Last reviewed 4 May 2015
Vehicle seizure by the authorities (ie HMRC, the UK Border Force (UKBF), the Driver and Vehicle Standards Agency (DVSA) and the police) is a very real threat to operators. Vikki Woodfine, Associate at DWF LLP explains the potential risks, the processes involved and how operators can minimise the threat to their business (and their vehicles).
This article focuses on two common reasons for the seizure of vehicles: suspicion of smuggling goods into the UK where excise duty has not been fully declared, and the operator not paying penalties accruing from the failure to prevent clandestine entrants entering the UK.
Vehicle seizures can occur for a variety of other reasons (as outlined in Vikki’s previous feature article from January 2013 on Vehicle seizures – the hidden cost) including the identification of suspected misuse of marked oil (ie red diesel); a vehicle being used on the road without proper insurance or being driven by somebody without a proper licence; and a large goods vehicle being used without having the appropriate operator’s licence in place.
The two common reasons why authorities seize vehicles
The number of clandestine entrants caught trying to enter the UK in vehicles or trains in 2013-14 increased by over 60% to 19,000, compared to less than 12,000 in 2012-13. Meanwhile, UKBF detected £262 million of goods in 2014 where excise duty had not been declared. Given the public sensitivity surrounding the former and the threat to UK tax revenues from the latter, the UK authorities are more than willing to exercise their powers of vehicle seizure.
Under the Immigration and Asylum Act 1999, UK Border Force (UKBF) can seize any vehicle of an operator if a penalty for failing to prevent the carriage of clandestine entrants is outstanding or if the authorities are concerned that any such fine will not be paid on time. This type of penalty can be levelled against drivers and operators (and operators are jointly and severally liable for their drivers’ penalty) — an operator can be forced to pay up to £4000 per clandestine entrant discovered on the vehicle.
Evasion of excise duty
In addition, HMRC and the UKBF have broad powers to seize vehicles if they have reasonable grounds for suspecting the duty payable on the goods being transported into the UK will be evaded. Note that the authorities only need to suspect evasion — they do not need to prove that it is the case.
The business impact of a vehicle seizure
A vehicle seizure will at best be an inconvenience for a business and at worst financially crippling. Having a vehicle off-road and unable to fulfil contracts is the most obvious repercussion arising from a seizure, but a longer-term impact may occur if a company is accused of or associated with smuggling goods or clandestine entrants.
Operators with vehicles under hire purchase agreements should be especially wary of the risks emanating from a vehicle seizure. More and more finance agreements contain provisions allowing the lessee to require the return of financed vehicles or require lessors to pay up all money owed immediately (on all of the vehicles it hires, even after seizure of just one vehicle). If HMRC or the UKBF decide to release the vehicle, they may decide to return it to the relevant finance company on the proviso that it is not returned to the operator.
Arranging the return of seized vehicles
Time is of the essence after a seizure as the authorities can apply for a vehicle to be sold without consent of the owner or operator. The notice informing an operator of the vehicle seizure should clearly set out the deadline for the operator to provide a response, but it is sensible to respond as soon as reasonably possible once in a position to do so. If an operator is challenging a seizure on suspicion of smuggling, they must do so within a calendar month of the date of seizure.
The costs and penalties depend on the reason why the authority decided to seize the vehicle in the first place.
If a vehicle has been seized due to an outstanding penalty, payment of the penalty (in addition to the administrative and storage costs of the vehicle) within the time limit specified by UKBF will normally be sufficient. It is possible to challenge a penalty, but the costs involved can often significantly exceed the £4000 cap on penalty per clandestine entrant found in an operator’s vehicle.
If it has been seized due to suspicion of excise duty evasion, the process is a much more complicated affair. An operator can challenge the legality of a seizure and require HMRC or UKBF to prove that the seizure was unlawful through a civil procedure known as “condemnation proceedings”, normally taking place in a Magistrates’ Court. Separately, operators can petition HMRC or UKBF to release the vehicle, even if the operator accepts that it was legally seized, through “restoration proceedings”. Restoration proceedings involve an officer from UKBF or HMRC reviewing the vehicle seizure, the operator’s individual circumstances and this may result in the release of the vehicle for a fee (in very rare circumstances, for no fee). A restoration decision can be appealed and if an operator is still unhappy with the outcome, they can appeal to a tribunal but this final step can be a costly exercise.
HMRC and UKBF’s official guidance on seizures states that they will apply to the court as soon as possible (and in most cases, within six months) if they receive a request to begin condemnation proceedings. Given the delays that can occur in the court system, restoration proceedings could result in a vehicle being returned weeks or months before the condemnation proceedings begin. However, the authorities also make it clear that it is their general policy not to return vehicles used for commercial smuggling.
Preventing vehicle seizures occurring
Given the relatively low level of proof required for UKBF and HMRC to seize vehicles, there is no magic bullet to preventing vehicle seizures. However, maintaining effective systems of work and records can go a long way to limiting the risk.
Operators that regularly undertake journeys between mainland Europe and the United Kingdom should consider joining the UKBF’s free accreditation scheme. The scheme requires operators to show that they have an effective system to prevent the carriage of clandestine entrants (and that it takes all reasonable steps to enforce that system). Civil penalties will not be imposed on accredited members if clandestine entrants are subsequently discovered and the operator can demonstrate effective compliance with the scheme.
Operators should also ensure that their internal processes and customer due diligence is up to speed to limit any association with smuggling. Background checks on drivers, verification of loads and conducting identification and verification checks on customers form part of a sensible “know your customer” process that can limit not just the financial but the reputational risks from being associated with smuggling.
There is further parliamentary guidance available online at www.gov.uk/secure-your-vehicle-to-help-stop-illegal-immigration. Operators that send vehicles onto the Continent or those that carry duty payable goods should pay very close attention to the risks that they face if the carriage goes wrong. They are therefore are recommended to look at their systems to check that they are up to scratch as a matter of priority.