Rolling out the changes

HMRC have issued a consultation outlining proposed changes to the range of sanctions available for the purpose of tackling tobacco duty evasion. Included in the consultation are several measures which will be of concern to landlords. In the consultation HMRC notes that in some cases they believe that the "landlord or landowners are aware of the fraud and turning a blind eye to their tenant’s behaviour to ensure rental income is maintained. In some cases we believe the landlord is complicit". The measures proposed by HMRC in the consultation include:

• Writing to "relevant landlord and landowners associations directly requesting that they voluntarily add a clause to their standard lease agreements" to help discourage illicit tobacco trading or other illicit excise trading.
• Additionally or alternatively to the above, imposing a statutory duty of care on landlords to ensure their property is not used for the sale of illicit tobacco (or other excise duty evasion) and to introduce a new civil penalty for non-compliance with requirements to ensure that their property is not used to evade duty.

In relation to the duty of care the consultation notes that this would only arise once the landlord or landowner has been notified that the tenant has evaded tobacco duty (or other excise duty). The consultation proposes that a defence would be available for those who have taken "reasonable steps to prevent future wrongdoings in or on their property". Suggested steps are listed as including:

• having provisions in all new leases making it clear that any illicit tobacco trading or any other illicit excise activity will terminate an existing lease
• undertaking periodic checks on the premises and request information relating to the tenants business
• evicting anyone who subsequently violates these provisions
• taking steps to ensure they are aware of illicit activity and contacting HMRC or Trading Standards immediately if they have concerns, and
• providing HMRC with a copy of the tenancy agreement with provisions relating to illicit tobacco or other excise products.

Clearly these provisions will cause concern for landlords and it is not clear how they would interact with, for example, the existing law on forfeiture. One of the areas on which the consultation invites views is the sanctions which should be imposed on landlords for failure to comply and whether there are wider consequences for adopting such an approach.

As is clear from the wording in the consultation HMRC have noted that they are looking at a potential extension of these proposals to other excise duty evasion and have also invited views on how the proposed measures would work in relation to each option.

The consultation is running until 12 May 2017.