HMRC raked in £1.63bn over the past 12 months from investigations into underpaid cigarette and alcohol taxes, new data shows today.
Revenues from investigations into so-called sin taxes are up six per cent on the year ending March 2015, according to figures retrieved by accountants UHY Hacker Young.
The UK’s black market in cigarettes and alcohol has become more lucrative as they have become more highly taxed. HMRC’s central estimate is that 10 per cent of cigarettes sold in the UK in the year to March 2015 were sold illicitly.
Taxes make up about 80 per cent of the selling price.
The incidence of smuggling is even greater with hand rolling tobacco – where HMRC estimates 4.5m tonnes, or 40 per cent of the UK market, is purchased illicitly.
Alcohol smuggling is also a significant issue for HMRC. In 2014-15 HMRC seized 5.3m litres of beer, 189,669 litres of spirits, and 1.49m litres of wine.
“Duty on cigarettes and spirits is consistently increased well above inflation – but the production cost of the goods is low – this makes them a prime target for smuggling,” said Roy Maugham, a tax partner at UHY Hacker Young.
“A significant number of taxpayers are disinclined to pay the full duty on alcohol and, particularly, cigarettes – which has created a thriving black market. It’s the inevitable result of heaping a heavy tax load onto any product.”