Finance Act 2013

2013 CHAPTER 29

Introduction

Section 182: Meaning of “Tobacco Products”

Summary

1.Section 182 amends section 1 of the Tobacco Products Duty Act 1979 (TPDA). It is designed to narrow the general exemption granted to herbal smoking products, so that exemption is only granted to products used exclusively for medical purposes. This change comes into force on 1 January 2014.

Details of the Section

2.Subsections (2), (4) and (5) of the section remove the existing references to herbal smoking products.

3.Subsection (3) invokes an exemption for non-tobacco smoking products which are used exclusively for medical purposes.

4.Subsection (6) makes the changes effective on and after 1 January 2014.

Background

5.This section amends section 1 of TPDA to correctly implement the following European legislation: Council Directive 2011/64/EC on the structure and rates of excise duty applied to manufactured tobacco (the Directive), specifically the second paragraph of Article 2.2.

6.Article 2.1 of the Directive sets out which tobacco products Member States should apply excise duty to.

7.Article 2.2 extends the definition to include products which may not contain tobacco but otherwise match the descriptions, for example, they are intended to be smoked.

8.Within Article 2.2 it is stated that products containing no tobacco and used exclusively for medical purposes are not to be treated as tobacco products.

9.The Directive is specific about which non-tobacco smoking products should be exempted from the application of excise duty - that is those products used exclusively for medical purposes. The current UK legislation does not specifically reflect this. In the TPDA (section 1, subsections 1.3 and 6) exemption was granted generally to herbal smoking products, rather than to those herbal smoking products used exclusively for medical purposes.

10.This section addresses that anomaly and aligns the UK legislation with the European Directive.

11.An additional advantage of this section is that it will address the small but increasing risk of tax evasion. This stems from traders importing and dealing in products which claim to be herbal smoking products, but in fact contain tobacco and are therefore liable to duty. There will be no advantage to wrongly declaring goods as herbal smoking products when they are taxed at the same rate as their tobacco counterparts.