Its current consultation on sanctions to tackle tobacco duty evasion and other excise duty evasion includes a section exploring the introduction of a statutory duty of care on landlords and landowners of properties. The consultation, which closes on 12 May, follows an informal consultation held in 2015 to explore options.

HMRC says the sale of illicit tobacco through retail outlets remains a significant problem, and claims that in some cases it believes that the landlord or landowners are aware of the fraud and turning a blind eye to their tenant’s behaviour to ensure rental income is maintained, or are in fact complicit.

To help discourage illicit tobacco trading or other illicit excise trading, HMRC is proposing to write to relevant landlord and landowners associations directly requesting that they voluntarily add a clause to their standard lease agreements expressing prohibiting such activity and stating, if uncovered, it would result in termination of the lease.

Additionally or alternatively, HMRC says it could introduce a new civil penalty for non-compliance with requirements to take reasonable steps to ensure that their property is not used to evade duty. The ‘reasonable steps’ could include having provisions in all new leases making it clear that any illicit tobacco trading or any other illicit excise activity will terminate an existing lease, and could also require undertaking periodic checks on the premises and requesting information relating to the tenants business, as well as making reports to HMRC of any suspicions.

Stuart Walsh, tax disputes expert at law firm Pinsent Masons, said: ‘Tobacco duty evasion is a criminal offence and, as such, it is a matter for HMRC and the police to deal with, not businesses.

‘Landlords will be concerned that these proposals will be overly burdensome. To regularly check in on their tenants to see what is actually being sold and even request to see their finances could be logistically difficult and time-consuming to enforce, particularly for institutional investors who may have large portfolios of commercial properties.

‘Even more questions are raised about subletting and whether a landlord would be expected to police both the tenant and the subtenant.’

Walsh said that the proposal of adding a voluntary clause to future agreements to help discourage illicit tobacco trading would be ‘easier for landlords’ than the statutory duty also proposed in the paper. However, it was ‘difficult to see what it would add in practice, as leases will usually already include an obligation not to use a property for any illegal activity’, he said.

The consultation on sanctions to tackle tobacco duty evasion and other excise duty evasion is here.