Mark’s memo: What not to do when HMRC comes knocking

Trade compliance mistakes aren’t just theoretical risks—they can be very real and very expensive. Here’s a true story that illustrates just how quickly things can spiral when documentation isn’t in place, and how the instinct to fight an investigation can sometimes do more harm than good.

This story stares a well-known international multi-channel fashion retailer who found themselves in an impossible situation. HMRC found the retailer liable for unpaid VAT and imposed penalties totalling a little over £20k. This was due to the fact that the retailer was unable to provide proof that the products had been exported out of the UK before sale.

This is where their problems really started…

Their Supply Chain Director approached me and said, “Mark, the board have instructed us to appeal the HMRC decision.”
I said, “OK, let me see what I can do…”

It was important to be realistic about what was going to be achievable. It is impossible to provide missing financial documentation from service suppliers that are no longer trading, or to obtain documents and proof to substantiate any claim to negate a revenue investigation from traders that simply neglect their own legal obligations.

Unfortunately, I’ve yet to see a court lean favourably towards an importer/exporter of record, as the law clearly states it is the importer/exporter of record’s responsibility.

In some scenarios, it can be even simpler in the sense that the service supplier may reuse specific number ranges—waybill numbers being a good example—and in some cases, you have as little as six months to ensure you have all the corresponding documents before they are wiped from a service provider’s system.

And this is exactly what had happened. The broker, FPO in this scenario was extremely helpful and gave me access to the three-year-old waybills in question.

“Wow,” I thought, “this is going to be easy…”

Then the realism of the recycling waybill numbers became evident, and it wasn’t going to be achievable to appeal the HMRC decision. As the waybills in question, no longer had any correlation to the customs declaration(s) which were also unknown to the company.

NB: HMRC hadn’t simply come to the decision to impose VAT and penalties arbitrarily. It was following a period of objective behaviour. HMRC hadn’t exerted their full powers—they had leniently imposed the VAT and penalties on one export channel only: UK–US.

Eye-watering costs

Not only is it important to understand what is achievable, but also to acknowledge the true cost of a business failing with trade compliance.

All too often, the instant reaction is to fight any investigation—not so much with an audit, as there are less likely to be immediate financial penalties. Upon notification of an investigation, a gung-ho approach is often adopted by companies, moving people into different roles away from their daily positions, creating a “Compliance” project with outside resources, and often involving the forensic services of accountants and tax lawyers.

Why not simply ask yourself: Is the cost of all this resource less than the penalty that could be imposed?

Remember that you already acknowledge you are at fault for compliance failings. Maybe you should take the executive decision and simply pay any penalty imposed, and look to put sustainable processes in place going forward.

Although any tax lawyer, forensic accountant, or consulting services provider would advise you differently—but hey, if they didn’t, how would their contract generation ecosystem work?

As an indication of cost: for a four-hour meeting, one of many occasions, I’ve been with the client who has invited their CEO, CFO, CTO, COO, tax lawyer/barrister, accountant, and consultant services to a kick-off session. Noting this excludes the resources that have already been moved from their daily roles to support any investigation.

A not-so-rough estimate for the four hours: £10k. This is simply the real day-zero cost and the start of an expensive “Compliance” project. It’s already more than half the penalty and unpaid VAT imposed.

Long story cut short…

• The retailer lost the appeal
• They paid the VAT & penalty imposed: £20k + interest
• They paid the associated internal audit, investigation, and external consultant project & legal costs: £35k
• They implemented a bespoke archive solution: in excess of £100k

The real solution is not rocket science

The solution is about first acknowledging there is an issue that needs to be resolved for the long term. Quickly evaluate how much time and resource to invest into any investigation. Know when to hold your hands up and admit there was a problem—but be proactive and upfront.

Advise revenue authorities of the proposed changes the business is making. Don’t make them your enemy. Yes, there may be penalties—but these are often a compromised settlement based on what action you agree to take going forward.

About Mark Jamieson


Mark is an experienced, multi-disciplined senior supply chain professional with over 30 years of experience helping companies achieve sustainability and significant productivity improvements. He drives business transformation by leveraging technology solutions tailored to unique business opportunities across diverse supply chain sectors. These include multi-sector manufacturing, air and rail passenger gateways, omni-channel retailing, and business support functions.

He has led successful product lifecycle management initiatives for numerous business technology solutions and innovation concepts, delivering major gains in performance, productivity, and accuracy—as well as multi-million-pound cost efficiencies for specific industries and client portfolios.

Mark has served as VP of Operations for Emma Systems UK since 2021.

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