Stats suggest value of HMRC penalties for export breaches is increasing

Stacy Keen of Pinsent Masons said the penalties issued to UK exporters, totalling £.3.6 million, showed that “six-figure penalties are no longer the exception” and that HMRC “will not shy away from investigating serious breaches of export controls on strategic goods”.

Export control breaches are criminal offences, but the 1979 Customs and Excise Management Act allows HMRC to "compound" offences and offer civil settlement penalties in lieu of referring the matter to the Crown Prosecution Service (CPS). A compound penalty can be up to three times the value of the goods exported, but a significant discount can be offered if a firm discloses potential breaches to HMRC on a voluntary basis – and subsequently agrees to cooperate with its investigation.

Keen warned that officials were far less likely to offer compound penalties if they learn of an offence through their own investigations, or via a report from the Export Control Joint Unit. Her comments came after HMRC announced that it issued a number of compound settlement offers in the final months of 2022, the highest of which was £1,883,442.00 relating to the unlicensed exports of military goods.

“HMRC has indicated that the enforcement of export controls is a high priority, and the rise in value of recent compound penalties evidences that priority. Companies that endeavour to be compliant, but which make an inadvertent breach, should seek to negotiate a compound penalty with HMRC. Compound penalties do not amount to a criminal prosecution, and involve far less publicity,” Keen said.

She added: “While HMRC report quarterly on the number and value of compound penalties agreed they do not give details of the breach or the methodology applied to calculate the penalty. Even for companies that have experienced potentially serious contravention of export control rules, voluntary disclosure may be the best course of action.”