Customs and Excise quarterly update – August 2026

Welcome to the August 2026 edition of RPC's Customs and Excise quarterly update.

News

HMRC updates Guidance on Vaping Products Duty and the Vaping Duty Stamps Scheme

The government has updated its Guidance on Vaping Products to provide further information about the supporting Vaping Duty Stamps Scheme.

Vaping duty stamps are highly secure labels indicating that the vaping product is legal. They must be rectangular, meet specific dimension requirements and be made from bespoke secure paper.

The Guidance sets out several key dates:

• Between 1 April 2026 and 30 November 2026, transitional vaping duty stamps will be available for purchase.
• From 1 September 2026, digital vaping duty stamps, containing a scannable digital feature, will be available for purchase.
• From 1 October 2026, companies must attach a vaping duty stamp on all retail packaging.
• From 1 January 2027, only digital stamps may be affixed to products; transitional stamps can no longer be used.
• From 1 April 2027, all products outside of duty suspension in the UK must have a vaping duty stamp attached.

The Guidance is available here.

Listen to RPC's Taxing Matters Podcast on "Vaping duty: the new excise regime businesses need to prepare for, with Clive Brady".

HMRC introduces new late filing and penalty payments for Alcohol Duty

The new measure, published in a policy paper alongside draft legislation, will affect producers of alcoholic products who are required to submit an alcohol duty return and who fail to submit their return on time or fail to pay on time.

As part of the penalty reform, a points-based penalty regime for the late submission of tax returns will be introduced which will penalise those who repeatably fail to meet their filing obligations and give a second chance to those who are occasionally late. The penalty amount will be determined by the amount outstanding to be paid and the length of time for which it remains unpaid.

Alcohol tax duty taxpayers would have to miss five submission deadlines within a 24-month rolling period in order to reach the points threshold and incur a financial penalty of £200. Once the threshold is reached, each subsequent failure to file on time incurs a £200 penalty.

The policy paper is available here.

Office of the United States Trade Representative (US Trade Representative) introduces new Section 301 tariffs

The US Trade Representative has announced that it is taking action under Section 301 of the Trade Act of 1974 by imposing tariffs on over 60 economies following investigations into the imposition and enforcement of measures aimed at preventing the importation of goods produced with forced labour.

Products that have originated from certain economies, including the UK and Canada, will be subject to an additional 10% tariff, whilst the European Union, Taiwan, Japan, Korea and Switzerland will face either an additional 10% or 12.5% tariff, and other investigated economies will face the higher 12.5% rate. 

The US Trade Representative has also determined that certain product exemptions will apply, including in relation to raw materials that, if subject to these tariffs, could lead to the unavailability of domestic supply and products that could cause economy-wide disruptions if subject to these tariffs.

The measures have been in effect since 24 July 2026.

The press release is available here.

Case reports

B&M Retail Ltd v Revenue and Customs Commissioners [2026] UKFTT 1062 (TC)

B&M Retail Limited (BM) appealed to the First-tier Tribunal (Tax Chamber) (FTT) against a penalty of £1,172,340.94 imposed under paragraph 4 of Schedule 41 to the Finance Act 2008 (Schedule 41). The penalty related to BM’s acquisition of alcoholic excise goods (mainly beer and wine) from Ruby Trading Company Limited (Ruby) in circumstances where HMRC could not verify that UK excise duty had been paid. The appeal came before the FTT following an Upper Tribunal remittal, and the sole issue was whether BM had a reasonable excuse within paragraph 20 of Schedule 41.

FTT decision

The FTT allowed BM’s appeal and set aside the penalty. It accepted BM’s evidence that it operated structured due diligence procedures designed to ensure goods were acquired on a duty-paid basis, and that those procedures were applied to Ruby. The FTT recognised that reliance on supplier assurances alone would not be sufficient, but found that in BM’s case supplier assurances formed part of a wider framework of due diligence and commercial checks and had to be assessed in that context.

The FTT also accepted that BM could not realistically obtain definitive proof of duty payment beyond the steps it had taken, and noted that HMRC itself was unable to establish whether duty had been paid because the upstream supply chain could not be traced. Against that background, the FTT rejected HMRC’s submission that repeated detentions and seizures necessarily made continued trading with Ruby unreasonable. On the evidence, the seizures demonstrated that HMRC could not verify the position rather than proving duty had not been paid; BM had responded in a measured and graduated way, and ultimately ceased trading when matters escalated and confidence in the supplier was undermined. The FTT emphasised that the test was whether BM’s conduct fell within the range of responses open to a reasonable trader in those circumstances, and concluded that it did.  The FTT considered HMRC’s approach would, in effect, impose a standard approaching certainty where certainty was not achievable.

Why it matters

This decision underlines that “reasonable excuse” under Schedule 41 is assessed objectively but in its real commercial context, including what verification steps were realistically available in the relevant market. It also shows that previous detentions/seizures may evidence uncertainty (HMRC being unable to verify duty status) rather than definitive non-payment of duty.  For businesses buying excise goods through intermediaries, the message is that penalty exposure will often turn less on achieving certainty (which may be unattainable) and more on being able to evidence proportionate checks, consistent application, and a rational decision-making trail as concerns emerge.

The decision can be viewed here.

3V International Ltd v Revenue and Customs Commissioners [2026] UKFTT 815 (TC)

3V International Ltd (3V) appealed to the First-tier Tribunal (Tax Chamber) (FTT) against HMRC’s assessments for customs duty and import VAT arising from four consignments of face masks (PPE) imported in April–May 2020, and against HMRC’s refusal of equitable remission.

The imports were made during the COVID-19 pandemic under a claim for customs duty and import VAT relief in accordance with Articles 74-80 of Council Regulation No 1186/2009 and Articles 51-57 of the Council Directive 2009/132/EC (Disaster Relief).  This was based on an intention to supply PPE to the NHS, supported by a National Import Reliefs Unit (NIRU) certificate issued on the basis that the end user would be “NHS/UK Government”. In practice, the goods were not supplied to the NHS, most were exported to Germany for indirect supply to the German Federal Ministry of Health (BGM), and the remainder were largely donated to a UK charity.

The key issues were whether Disaster Relief applied (in particular whether Condition C of Commission Decision (EU) 2020/491 (the Commission Decision) was met and whether BGM/3V was an “eligible body”), whether import VAT was chargeable where goods were exported to Germany on the day of arrival, and whether equitable remission was available under Article 120, Union Customs Code (UCC).

FTT decision

Disaster Relief was refused. The FTT agreed with HMRC that Condition C requires the goods actually to be imported by or on behalf of an eligible body, not merely that the importer intended that outcome at the time of importation. The FTT also held that Article 123 UCC meant relief conditional upon particular use could only be granted by the authorities in the Member State where the goods would be used; on that basis, BGM was not an eligible body for these UK relief purposes, and 3V was not an eligible body simply by holding a NIRU certificate (which had been issued on the specific premise that the end user would be the NHS/UK Government).

On import VAT, the FTT allowed 3V’s appeal in relation to the consignments that were exported to Germany on the same day as arrival, holding (applying Federal Express Corporation Deutsche Niederlassung (C-26/18)) that the evidence rebutted the presumption that the goods entered the UK’s “economic network”; instead, they entered Germany’s.

On customs duty, however, the FTT held the duty liability was triggered in the UK because the breach of the Disaster Relief conditions occurred in the UK at importation, so customs duty was (in principle) payable in the UK.

Finally, the FTT allowed 3V’s appeal against HMRC’s refusal of equitable remission under Article 120 UCC. It found special circumstances arose from the unprecedented pandemic emergency (including government encouragement to procure PPE and practical difficulties in NHS administration at the time), and concluded there was no obvious negligence by 3V given the unclear fast-moving rules, lack of customs expertise and the urgency of the situation. As a result, the customs duties assessed were not payable.

Why it matters

This decision is a useful reminder that COVID-era Disaster Relief turned on strict statutory conditions.  A good-faith intention to supply an eligible body may not be enough if the goods do not in fact end up with an eligible body and the “particular use” requirements are not met. The case shows that equitable remission can provide a meaningful route to relief in exceptional circumstances, with the FTT taking a fact-sensitive approach to “special circumstances” and “no obvious negligence” in the unique context of the pandemic.

The decision can be viewed here.

Adrian Filimon v HMRC [2026] UKFTT 00842 (TC)

Mr Adrian Filimon appealed to the First-tier Tribunal (Tax Chamber) (FTT) against a Customs Civil Evasion Penalty of £17,868 issued under section 25(1) Finance Act 2003 and an Excise Civil Evasion Penalty of £41,957 issued under sections 8 and 13 Finance Act 1994.  The penalties arose from a Border Force stop at Dover Eastern Docks in July 2023, where a trailer described as carrying “packaging” was found to contain 102,200 cigarettes concealed within the load. When first stopped, Mr Filimon stated he had “2½ cartons” of cigarettes and “no alcohol”.

The key issue was whether HMRC had adduced sufficient evidence to establish that Mr Filimon engaged in dishonest conduct for the purpose of evading duty, which is a statutory precondition for civil evasion penalties under both the customs and excise regimes.

FTT decision

The FTT allowed the appeal and set aside both penalties, concluding that HMRC failed to prove dishonesty. The FTT confirmed that the burden was on HMRC to establish dishonest conduct for the purpose of evading excise duty and customs duty, and that the standard of proof was the civil standard (balance of probabilities). It applied the approach to dishonesty in Ivey v Genting Casinos (UK) Limited t/a Crockfords, requiring it first to determine (subjectively) Mr Filimon’s actual knowledge or belief as to the facts, and then to assess (objectively) whether his conduct was dishonest by the standards of ordinary decent people.

HMRC’s dishonesty case turned on the proposition that Mr Filimon had “accepted ownership” (and therefore knowledge) of the concealed cigarettes, based on a Border Force notebook entry. However, the FTT noted that there was no recorded near-verbatim exchange to support an express admission, and the Border Force officer’s evidence was that Mr Filimon had not said anything when told about the cigarettes but had nodded his head. Mr Filimon accepted he nodded but said this was only acknowledgement that cigarettes had been found. The FTT held that a nod (particularly given his limited English) was not synonymous with a spoken confirmation of ownership and was insufficient to establish dishonesty on the balance of probabilities.

Why it matters

This decision is a reminder that civil evasion penalties are highly fact sensitive and sufficient evidence is required.  It also highlights how determinative contemporaneous records can be, and the importance of testing precisely what was actually said (or not said) at the point of intervention. Where an alleged “admission” is recorded only in summary form, and the reality may be limited to ambiguous conduct (such as a nod) in circumstances involving language barriers, the FTT may be unwilling to treat that as sufficient proof of knowledge and dishonesty.

The decision can be viewed here.