UHY Hacker Young says that the rise in extra revenue from investigations into unpaid excise duty is partly being driven by the UK’s continued smuggling problem around cigarettes and alcohol.

The issue around smuggled goods is due to the high level of duty levied on cigarettes and alcohol with the UK having one of the highest tax rates in Europe on cigarettes - with tax making up 84% of the average cost of cigarettes in the UK.

Andrew Snowdon, international and corporate tax partner at UHY Hacker Young, said: ‘A doubling in additional compliance revenue from cigarettes and alcohol shows just how big of an issue smuggling of these products is.

‘With prices for alcohol and especially cigarettes continuing to rise, it would be no surprise if fraudsters looked to take advantage by smuggling more of these products in.’

Investigations into large businesses have also contributed to the increase in HMRC’s additional tax take. Additional revenue from excise investigations into large businesses grew to £198m in 2016/17, more than 10 times the £16m generated in 2015/16.

The problem with smuggled goods may worsen in the case of a hard Brexit scenario. Leaving the customs union would result in importers paying an extra levy to move good into the UK, resulting in higher prices, therefore the demand for cheaper goods could increase.

Report by Amy Austin