-paid fiscal mark" as a mark indicating that excise duty has been paid on the products.
24. Section 8G(3) defines a compliant duty-paid fiscal mark as being one which complies with the requirements in respect of contents, appearance, positioning of the mark etc. as laid down in Regulations or Notice.
25. Section 8G(4) makes it an offence to possess, transport, display, sell, offer to sell or otherwise deal in "unmarked products", with the tobacco products in question subject to forfeiture. Circumstances where unmarked tobacco products may be possessed, sold etc without an offence being committed will be laid down in Regulations. This will allow the movement, sale etc. of products that legitimately do not carry a fiscal mark (for example, transportation of tobacco products for export under duty suspended arrangements).
26. Section 8G(5) provides a defence, for a person charged with an offence under section 8G(4) above, to prove that the unmarked tobacco product in question is not required to carry a mark.
27. Section 8G(6) makes the penalty for a person guilty of an offence relating to unmarked tobacco a fine of up to level 5 on the standard scale (currently £5000).
28. Section 8H(1) makes it an offence for a manager to suffer the premises he manages to be used for the sale of unmarked products.
29. Section 8H(2) provides a defence for a manager charged with an offence under section 8H(1) to prove that the unmarked product in question was not required to carry a duty-paid fiscal mark.
30. Section 8H(3) makes the penalty for a manager guilty of an offence under section 8H(1) a fine of up to level 5 on the standard scale (currently £5000).
31. Section 8H(4) allows the court, before which a person is convicted of an offence under section 8H(1), to impose a prohibition on the sale of tobacco on the premises in question.
32. Section 8H(5) restricts a prohibition on the sale of tobacco products, imposed by the court under section 8H(4), to a maximum period of six months.
33. Section 8H(6) makes it an offence for a manager to suffer premises he manages to be used in breach of a prohibition on the sale of tobacco products made under section 8H(4).
34. Section 8H(7) makes the penalty for a person guilty of an offence under section 8H(6) a fine of up to level 5 on the standard scale (currently £5000).
35. Section 8H(8) defines, for the purposes of this section, "a manager of premises".
36. Section 8J(1) describes the circumstances to which section 8J applies, ie altering or overprinting a fiscal mark.
37. Section 8J(2) specifies that altering or overprinting a fiscal mark shall attract a civil penalty. (see section 8J(4)).
38. Section 8J(3) provides that tobacco products that bear a fiscal mark that has been altered or overprinted are liable to forfeiture.
39. Section 8J(4) provides that altering or overprinting a fiscal mark shall attract a geared civil penalty of 5% of the duty involved or £250, whichever is the greater (s9, FA94), and for the calculation of the penalty to be based on the rate of duty chargeable at the time of the contravention.
40. The Government will introduce from 1 April 2001, a scheme of compulsory marking of cigarettes and hand-rolling tobacco to indicate that UK duty has been paid. The introduction of the mark will be accompanied by new offences relating to the possession, sale etc. of unmarked tobacco. The objective of the scheme is to support the Governments anti-smuggling strategy by helping to prevent, detect and deter the handling, distribution, sale and purchase of smuggled tobacco products.
41. The Commissioners will lay regulations this year to implement the scheme. The regulations will make it a requirement for tobacco product cleared to "home use" to carry the fiscal mark, effective from 1 April 2001. Failure to comply with this requirement after that date will carry a penalty of £250 and the tobacco products concerned will be liable to forfeiture.
42. The regulations will make provision to ensure that the new criminal offences will apply to cigarettes and hand-rolling tobacco that is manufactured in the UK or imported into the UK and cleared to home use on or after 1 April 2001. For cigarettes and hand-rolling tobacco manufactured in the UK or imported into the UK and cleared to home use before that date the regulations will allow until 1 July 2001 for stocks to be exhausted. After that time the new criminal offences will apply to all cigarettes and hand-rolling tobacco for sale in the UK.
43. This Clause provides for the Commissioners to specify or vary the elements of the scheme that relate to the specification of the mark itself; its content, position, size and colour, by regulation or Notice. This will allow the Commissioners to respond flexibly to changing circumstances. For example, where minor adjustments to some elements of the mark are necessary, these may be simply made by Notice. More fundamental changes to the specification could be made by regulation.
44. Provision is made for the mark to carry a time-limiting element, described as a "period of sale mark". This is designed to restrict the sale of tobacco products to the period indicated by the "period of sale mark". This would be used to tackle the anti-avoidance device known as forestalling, where tobacco goods are removed from duty-suspension just prior to a Budget at the then lower rate of duty. Effectively this postpones the date of the Budget increase until such time as these stocks have been exhausted. Such a mark could also have a wider application, for example, as an anti-counterfeiting measure.
45. Following consultation, an alternative scheme to prevent forestalling is to be trialled which relies upon existing legislation to restrict the volume of removals of tobacco goods from duty-suspended storage in the run up to a Budget. Therefore the elements of the Clause relating to a "period of sale mark" will not be implemented by regulation this year. Should the alternative arrangements fail adequately to tackle forestalling, then the powers contained in the Clause to introduce a "period of sale" element to the mark will be implemented by regulation.