Budget 2021: Customs and Excise Duties Changes

Chancellor Rishi Sunak laid out changes to customs and excise duties as part of his 2021 Budget, delivered on October 27. Here is everything you need to know...

Customs duty

The Chancellor announced three essentially administrative measures which are designed to ensure that the UK’s customs duty regime can be operated more smoothly.

Greater ministerial involvement in the work of the Trade Remedies Authority (TRA)

The TRA is the body responsible for reviewing trade remedies. Also known as trade defence measures, these are additional tariffs or quotas imposed on imported goods to protect domestic industries. While the UK was fully part of the EU customs union, 43 trade defence measures were in operation; these continued to apply from 1 January 2021.

The Government has determined that greater ministerial involvement in the TRA’s review of existing and proposed trade remedies will benefit the UK. The measure will allow the Secretary of State for International Trade to ‘call in’ a transition review and a reconsideration of a transition review. After calling a particular case in, the Secretary of State will be responsible for determining the outcome.

Introduction of public notice powers for on-duty tariff changes

Currently all changes to the UK Global Tariff must be made by legislation. Finance Bill 2021–22 will include measures to enable non-duty changes to be made by public notice.

The aim of the measure is to reduce the amount of secondary legislation because, in the Government’s view, it is currently the case that a disproportionate amount of resource is needed to make minor technical amendments or corrections.

Extension of excise duty wrongdoing penalty

The scope of the excise duty wrongdoing penalties will be extended so that they apply to goods held in the free zone customs special procedure and to goods subject to the authorised use procedure. The aim of this change is to ensure that all excise goods held in suspensive arrangements are subject to the same penalty regime.

Vehicle excise duty (VED)

• The VED rates for cars, vans, motorcycles and motorcycle trade licences will increase by RPI from 1 April 2022.

• The HGV rates of VED will be frozen for 2022–23 (continuing a freeze which has been in place since 2015).

• In response to the current supply chain difficulties some UK businesses are facing due to the shortage of HGV drivers, the cabotage rules will be relaxed. Cabotage is the transport of goods between two places in the same country by a transport operator from another country for the purposes of hire and reward. Currently, non-UK operators can only make two cabotage journeys within seven days of entering the UK. Until 30 April 2022, unlimited cabotage journeys within 14 days of entering the UK will be permitted. The VED legislation will be amended to ensure that non-UK operators do not become liable to VED as a result of this measure.

• VED rates for motor cars are set according to the vehicle’s emission (as are certain capital allowances and company car tax). Until 31 December 2020, vehicle manufacturers could apply for a ‘type approval’ within the EU which enabled an EU certificate of conformity to be issued. Since 1 January 2021, these certificates have no longer been automatically recognised in Great Britain and manufacturers have had to obtain a provisional GB type approval. During 2022, this provisional GB type approval scheme will be replaced with a comprehensive GB type approval scheme.

HGV road user levy

HGV road user levy will be unchanged in 2022–23 (continuing the freeze which has been in place since 2019).

In addition, the suspension of the levy for UK vehicles whose licence expired on or after 1 August 2020 will be extended. It was due to end on 31 July 2022 but it will apply for a further 12 months from 1 August 2022.

Tobacco duty

Tobacco duty rate

The duty rate on all tobacco products will increase by 2% above RPI inflation, with two exceptions. The tax due on hand-rolling tobacco will increase by 6% above RPI inflation and the minimum excise tax will rise by 3% above RPI. These changes take effect from 6 p.m. on 27 October 2021.

Tobacco track and trace system (TTS)

The TTS has been used to control the manufacture and supply of tobacco products since 2019 using a system of on-pack security markings and scannable technologies. In order to combat duty evasion, the Finance Bill 2021–22 will extend HMRC’s powers to introduce tougher sanctions. The new powers will allow HMRC to:

• issue penalties of up to £10,000 for failure to comply with TTS requirements;

• make liable to forfeiture TTS compliant product that is found alongside product that does not comply with TTS requirements;

• exclude retailers from TTS on a temporary or permanent basis;

• extend TTS enforcement powers to trading standards by way of future regulations; and

• make future administrative amendments to TTS regulations.

Gambling duty

The rates of all gambling duties are unchanged with the exception of gaming duty (which is levied on casino games). The gross gaming yield bandings will be increased in line with RPI with effect from 1 April 2022.

Hydrocarbon fuel duty

At the Spring Budget 2021, it was announced that from 1 April 2022 there would be changes to the uses to which rebated diesel and biofuels (also referred to as red diesel or marked oils) could be put. In summary, the aim was to ensure that these fuels could not be used on roads and to restrict non-road use to certain activities. The Autumn Budget 2021 announced that additional legislative changes, mainly of a technical nature, were needed in order for the policy to be fully operational from 1 April 2022.

Hydrocarbon oil duty rates were unchanged (continuing a freeze which has applied since 2011).

Landfill tax

The rates of landfill tax (applicable in England and Northern Ireland; the tax has been devolved to the Scottish Parliament and Welsh Parliament) which will apply from 1 April 2022 were announced at the Spring Budget 2021; the rates applying from 1 April 2023 were announced at the Autumn Budget 2021.

Insurance premium tax

There will be no changes to insurance premium tax as a result of Finance Bill 2021–22 but it will include a measure to move legislation concerning the location of risk for the purposes of the tax from the Financial Services and Markets Act 2000 into the insurance premium tax legislation by amending FA 1994, Sch. 7A, para. 8.

Climate change levy

Increases to the main rate of climate change levy applicable to gas and any other taxable commodity (i.e. commodities other than gas, electricity and liquid hydrocarbons) applicable from 1 April 2022 and then 1 April 2023 were announced. The previously announced freeze to the carbon price support rate will continue until 31 March 2024.

Alcohol duty

No immediate changes to the scope or rates of alcohol duty were announced in the Autumn Budget. However, the Chancellor unveiled plans to comprehensively reform the duty and remove the many anomalies and inconsistencies which currently exist within the tax. The overall aim of the proposals is to tax alcohol by reference to its strength and to simplify the administration of the duty.

A consultation exercise on the proposals was announced and its closing date is 30 January 2022.

Air passenger duty

Air passenger duty rates will remain at their current rates and will not be increased from 1 April 2022.

With effect from 1 April 2023 air passenger duty will be reformed. The rates applicable to domestic flights will be reduced and the current Band B (flights of over 2,000 miles) will be split into two, creating a new Band B (flights of 2,001–5,500 miles) and Band C (flights of over 5,500).

Band C, also referred to as the ultra-long haul band, will be subject to much higher rates of air passenger duty than Band B.

Plastic packaging tax

Legislation for this tax, due to take effect from 1 April 2022, was included in FA 2021. It charges manufacturers and importers of plastic packaging containing less than 30% by weight of recycled plastic to a tax of £200 per tonne.

Changes to appear in the Finance Bill 2021–22 and in Statutory Instruments are being made to ensure that the UK complies with international agreements and HMRC have the appropriate framework to administer the tax. Those changes include:

• tax reliefs for persons enjoying immunities and privileges (e.g. visiting forces);

• transferring obligations and entitlements from group members to the group’s representative member; and

• amending definitions of unincorporated bodies to ensure consistency.

Soft drinks industry levy

The levy was unchanged at the Budget; the standard rate remains 18p per litre and the higher rate remains at 24p per litre.

Aggregates levy

The levy was unchanged at the Budget and remains at £2 per tonne (the rate has been unchanged since 1 April 2009).

Budget 2021 - Overview of Changes

• Administration and Compliance Changes
• Capital Gains Tax (CGT) Changes
• Corporation Tax and Other Business Tax Changes
• Customs and Excise Duties Changes
• Employment Tax Changes
• Personal Tax Changes
• Property Tax Changes

If you have any questions about the issues raised in this article, we at Key Business Consultants can help. Get in touch with us today or call us directly on 020 3728 2848.