Clause 95 - Goods carried as stores

Finance Bill – in a Public Bill Committee at 2:15 pm on 10 June 2014.

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Question proposed, That the clause stand part of the Bill.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

Clause 95 clarifies the law by introducing schedule 17, which makes provisions for the treatment of goods carried onboard as part of a ship or aircraft’s stores. Put simply, the measure addresses legislation and regulations concerning the storage and sale of duty-free goods.

I have a couple of queries for the Minister. The clause provides for penalties in certain circumstances, but will he clarify exactly what those penalties will entail? What, for example, will the penalty be for those who contravene  any of the new provisions? Conversely, what will the penalty be for those who fail to make a required declaration under the new regulations, in addition to paying any duty due? As the tax information and impact note helpfully explains, schedule 17 amends section 1(4) of the Customs and Excise Management Act 1979 to provide that goods for sale to persons carried on a ship or aircraft will be treated as stores if they are to be sold by retail in the course of a journey made by the ship or aircraft, but the measure omits a reference to “relevant journey,” as under section 1(4) of CEMA, and instead provides that eligible journeys will be specified or defined by regulation. Will the Minister clarify how the change will work in practice?

Photo of David Gauke David Gauke The Exchequer Secretary

Clause 95 and schedule 17 will support the growth of the shipping and aircraft industries by enabling them to simplify procedures and streamline operations, thereby reducing burdens. The changes will provide flexibility to facilitate trade practices and increase controls on areas of revenue risk, which will enable HMRC and Border Force to work with the industry to improve compliance and is in line with our wider commitment to bring customs and excise law up to date to protect customs and excise revenues.

It may be helpful to provide a little background to this discrete area of law. In August 2011, HMRC issued a consultative document entitled “Modernising Customs and Excise Law”, which highlighted a need to bring customs and excise law up to date to protect revenues, reduce the tax gap and better reflect modern trade practices. HMRC announced that it was the intention to reassess the requirements and legislation currently used to control ships and aircraft duty-free stores to include compliance in this area.

The measure will provide that goods for sale to persons carried on a ship or aircraft will be treated as stores if they are sold by retail in the course of the journey made by the ship or aircraft. It will clarify that surplus stores can remain on board the ship or aircraft without payment of duty. The journeys on which stores can be shipped or carried without payment of duty will be specified in regulations, enabling trade and HMRC to respond quickly and flexibly to changes in business requirements. The power to make regulations will come into force on the date that the Finance Bill 2014 receives Royal Assent.

The changes made are expected to have a negligible impact on most businesses. The cruise ship and airline industry will benefit from the introduction of procedures to account for duty retrospectively on stores consumed in port or on an intra-UK flight. Penalties will affect only individuals and businesses that contravene a provision of the regulations, fail to make a return or do not pay the required amount of duty due. All penalties are subject to reasonable excuse and mitigation consideration. In the majority of cases, a penalty notice will not be issued without the trader first having had a warning letter.

New regulations for an authorisation procedure to control goods moving from warehouses to be shipped as stores will impose some new requirements, but this will impact on a small number of specific businesses and, as I said earlier, the introduction of penalties will  not affect compliant businesses. “Relevant journey” will be defined in regulations, which will allow the flexibility to respond to changing commercial practices to facilitate trade. We believe that is a pragmatic response. With those remarks and clarifications, I hope that the clause and schedule will stand part of the Bill.

Question put and agreed to.

Clause 95 accordingly ordered to stand part of the Bill.

Schedule 17 agreed to.