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Tobacco smugglers could receive millions of pounds in compensation because customs officers wrongfully confiscated their goods.
More than 4,000 cases in which tobacco products were seized on Britain's borders are under review amid fears that officials breached legislation.
Revenue and Customs failed to notice a change in the law in 2001 which restricted who could be targeted for tobacco smuggling. It faces having to pay millions in legal costs and compensation.
Since 2005 customs officers have seized £88.6million of tobacco smuggling assets, although it is not known how much of this may have to be returned.
HMRC confirmed today that it was conducting a review into defendants convicted of tobacco smuggling.
It is the latest in a series of errors made by British customs officials. It was revealed this month that organised crime boss Raymond May had failed to pay back £3.2million he took from defrauding HMRC in a scam involving computer chips. Officials blamed the failure on the complexity of the case. Last month, a judge at Bradford crown court branded the agency "incompetent and negligent" after he was forced to allow a drugs baron to keep more than £4.4million following legal blunders.
A spokesman for HMRC prosecutions office said: "To date we have reviewed 711 defendants' cases. Of these, we have written to 35 defendants as part of the second stage of the review [those cases where the law has been wrongly applied].
"A further 13 convicted defendants have contacted us on learning of the review and we are corresponding with them. By a process of extrapolation from the number of tobacco cases recorded, we project that there are a further 3,300 defendants' cases to be reviewed."
The Revenue and Customs Prosecutions Office said in a statement: "Whilst the error is deeply regrettable we were not alone in making it: the same error has been made in academic texts and by practitioners at all levels."
The blunder became apparent at a court hearing last year when an HMRC lawyer realised the statute detailing who was liable to pay excise duty in tobacco smuggling cases had been changed.
The change meant the law was only enforceable against the masterminds of smuggling operations - not everyone involved in the crime such as transporters and sellers.
Don Mavin, a tax consultant who is representing two defendants claiming money which they say was wrongfully confiscated from them, said: "Some of these people may have been bankrupted or forced to sell their homes. Many will be considering compensation claims."
Reader views (2)
Immediate resignation of the Head of the HMRC now, clear off do not get massive civil servants compensation and forfeit the pension Go now !!!
- Nick Holland, glasgow, 19/08/2009 12:08
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Sounds about right for an incompetent jackboot autocracy.
- Reuben Camara, Principality of Morecambe, EUSSR, 19/08/2009 11:39
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