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HM Revenue and Customs (HMRC) says it will promote the new vape tax system through mandatory “digital channels”.
Vape products will usher in a registration system.
In the recent Spring Budget, Finance Minister Jeremy Hunt announced this new system. Vapes will be subject to excise tax like tobacco and alcohol products. Currently, vape products are only subject to the standard value-added tax rate of 20%. And, they are not included in the consumption tax.
In a consultation paper on the new tax package, HMRC says:
“HMRC operates on a ‘digital-by-default’ basis and will look to mandate digital channels by which all businesses within the scope of the duty must register, report, and pay online, with exceptions only for those who are digitally excluded by virtue of protected characteristics.”
Mandatory use of online channels will help ensure legal compliance. Besides, it will minimize errors and fraud.
The document reveals that once the new tax comes into force in October 2026, it will mean that UK vape manufacturers who are liable to pay the tax will have to register with HMRC. Besides, they will need to report information about the goods they have produced. And, pay their liability via monthly returns.
The tax agency says the measure would provide support and clear guidance to businesses ahead of implementation.
“The digital service for registering will also be available in good time to allow business to prepare for the introduction of the duty. We expect the registration requirements to be broadly similar to existing excise regimes.”
Vape Industry insider’s reaction to the new system.
We have to look at the new vape tax system from two aspects.
On one hand, using digital platforms allows for streamlined processes, and improved record-keeping. And it can improve greater transparency in tax compliance. It promotes a fair and accountable tax system. Besides, it provides vape manufacturers with a clear framework for meeting tax obligations.
On the other hand, this will undoubtedly increase the costs for vape manufacturers. Therefore, if the tax cost is higher, it may lead to an increase in the price of vape products in the future. For long-term vape users, it may increase their budget. If the cost of using vaping products is too high, it cannot be ruled out that some vape users will switch to traditional cigarettes. This would be counterproductive to reducing smoking rates.
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