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A brief history of HM Customs and Excise

Introduction
Source: Gilbert Denton, NKBH Library (revised 1997)

The responsibility for collecting the Customs and Excise duties is laid by Acts of Parliament on the Commissioners of Customs and Excise who are all senior civil servants, appointed by the Queen under the Great Seal. The modem department goes back to 1909 when the separate Boards of Customs Commissioners and Excise Commissioners were amalgamated.

Both departments were then already old: Excise duties on home produced articles were first imposed in 1643 to provide money for Cromwell's Parliamentary Army and then continued by King Charles II for ‘royal purposes’.

Although the Board of Customs was also instituted by King Charles in 1671 it was already a much older organisation in other forms to control imports and exports and to levy the Customs duties.

Customs
Source: Gilbert Denton, NKBH Library (revised 1997)

To King John in 1203 goes the credit for establishing a Customs service on a national scale responsible directly to the Crown. At all the ports, he required six or seven 'wise and substantial men, well versed in the law' to account to him for the revenue; and he divided the control between assessment, collection and accounting to guard against bribery or collusion.

Collectors of Customs were appointed at each principal port. The limits between each port were defined to ensure the whole of the coastline was covered. The collectors’ principal task was to assess and collect the proper duties of Customs.

At various times in history, instead of appointing his own collectors, a King would sell the rights to the Customs duties for a fee, often substantial, to a merchant who would then undertake the collection with his own staff. This system of 'farming' was open to abuse, bribery and loss of revenue and was finally abandoned in 1671 when Charles II appointed his first Board of Commissioners.

Under royal authority, attempts to avoid paying duty or avoid a prohibition were made more difficult by requiring goods only to be landed or shipped at approved quays, with London growing into the premier port.

Edward I had expelled the Jewish financers and their place as 'fanners' of the Customs had been taken by Italian merchants such as Luke of Lucea and the Bardi and Frescobaldi families of Florence.

In 1303, Edward introduced the Carta Mercatoria which placed both trade and customs duties on a firmer footing and involved the levying of the Aliens Customs or butlerage, a tax on wine to be paid only by aliens (anyone who is not a national or citizen of the United Kingdom). Later, the tax was also paid by English merchants in lieu of providing the monarch with a certain quantity of imported wine. This act also provided for 'weighting' at the wool scale or 'King's Beam' by officials controlling the operation with officially approved weights.

The Customs service gradually expanded during the next two hundred years and Henry VII - by his mercantilist policies and trade agreements - gave trade a great impetus. The 1496 Customs Roll of the port of Bristol shows how the King arranged for Richard A'Meryke, the Customs collector at Bristol, to pay certain money to John Cabot to finance his voyages. In the same year, he signed a treaty of commerce with the Netherlands which included an article providing that 'officers appointed for searching for contraband goods shall perform it civilly'. His treaty of commerce with Castille in 1506 was also significant to the Customs inasmuch as it provided that the rates of duty payable should be publicly affixed to the Custom Houses of the countries concerned. In the following year, the first known Book of Rates, forerunner of the present day tariff, was produced, for many articles other than wine and wool were now liable to duty.

By the time of Queen Elizabeth I, the whole of the Customs was let out in one' Great Farm' and Sir Thomas Smythe became known as Mr Customer Smythe. Although the collection of duties was managed by the 'farmers', the rates were determined by the King, sometimes with, often without, the authority of Parliament and given force in the Books of Rates.

When James I wished to increase the revenue and, being unable to get Parliament to raise the rates, decided he would revise the valuation of goods in the published Books, a merchant called Bates took legal action on the grounds that no increase in taxation could be imposed without the consent of Parliament. The court held that the King acted within his prerogative: Bates lost.

At the height of the Civil War, Parliament appointed their own Commissioners and published new Books of Rates directed to achieve rigid protection against foreigners. Few goods were exempt.

In 1651, the Rump Parliament passed the first Navigation Act requiring goods brought to England to be carried in English ships, navigated by English crews and captains.

New duties came into force in December 1660 when the Commonwealth duties lapsed. By 1662, both Customs and Excise were back in farm. By 1671, both were for renewal and, although the Customs looked to be continued by the farmers, Charles II cancelled the agreement, having no certainty of the revenue collection.

A second Navigation Act of 1661 gave more work to the Customs enforcing the requirement of certificates on produce carried only on British ships.

In 1686, the Board of Customs became the Commissioners for the 4.5 per cent duty levied on West Indian produce and became responsible for the administration of Customs in the plantations there and in America, as well as in Africa and Australia

By the late 1700s, the Customs laws needed to be consolidated - and simplified. The laws contained in 27 volumes were not available to the public; many goods were liable to duty under 12 to 18 separate Acts and there were 100 different branches of duty for value, imports and accounts.

In 1787, William Pitt introduced his 'remedy for this great abuse' by substituting one single duty for each article. Nearly 3,000 different resolutions were approved by the House of Commons at one sitting! Over the next forty years, Parliament broke with tradition and ended the grants various Kings had made from the Revenue.

During the nineteenth century, duties continued to be rationalised. The subordinate Boards in Edinburgh and Dublin were wound up in 1829 and all administration since then has been controlled from London.

In 1909, the Board of Customs was amalgamated with that of Excise by Order in Council and renamed the Board of Customs and Excise.

Smuggling

Source: Maritime Archives & Library

Customs duties on imported (eg wine) and exported goods (eg wool) were well known as far back as the Magna Carta. The length of time these taxes had been in place meant they did not raise a great deal of hostility; however, Excise was regarded as 'a hateful tax' (Dr Johnson). Taxes known as Excise were placed on goods made in this country (eg beer and candles) and were introduced in England during the Civil War to pay for Cromwell’s army. In 1660, when the monarchy was restored, they paid for the expenses of both the government and King.

When taxes were high - as during war time - smuggling levels increased in violence and scale. To meet the armed and violent gangs of smugglers, the revenue men were also armed and had the support of mounted and armed soldiers (or the Royal Navy if they were at sea).

Smuggling started in the reign of Edward I (late 13th century) when a Customs duty was placed on the export of wool, which was in great demand in Europe. The initial duties were small, but as the Hundred Years War progressed in the 14th century, so the tax increased in order to fund troops and further fighting.

Initially, the Customs Service existed only to collect the duties at the ports, and not to prevent smuggling. However, during the 17th and 18th centuries, illegal trade increased. From the previously small scale evasion of duties, smuggling had now developed into an industry. It has been suggested that at times more illicit spirits were being smuggled into the country than entered legally into London docks.

In 1614, the export of wool was made illegal. Smuggling of wool was known as ‘owling’ (after the owl like noises made by the smugglers to communicate with each other). In 1661, the illegal export of wool was made punishable by death; smugglers subsequently began arming themselves. In turn, they were faced with armed prevention in the form of the British Army. In 1671, Charles II created the Board of Customs - an official body responsible for the collection of Customs duties. In the 1680s, Revenue Officers were provided with customs cutters to enable them to patrol the coast to catch smugglers.

In the 18th century, 'Customs' was not the only taxation on goods. Excise was a type of tax on domestic consumption. During the years of the Civil War, it covered many different items. But it was reduced ten years later to cover just chocolate, coffee, tea, beer and spirits. However, it was an effective way of raising tax revenue, so successive governments re-introduced and repealed Excise duty on various items including essentials such as salt, leather and soap. The difference between these two taxes was of little interest to the people, who cared only that what they bought was becoming increasingly expensive.

In the 18th century, extraordinary quantities of goods were smuggled into Britain. In some areas, whole communities were dependant on smuggling. Many communities in the late 1700s (such as the Scilly Isles) were in league with the smugglers who could provide contraband goods, such as tea or tobacco, which they could not otherwise afford.

The heyday of smuggling was during the wars against France and Napoleon. However, smuggling continued throughout the early 19th century, but declined after the conclusion of the Napoleonic Wars in 1815 when the preventive effort was stepped up with the introduction of coastal blockades, blockademen and Coastguard. By the late 1820s, the effectiveness of the two forces was apparent.

In 1831, the Coastguard Service became responsible for the entire coastline and ultimately becoming the preventive force.The Coastguard drove smuggling underground, but economics finally ended the smuggling era. Britain adopted a free-trade policy in the 1840s reducing import duties significantly, so made smuggling no longer a viable occupation.

Rummaging

Source: Maritime Archives & Library

Historically, a tax on a product was ample incentive to smuggle. To smuggle meant concealing the product from the prying eyes of the customs official. There are numerous accounts of hidden contraband in official departmental reports from the 1700s. Contraband was often hidden in vessels with false bulkheads, hollow spars, and adapted cavities between decks.

The search of vessels has taken place for centuries. Early instructions to Customs officers before 1673 indicate ships were being searched for concealed goods. The master faced a penalty of £100 if goods were found.

After 1760, officers were employed exclusively on ‘Waterguard’ duties with job titles such as Inspector of the River, Tide Waiter and Waterman. By 1809, a ‘preventive waterguard’ was established to patrol the coast by boat during the day and on foot at night. This body takes on life-saving duties and become the coastguard of today. By 1891, the specialist unit dedicated to searching or rummaging was established and was known as the Waterguard. The specialist rummage officer retained this title until reorganisation in 1972 when the unit was absorbed into the Customs & Excise department.

An early written manuscript describing smuggling method was produced by a Lieutenant Rawstorne. The manuscript is one of the few surviving early accounts produced by an officer in the field. He was a Royal Naval officer and a chief officer in the Coast Guard; from 1830 to1837, he produced detailed description of vessels involved in smuggling accompanied by fine intricate drawings of concealment methods.

The equivalent in the 20th century was the copycat drawings. Produced by officers, these drawings were then circulated to Waterguard stations around the coast. First appearing around 1955, the copycat drawing became the accepted method of sharing intelligence.

Historically it was the Waterguard Training Centre which played a key role in training of new recruits.

Established after World War Two in Gravesend and Southend, it provided classroom based learning delivered by experts in the field. The trainers were often Chief Preventive Officers with long experience of preventive work. The students included new recruits to the Waterguard and overseas students often from Britain’s former colonies. They were given hands on experience which included visits to the London Docks and its shipping and London’s airports. The training was intensive and could include examination to qualify as an APO (Assistant Preventive Officer) or PO (Preventive Officer).

Although now long disbanded, the Waterguard history and traditions are still remembered and celebrated by retired officers. Officers often have reunions around the country and have a dedicated website to celebrate its history.

Excise
Source: Gilbert Denton, NKBH Library (revised 1997)

The Excises were first imposed in this country by the Long Parliament in 1643, to provide money for the parliamentary forces whilst engaged in war against the Crown. Thus, where the Customs are old, royal and prerogative duties - long pre-dating Parliament - the Excises are of purely parliamentary origin.

Excises were initially managed directly by a Board of Commissioners in the same manner as the Customs. At the Restoration, it was part of the settlement that one half of the total Excise Revenue should be made over to Charles II for the term of his natural life, and the other half to him or his heirs forever (as compensation for the loss to the Crown of their rights to the feudal dues).

The whole of the Excise was therefore in Charles' personal hands, and contemporary records show that he allowed, for example, Nell Gwynn £500 a month from these monies.

Although he had placed the Excise back into ‘farm’ in 1660, he decided to reconstitute the
Commission as he reconstituted the Customs Commission and the Excise came finally out of ‘farm’ in 1683. The Excise was a long time living down its political unpopularity partly because, perhaps, the hated ‘right of entry’ to inspect premises and produce had to be exercised more often in the Excise than in the Customs. It is, for example, interesting to note with regard to the Hearth Tax, that the householder's declaration could be verified only by the exercise of the Officer's ‘right of entry’ to the declarant's own house. The Hearth Tax was abolished by William of Orange in an early Act of his reign only to be re-introduced in the form of the Window Tax - where the declarant's liability could be verified by counting the windows from outside the house.

After the time of Charles II, new duties were deemed part of the state revenue and allocated to specific services. In 1787, the hereditary Excise was abolished as such, the Crown was provided with a Civil List, and all duties were thereafter accounted to the Consolidated Fund.

The history of the Excise is a chronicle of political expediency and administrative convenience, depending on what trade was fashionable and prosperous. Between 1660 and 1960, a quick count of things subjected to Excise - by duty, licence, stamp or assessment gives a total of some 160 different headings.

Some were temporary like Income Tax but stayed long enough to be permanent; some, like Purchase Tax, lasted over 30 years; some came and went to reappear in another form like Hearth and Window Taxes; and some were tried and quickly lapsed.

When wigs were fashionable, the Excise was on hair powder; when people had servants they were taxed on male servants; if they displayed their armorial bearing, they were taxed - but officers were directed to approach the aristocracy with due deference. If gentry or common folk felt thirsty then they could enjoy tea, coffee, chocolate, beer, wine, cider, perry, mead - but only after the duty was paid; and if they tried to avoid the duty with a substitute the Excise taxed that - saccharin for sugar or chicory for coffee.

A number of duties were proposed to produce revenue for foreign wars. During the 1745 Rebellion, the Jacobite army collected the Excise as it progressed southwards. The wartime taxes often outstayed their welcome like Purchase Tax or Entertainments Duty.

The tax on spirits has a particularly troubled history. Their introduction has caused William of Orange to be credited with the introduction of gin drinking and general drunkenness. His intention was to stimulate the growing of corn 'for the greater Tillage in the Kingdom' but he forgot to regulate the activities of the distillers who used the malt to produce a substitute for French brandy which he had prohibited during his war with France.

The extra duty on malt caused riots in Scotland, and the general public hostility to a General Excise put back for years the attempt by Robert Walpole to introduce a warehouse scheme. As a means to move the tax burden on merchants to the point of consumption, away from importation or production, he proposed a series of secure, bonded warehouses where goods could be deposited duty free until removed on payment of the duty for use in the domestic (home) market.

Excise penalties were severe. A pack of cards only bore the duty of 6d, when complete with the 52nd card - the ace of spades - which was ornamentally embossed to prevent forgery. To forge an ace of spades was punishable by hanging, hence the ‘hanging card’.

The 19th century was a period of change as the country moved to free trade. It was for the Excise a period of technical advance: spirits were more accurately checked by the Sikes' hydrometer (not taken out of use until 1979) and the strength of beer was measured by the Bates saccharometer.

In 1932, against a picture of world recession the country put up tariff barriers against manufactured goods, with some relief for imports from the Commonwealth and Empire. For the Customs, this meant a tariff sometimes in five layers of duty and most goods meeting a general ad valorem ten per cent duty. Questions of valuation were rife.

In 1940, Purchase Tax was introduced on a wide range of goods as a deterrent on 'luxury goods' but remained as a revenue raiser until superseded by Value Added Tax (VAT). These two taxes introduced the department to a much wider range of tax/duty payers with an expansion in staff numbers.

Continuing reviews caused duties to be abolished, including table waters, where the cost of collection made them uneconomic. And small licences of a control nature , eg hawkers of dogs, in England were transferred to the country councils or the police, before finally being abolished.

Passenger traffic was being concentrated at airports and ferry terminals and the pressure of numbers made it impracticable for every traveller to be confronted by a Preventive Officer and a self assessment system of declaring goods for duty by Green and Red Channels was introduced.

Freight traffic by air increased, with London Airport pre-eminent. The department used the services of the computer age to speed the handling of paper work and delivery of goods to the importers after payment of duty. Faster systems were later introduced at the ports and for the convenience of importers a system of postponing duty payment under a bankers’ guarantee was established.

The post-war years showed the growth of international co-operation to facilitate commerce and trade from the Geneva Agreement on Tariffs and Trade (GATT) in 1947, via the Treaty of Rome in 1957 establishing the European Economic Community - EEC (to which at that time this country did not accede) and the European Free Trade Association (EFTA) - which we did join in 1959, and which led by 1966 to nil tariff between the member states.

Probably the most far-reaching decision was this country's accession to the EEC in January 1973. Adjustments were required to harmonise the existing tariffs, the basis of valuing goods, the harmonisation of Excise duties and the introduction of quotas, levies and refunds for produce under the Common Agricultural Policy (CAP). All the new procedures placed extra demands on the resources of both Customs and Excise.

In 1971, after some seven years of consideration, the Chancellor of the Exchequer announced that Purchase Tax and Selective Employment Tax (not a departmental responsibility) would be abolished, to be replaced by a simple, broad-based Value Added Tax - targeted for April 1973. As the tax was to be based on transactions and invoices, in which Customs and Excise had greater experience than the Inland Revenue, the control of the tax was laid to the Commissioners of Customs and Excise.

A challenge to the department was the tax to be levied on services as well as goods but not all services were taxable, leading to a dual problem of exempt and partially exempt traders. However, despite any initial doubts, VAT is now the largest single revenue and involves over one third of departmental staff resources.

1993 saw the introduction of the Single European Market with harmonisation of controls between the European member countries on standardisation, movement of people, goods and finance. Since that year, three new taxes have been introduced: a duty on air travel and a tax on insurance premiums came into force in 1994 and a tax on waste disposal at landfill sites in 1996.