HMRC removes £10,000 C18 exception to customs penalty warnings

HMRC has removed the specific exception that allowed a customs civil penalty for a first contravention where a C18 demand note had been issued for a customs debt of £10,000 or moreGOV. The deletion is in the warning policy in Customs Notice 301GOV. The £10,000 figure referred to the customs debt, rather than the amount of the penaltyGOV.

For most contraventions, HMRC still says it will not charge a penalty unless it has sent a warning letter within the last two years for the same or a similar type of error or failure. A further similar contravention after that period will usually attract a new warning. A warning about system deficiencies can also set a deadline for corrective action, with a penalty possible if the instructions are not followed.

The three remaining exceptions listed in section 2.5 of Notice 301GOV concern serious errors with a serious detrimental effect on revenue or physical control of goods; failure by traders or third-party declarants to follow written HMRC instructions or guidance on their legal obligations; and a trader’s failure to comply with authorisation conditions. HMRC may, where appropriate, issue a penalty for a first contravention in those circumstances. The deletion therefore does not establish an unconditional right to a warning before every first penalty.

The serious-error tests remain relevant when assessing that exposure. For incorrect declarations, missing declarations required by an authorisation, and unauthorised incorrect use of Customs Procedure and Economic Impact, the notice uses duty, import VAT or both exceeding £10,000GOV. Identical errors are aggregated when testing seriousness. Where a delayed declaration moves payment into a later period, the threshold is an amount exceeding £25,000. Errors affecting the movement, tracking or control of goods have no monetary limit.

These tests should be distinguished from the removed C18 criterion: an issued demand for a debt of £10,000 or more was a separate listed exception. Serious errors can still support first-contravention action under the remaining policy.

Reasonable excuse and mitigation also remain distinct. Under section 27(1) of the Finance Act 2003, a person is not liable to a section 26 penalty if they satisfy HMRC, or an appeal tribunal on appeal, that they have a reasonable excuse. Section 27(2) excludes insufficient funds to pay tax, duty or a penalty, reliance on another person to perform a task, and contraventions attributable to that person’s conduct from reasonable excuse. Section 29 permits reduction of a penalty, including to nil, but excludes lack of funds, little or no tax loss, and good faith from mitigation considerations.

For a review of an HMRC warning letter or penalty notice, the notice directs the recipient to write to the issuing officer within 30 days of its date and explain the disagreement.

Notice 301 section 1.2 identifies sections 24 to 41 of the Finance Act 2003 as providing for civil penalties and says the Schedule to the Customs (Contravention of a Relevant Rule) Regulations 2003 lists the contraventions that may be penalised, the person who may be liable and the maximum penalty that may be imposed.