VPDS182300 | Vaping Products Duty and Vaping Duty Stamps: Compliance: Approval conditions: Proportionality

A condition must be reasonable, proportionate and comparable in impact to the evidenced concern; it must directly address a specific compliance or revenue risk and not unnecessarily impede trade or impose burdens where there is no substantiated reason. Examples include:

• restricting an approval to prevent trading in high-risk arrangements, such as:

  • failings in due diligence

  • frequent tax losses

  • preventing tax loss during a revocation notice period

• controlling high-risk activities

• protecting revenue, such as:

  • requiring financial guarantees where serious deficiencies in day-to-day controls exist

Any restrictive conditions must be reviewed regularly. If the reason for the condition no longer applies (for example, compliance improves significantly), the restriction should be lifted. It is not proportionate to allow a restrictive condition to remain indefinitely without justification.

Unreasonable and disproportionate conditions should not be applied, for example:

• requiring high-value financial security just because of a small HMRC debt (the relative quantum of the debt must be taken into account. What is significant to a small business will be less so to a larger multi-national company)

• significantly restricting a business where:

  • no substantiated revenue risk exists

  • the actual revenue at risk is low

In order to consider whether a condition is proportionate and reasonable, you should:

• assess and quantify the risk based on clear evidence

• consider:

  • the amount of revenue at risk

  • likelihood of revenue loss

• if risk needs managing:

  • establish what needs preventing or controlling

  • review all compliance options and their impact on the business

• alternatives to conditions include:

  • education

  • warnings

  • financial penalties

  • revocation in serious cases

In order to support your decision to impose conditions on an approval, you should hold clear, cogent, and admissible evidence that can be disclosed to the business and/or a Tribunal. Conditions must never be applied based on suspicion alone.

It is important that you communicate clearly with the business and inform the business of concerns at each stage of the decision process. You should notify the business of any new condition in writing within 5 working days of discussing issues with its director, owner, or manager. You must ensure the business understands:

• the concerns being addressed

• the purpose of the condition