HMRC sees 49% rise in recovered ‘sin taxes’

Investigations into ‘sin tax’ avoidance on booze, fags and gambling helped boost the UK government’s coffers by 49% to £3.9 billion, according to the latest analysis, as fears rise that a no-deal Brexit may increase bootlegging.

An increased focus by HMRC on catching criminal gangs who smuggle booze and cigarettes helped added an ‘extra’ £3.9billion of tax to the total raised, up from £2.6 billion in 2017-18 and £1.3 billion in 2016-17, according to research by national accountancy group, UHY Hacker Young.

Operations into underpayment of tax by criminal gangs saw the successful prosecution of two London-based brothers who evaded £3.6m in unpaid tax by distributing smuggled alcohol in the UK, who were jailed for a total of over 12 years in November 2018 for example.

According to figures released by HMRC in June, the government raised £12.1bn of total revenue from alcohol in 2018-19, up 5.2% on 2017-18, boosted not only be increased sales on the back of the World Cup and Royal Wedding, but by increases in the rates of duty on 13 March 2017 and 01 February 2019.

UHY Hacker Young partner Clive Gawthorpe said the amount of extra tax collected highlighted the scale of the problem as he warned that the increased burden from a no-deal Brexit is likely to see a rise in criminal activity.

“Many consumers are not willing to pay the higher prices that result from the high taxes that the UK levies on drinks and cigarettes. For lower earners, these taxes make up a high percentage of their income,”

“With a no-deal Brexit still on the table, high tariffs and import documentation could become a reality for vendors. This could result in more people looking to cut corners and smuggle products in illegally. HMRC will be watching.”

HMRC’s investigations into smuggled cigarettes and alcohol were one of HMRC’s biggest earners, he said.

The Wine and Spirits Trade Association (WSTA) has previously estimate that should new import certifications known as VI-1 forms be required in the event of a ‘hard’ Brexit, this could cost the alcohol industry £70m a year in lost revenue, raise the price of wine and potentially exclude many smaller producers from the UK market.. However in October, the new Boris Johnson-led government reaffirmed that it would suspend these new import documents for wine for up to nine months after Brexit, saving the industry millions, after it appeared to backtrack on a previous assurance.

The UK is one of the most expensive countries in Europe to buy booze.