Clause 81 - Excise Duty: Penalties

Finance (No. 2) Bill – in a Public Bill Committee at 6:15 pm on 5 January 2022.

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

Photo of Helen Whately Helen Whately The Exchequer Secretary

Clause 81 makes two changes to ensure that current penalties for excise wrongdoings also apply to excise goods located in the customs-free zone of a freeport and to excise goods imported under the new authorised use customs procedure introduced at the end of the transition period. These changes do not create any additional burdens for businesses. They simply ensure that there is a consistent approach to excise wrongdoing penalties for serious non-compliance.

The Government have introduced two new customs procedures. The first is the free zone procedure, which will allow excise duty to be suspended in customs-free zones located in freeports. Freeports are part of the Government’s plans to regenerate and develop deprived areas and our mission to level up across the country. The second is the authorised use procedure, a customs import procedure introduced at the end of the transition period to replace a previous customs procedure that no longer applied when we left the EU. The current UK excise wrongdoing penalties in schedule 41 to the Finance Act 2008 do not extend to either of these procedures. This clause corrects that and ensures that HMRC can tackle abuse and non-compliance in respect of excise goods stored under these procedures.

The changes made by the clause extend the excise wrongdoing penalty regime in schedule 41 to the Finance Act 2008 to free zones and to situations where businesses release goods into the authorised use procedure introduced at the end of the transition period. These changes do not create any additional administrative burdens or costs for businesses. They will apply only to businesses that import excise goods into UK free zones or to businesses authorised to release goods into the authorised use procedure. These changes will enable HMRC to penalise individuals for any wrongdoing or non-compliance relating to excise goods imported under either of these processes.

In summary, these changes ensure that the Government have the necessary tools to tackle non-compliance and avoidance when goods are imported into the UK under either the free zone procedure or the authorised use procedure.

Photo of Abena Oppong-Asare Abena Oppong-Asare Shadow Exchequer Secretary (Treasury)

I thank the Minister for her explanation of the clause, which applies the excise wrongdoing penalty regime to freeports. We do not oppose this measure; indeed, Labour Members have repeatedly raised concerns that freeports may increase the risk of tax evasion and smuggling, as well as potentially undermining workers’ rights. We are also concerned that HMRC, which is already overstretched, is not well placed to manage these new risks.

The Government have introduced a number of different tax reliefs and other measures that will operate in freeports, and it is important that they are monitored closely. There is evidence from around the world that freeports have increased illicit activity. I have a couple of questions for the Minister about the steps the Government are taking to prevent tax avoidance and other illegal activity in freeports.

First, will the Minister update us on how many of the eight English freeports are now operational? What checks were done prior to those freeports opening to ensure that they will not inadvertently allow illicit activity within their borders? Secondly, will she set out the process HMRC and Border Force will use to monitor and ensure compliance in freeports? Finally, will she commit to update Parliament regularly on the operation of freeports, which should include any compliance issues that have been identified, the action that was taken and an estimate of the economic impact of freeports, both in the area they operate in and on a wider scale?

Photo of Helen Whately Helen Whately The Exchequer Secretary 6:30, 5 January 2022

I am glad that the Opposition will not oppose the clause, although I think I heard that, overall, they oppose freeports. Clearly, they take a very different view from us, because we see freeports as an important part of our ambitions to level up and increase opportunities in some of the more deprived areas of the country.

From memory, I believe that three freeports are already open. I recently visited the Teesside freeport to see the great excitement there about the opportunities that it will provide to the community in that area.

The hon. Member asked what checks there will be and what we will do to ensure that there is good compliance in freeports. One thing I will say is that the change made under this clause will mean that HMRC has the tools to tackle non-compliance in relation to excise goods suspended inside the customs-free zone procedure in freeports. Overall we are confident that we will see not only compliance, where appropriate, but also economic growth and all the benefits associated with that, both in and around freeports.

I am happy to write to the hon. Member with any further details about the regime of checks that will be carried out for freeports. I therefore move that the clause stand part of the Bill—

Photo of Abena Oppong-Asare Abena Oppong-Asare Shadow Exchequer Secretary (Treasury)

I thank the Minister for the points she has made. I just want to say for the record that we are not against freeports; what we are concerned about is the increased risk of tax evasion and smuggling, and the potential undermining of workers’ rights. I am sure that we agree that we all want freeports to work; we just need to make sure that some issues are addressed.

In terms of the freeports that are open, I thank the Minister for saying that she will write to me, which is really helpful. She mentioned that the Bill allows checks and other tools to deal with non-compliance at freeports, and it would be really helpful if she could list in her response exactly what action will be taken, because the Bill does not set that out in detail.

It would also be helpful if the Minister could elaborate in her written response, if she is not able to right now, on what steps HMRC and Border Force are taking to monitor these freeports, particularly those that are in action right now, and to ensure that they are compliant.

Photo of Helen Whately Helen Whately The Exchequer Secretary

I am glad to hear that Labour does indeed support freeports, and I thank the hon. Member for making that clear. As I said, I will write to her about her more detailed questions. I commend clause 81 to the Committee.

Question put and agreed to.

Clause 81 accordingly ordered to stand part of the Bill.