Finance Bill – in a Public Bill Committee at 2:30 pm on 30 January 2025.
James Wild
Shadow Exchequer Secretary (Treasury), Opposition Whip (Commons)
2:30,
30 January 2025
I beg to move Amendment 67, in Clause 82, page 95, line 14, at end insert—
“(2) In doing so His Majesty’s Revenue and Customs must have regard to the desirability of requiring a digital tax stamp to be applied to e-cigarette liquids.”
This amendment requires HMRC to have regard for requiring a digital tax stamp to be applied to e-cigarette liquids.
Valerie Vaz
Labour, Walsall and Bloxwich
With this it will be convenient to discuss Clause stand part.
James Wild
Shadow Exchequer Secretary (Treasury), Opposition Whip (Commons)
The Clause is about enabling HMRC to prepare for the introduction of a new excise duty on vaping products before it is formally provided for in law. Amendment 67 would require that, in doing so, HMRC must have regard to the desirability of requiring a digital tax stamp to be applied to e-cigarette liquids.
A million people in England now vape despite never having been regular smokers—a sevenfold increase in just three years—and vaping rates are highest among 16 to 24-year-olds, hence the measures that are going through in the Tobacco and Vapes Bill. Like many of the measures we have discussed in Committee, this new duty was first announced by the previous Conservative Government, and my right hon. Friend Jeremy Hunt announced the introduction of an excise duty on vaping products from October 2026.
There is a strong case to take action on the affordability of vapes, while ensuring that there is a significant differential between the duty on vapes and the duty on other tobacco products. After the consultation that the previous Government launched, this Government have announced that they will apply a flat-rate duty on all vaping liquid from October 2026, set at £2.20 per 10 ml of vaping liquid.
Clause 82 simply provides for HMRC to
“prepare for the introduction of a new duty”; the main provisions will come in future legislation. When new taxes and levies are introduced, it is important to get the implementation right. After consultation, a single flat-rate duty will apply, which should reduce non-compliance and tax avoidance opportunities and be more proportionate both for industry and for HMRC to administer.
Tristan Osborne
Labour, Chatham and Aylesford
Is the hon. Gentleman aware that the Treasury is already consulting on digital access for vaping products as part of the vaping products duty? It is already going through the process, but we are subject to the progress of that duty in the Tobacco and Vapes Bill Committee just down the corridor.
James Wild
Shadow Exchequer Secretary (Treasury), Opposition Whip (Commons)
2:45,
30 January 2025
After that Intervention, I hope the hon. Member will support my Amendment when I press it to a vote. The Government are moving in this direction, so let us get this in the legislation and get HMRC working at full throttle to make sure that it happens. I hope that he will feel able to support that.
As with any new tax, there are risks associated with the duty. The illicit market could be boosted, increasing the enforcement burden on HMRC and other Departments. Juul, one of the largest operators, believes that the Government should give HMRC sufficient enforcement powers. At the very least, they should mirror those in relation to tobacco duty. What steps are the Government taking to boost compliance powers and protect against illicit activity in this market?
Amendment 67 would require HMRC to have regard to the desirability of introducing a digital tax stamp. I am pleased that the Government intend to implement a vaping duty stamp scheme to help enforcement bodies and the industry to identify products that are non-duty paid. I note that in the Government’s further consultation on compliance measures to complement HMRC’s traditional compliance activity, the Government stated their intention, to which the hon. Member for Chatham and Aylesford referred, to incorporate a degree of digital tracing and authentication into the final stamp design.
Digital stamps are harder to counterfeit. They are less prone to damage and less likely to fall off products, and they allow for more information to be held and tracked by both the industry and HMRC. Juul points out that its experience in Canada, where it is required to apply physical duty stamps, has led it to believe that digital versions are far better for business and tax authorities alike.
Industry needs certainty. Given the Government’s digital by default approach to taxation, I hope that the Minister will be able to give a commitment today that the Government intend to require a fully digital tax stamp. Under an earlier Clause, we spoke about removing a physical stamp from alcohol and spirits, for example, so I do not see why the Government would not be able to support my amendment 67.
We will not oppose clause 82, but I look forward to the Minister’s response to my specific points, and I intend to press my amendment to a vote.
Emma Reynolds
The Economic Secretary to the Treasury
I thank the Shadow Minister for his comments. If he will bear with me, I will speak generally about Clause 82 before I address his Amendment.
Clause 82 will make changes to ensure that HMRC can secure the resource it needs to implement the vaping products duty. The duty will be legislated for in this Bill and will come into force on
The chief medical officer is clear that those who do not smoke should not vape. Introducing a vaping products duty is part of the wider Government strategy to tackle vaping among young people—as the shadow Minister stated, there are worrying developments in the number of young people taking up vaping—and indeed among those who do not smoke, including via the Tobacco and Vapes Bill and the ban on disposable vapes. The vaping products duty is forecast to raise £525 million in revenue a year by the end of the scorecard, to fund vital public services such as the NHS, defence, education and stop smoking initiatives supporting a smoke-free UK.
In 2023, 12% of the UK’s adult population used e-cigarettes, the highest rate ever recorded. One million people in England now vape despite never having been regular smokers: a sevenfold increase in just three years, which is pretty shocking. As the shadow Minister said, vaping rates are highest among 16 to 24-year-olds, with 15.8% vaping daily or occasionally. Reducing affordability is part of the Government’s wider strategy to influence behaviour, especially given the addictive nature of these products.
Several countries have already introduced a tax on vaping. Approximately 50 countries have a national tax on vaping products, with most targeting liquid as the tax base. The Majority target both nicotine-free liquids and liquids containing nicotine. The changes made by clause 82 will enable HMRC to prepare for the introduction of the new excise duty before it is formally provided for in primary legislation next year. It will allow for spending on IT systems and staff recruitment.
On the shadow Minister’s amendment 67, I thank him for his speech, and I agree that it is crucial to get the implementation of the Bill right. His amendment would require HMRC to
“have regard to the desirability of requiring a digital tax stamp to be applied to e-cigarette liquids.”
The Government deem the amendment unnecessary at this time, as HMRC is already giving due consideration to vaping duty stamps. The decision to introduce vaping duty stamps was supported by respondents to the vaping products duty consultation, who pointed to their use on vaping products in other jurisdictions.
The shadow Minister asked about the illicit vaping market. HMRC intends to exploit modern technology and digitalisation to ensure that the vaping duty stamps scheme targets the specific risks of the illicit vaping market. A technical public consultation on the design of the scheme ran from
Let me try to answer the shadow Minister’s questions. He asked whether there is a risk that increasing tobacco duty and introducing a vaping duty will drive up illicit trade. The threat from illicit tobacco needs to be addressed by reducing its availability, rather than allowing it to dictate our public health and tax policies. We are consulting on additional robust compliance tools for tackling the illicit trade in vapes and will collaborate with Border Force to target the illicit trade when the duty goes live. HMRC and Border Force already have a strategy in place to tackle illicit tobacco. I hope that that reassures the shadow Minister.
The shadow Minister also asked about digital versus physical vaping duty stamps. Vaping duty stamps will support both enforcement and industry by identifying products that are non-duty paid and therefore illicit. They will also help HMRC to manage the revenue risk from the initial sell-through period and to limit the duty avoidance practice known as forestalling, which is clearing large quantities of excise goods from duty suspense immediately prior to a rate increase to avoid paying the new tax.
In regard to the shadow Minister’s amendment, the Government will not commit to fully digital stamps, as we are analysing consultation responses. A policy decision will be taken in due course, but I reassure him that we will take his views on board.
James Wild
Shadow Exchequer Secretary (Treasury), Opposition Whip (Commons)
I am grateful for the Minister’s response. However, the Amendment would help set a clear direction. It is in line with the Government’s digital by default approach to taxation and reflects what was in the consultation document and what industry is calling for. It does not say that HMRC must introduce such a system; it simply says that HMRC
“must have regard to the desirability of requiring a digital tax stamp”.
I specifically worded the amendment to allow for precisely the point that the Minister has outlined. HMRC may decide that, contrary to the Government’s digital by default tax approach, a digital tax stamp is not necessary. In that case, all that has been required is for HMRC to have a proper look at introducing it. I will press amendment 67 to a vote.
Division number 4
Finance Bill — Clause 82 - Duty on vaping products
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Many hundreds of amendments are proposed by members to major bills as they pass through committee stage, report stage and third reading in both Houses of Parliament.
In the end only a handful of amendments will be incorporated into any bill.
The Speaker - or the chairman in the case of standing committees - has the power to select which amendments should be debated.
A parliamentary bill is divided into sections called clauses.
Printed in the margin next to each clause is a brief explanatory `side-note' giving details of what the effect of the clause will be.
During the committee stage of a bill, MPs examine these clauses in detail and may introduce new clauses of their own or table amendments to the existing clauses.
When a bill becomes an Act of Parliament, clauses become known as sections.
As a bill passes through Parliament, MPs and peers may suggest amendments - or changes - which they believe will improve the quality of the legislation.
Many hundreds of amendments are proposed by members to major bills as they pass through committee stage, report stage and third reading in both Houses of Parliament.
In the end only a handful of amendments will be incorporated into any bill.
The Speaker - or the chairman in the case of standing committees - has the power to select which amendments should be debated.
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