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Landlords – are you responsible for your tenants tobacco duty evasion?

Commercial landlords could be fined for failing to ensure their tenants are not breaking customs and excise rules - particularly the sale of illegal tobacco through retail outlets - if new Government proposals get the go ahead.

A consultation document has been published by HMRC, with a deadline of 12 May, as part of its plans to crack down on tobacco and excise duty evasion and tackle what remains a "significant problem" in the UK.

For example, in 2015 -16, the UK consumed around five billion illicit cigarettes and 3,200 tonnes of illicit hand-rolling tobacco.

Landlord accountability

The proposals show that HMRC is looking at a number of ways to make landlords more accountable for the actions of their tenants, and raise awareness of the problem, including:

  • Writing to landlords and landowners associations asking them to voluntarily add a clause to their standard leases prohibiting illicit tobacco trading and other illicit excise trading.
  • Potentially introducing new legislation imposing a duty of care on landlords and landowners of properties used in tobacco (or other excise duty) fraud to ensure their properties are not used to evade duty, with a civil penalty for non-compliance.

'Reasonable steps' defence

HMRC has suggested that there would be a defence for landlords or landowners who took 'reasonable steps' to prevent future wrongdoings in their properties, which might include regular spot checks as well as specific wording in lease agreements relating to illicit tobacco trading and subsequent eviction for anyone who violates these provisions.

It is a move unlikely to be welcomed by landlords with many concerned that as tobacco duty evasion is a criminal offence, it is a matter for the police and HMRC to deal with and not them.

A copy of the consultation document can be found here

  • Heather Jones is a commercial property specialist and Head of Business Services and Commercial Property. Please contact her for help with all aspects of tenancy agreements or advice on your legal obligations as a landlord.

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