Responses to the Government’s consultation on the Vaping Products Duty (VPD) have raised questions over the implementation of the scheme and the timeline for introduction.
At the Autumn Budget 2024, chancellor Rachel Reeves (below left) confirmed the introduction of the VPD.
Alongside this, the Government published a consultation response and launched a further technical consultation on additional compliance measures required covering proposals for a Vaping Duty Stamp (VDS) scheme and questions on possible controls on the supply of nicotine.
Given the risks of non-compliance and illicit activity, the Government has decided there is a need for additional compliance measures to complement HMRC’s traditional tax compliance activity to allow a greater oversight of the vaping market, making it easier to target exactly that. Duty stamps will be introduced alongside the duty on 1 October 2026.
The ability to produce and sell illicit vaping products outside of the legitimate market is helped by the availability and ease with which the ingredients such as highly concentrated nicotine solutions can be obtained. Following the consultation, the Government has decided to introduce controls on the supply of nicotine to tackle these risks. HMRC will undertake work to develop policy proposals for this scheme which will be shared in due course, it says.
It has therefore discussed the proposal with other departments, interested businesses and trade bodies, public health groups and tax professional bodies.
Responses varied on how long businesses would need to modify their manufacturing processes and when stamps would need to be available to purchase ahead of the scheme going live. The majority of respondents suggested between three to twelve months. Respondents set out that this time was needed for businesses to acquire machinery, update and adapt processes, design packaging, and train staff.
But responses were mixed when asking how long any grace period would be needed for businesses to clear non-duty liable stock from the supply chain including retail stock before all vaping products must carry a duty stamp. Six to twelve months was the most common answer. One trade association noted the importance of balancing clearing stock against the need for enforcement officers to be able to start identifying illicit products.
Overwhelmingly respondents were in favour of a registration system where businesses must be approved by HMRC to buy stamps. Respondents commented that this would help tackle the illicit market as only legitimate, approved businesses should be able to acquire stamps. Respondents also felt it could enable control of the supply of stamps to any businesses suspected of duty evasion. A health organisation noted this would allow the government to increase its understanding of the UK vaping market as well as supporting enforcement bodies.
Respondents generally agreed with the proposal that products being imported into the UK should be stamped before clearing customs or before leaving duty suspense. Some businesses suggested a stricter approach requiring duty stamps to be applied to imported products only before leaving customs and HMRC should not allow stamps to be affixed within duty suspense. However, a duty stamp supplier commented that having stamps applied overseas may have a higher risk of theft or duplication.
The majority of those who responded agreed that overseas manufacturers should have a UK representative who would be financially and legally responsible for their stamps. Businesses stated that this would give HMRC stronger oversight of the scheme and mitigate the risks of stamps being diverted onto the illicit market. However, one trade association expressed concerns that this may create barriers for some overseas manufacturers.
“Retailers objected to the principle of introducing VPD, arguing that some businesses would close due to additional costs and the duty would result in an expansion of the illicit market.”
However, a small number of respondents – notably mostly individuals and retailers - objected to the principle of introducing VPD, arguing that some businesses would be forced to close due to the additional costs and the duty would result in an expansion of the illicit market in the UK.
Following consideration, the Government says it has decided to implement a physical stamp with digital elements incorporated to enable tracing and authentication. This approach will be taken due to the benefits a physical stamp provides as a clear visual aid for enforcement bodies, industry and consumers. The presence of a physical stamp can be quickly determined and the digital element will enable verification.
For their next steps, HMRC and the Treasury say they will continue to engage with key stakeholders most affected by VPD and its associated compliance measures. It will look to introduce legislation in Autumn this year, ahead of those coming into force on 1 October 2026, with registration available from 1 April 2026. There is a lead-in period to allow businesses to prepare for the duty and implement processes as needed.
HMRC will also develop a comprehensive communications package and detailed guidance, which the government recognises is essential for businesses to comply with their obligations, to be published on GOV.UK.
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