Business, Freight News

UKWA predicts excise upheaval if Scotland goes independent

[ July 29, 2014   //   ]

A ‘yes’ vote in the Scottish independence referendum could have serious implications for the logistics industry, particularly excise goods, says a UK Warehousing Association expert, Alan Powell.

The excise specialist said things would have to change significantly for business on both sides of the border for the control of taxes on alcohol and tobacco if Scotland and the UK were different member states.

“If Scotland were to become a separate EU Member State, the excise duty paid in England or elsewhere in the UK would not ‘count’ in Scotland. Instead, the goods would continue to bear UK duty whilst also having to have Scottish duty pre-paid prior to movement across the border.” |And to prevent double taxation, there would also have to be an onerous administrative system for duty to be reimbursed.

The system would apply in reverse for goods sent from an independent Scotland to the rest of the UK and would also be resource-intensive for the revenue authorities of both member states, which in turn would lead to real risk of business snarl-ups and cash-flow jeopardy for cross-border business. “Believe me, you really do not want to be involved in this administrative and fiscal nightmare,” he said.

According to Powell, the solution would be total duty suspension, meaning excise goods remain in duty-suspension if they are intended to move (or might be moved) between the two countries.

“To do this, you would need to apply to HMRC to be approved to deposit or store excise goods in a third party warehouse or, if the size of your business warrants it, set up a bond of your own,” Powell explains.

“The total duty suspension option also requires the Scottish side of the transaction to be prepared to receive those “bonded” goods.  These movements have to be controlled under the Electronic Movement and Control System (EMCS) and require movement guarantees to cover the ‘risk inherent in the movement’,” he adds.

Currently, large and established alcohol excise businesses will use the tax warehousing system to move alcohol within the UK and rest of the EU but a move to an independent Scotland would lead to a dramatic increase in the number of companies using the system on both sides of the border – creating extra work, cost and risk of sanctions on businesses for even minor administrative errors. It would also mean extra difficulties for moving and releasing spirits under the “tax stamp” regime.

In the case of tobacco products, UK law currently only allows the duty-suspended receipt of tobacco products into an excise warehouse for subsequent export from the UK.

Powell adds: “In the event of ‘yes’ vote, one would expect to see a proliferation of tobacco tax warehouse applications to enable tobacco products to remain in duty-suspension for ‘export’ between the UK and Scotland.  This could be of benefit in terms of cash-flow to wholesale customers of the tobacco companies, since there is no duty (or VAT on the duty) payable on the product whilst it remains in duty suspension.  For Scottish Revenue, it means more compliance resources required and more revenue risk,” warns Alan Powell.

On a brighter note, says Powell, “Scottish independence would eliminate the unlawful UK policy on restriction of duty suspended movements of petrol and diesel and other fuels between Scotland and the rest of the UK. This would free the PetroIneos refinery at Grangemouth to supply duty-suspended oil to valuable sites in England.  In reverse, UK refiners and other businesses could look at duty-suspended possibilities in Scotland.  Furthermore, an independent Scotland could make its own policy about movements of all fuel within a Single Member State to protect its fuel resilience programme and free from the dogmatic policies of HM Treasury and HMRC.”

Alan Powell resized