The Alcohol Wholesaler Registration Scheme (AWRS) is being introduced on October 1 by HM Revenue and Customs (HMRC), to tackle alcohol fraud. If you’re an alcohol wholesaler or trade buyer, you need to get ready now, says the Government. That is: review processes and supply chains to make sure you are sourcing only legitimate alcohol.
AWRS will apply to existing, and new, wholesalers of alcohol, trading at or after the point at which excise duty has become payable. All businesses who trade in or retail alcohol will in future need to make sure that any UK wholesalers that they buy from are registered with HMRC. It doesn’t apply to individuals buying from retail.
From January 2016 HMRC will start to review all AWRS applications to decide whether businesses are ‘fit and proper’ to be accepted onto the register. To be fit and proper, you shouldn’t be doing illicit trading and avoiding excise duty; and a business should have in place what the Revenue calls ‘satisfactory due diligence procedures’ to protect it from trading in illicit supply chains. Most commonly, ‘inward diversion’ fraud involves organised criminals sourcing and positioning large commercial consignments of genuine brands of alcoholic drinks on the near-continent for smuggling into the UK, untaxed. Hence alcohol brewers and their shippers should ‘know your customers’ and be wary of odd shipments to countries that don’t consume such quantities; those genuine products may be wanted by fraudsters for diversion or smuggling back into the UK without tax. The authorities say that hauliers should beware of unusual terms, or a lack of paperwork, or unknown destination, or destination changed on the way; while alcohol retailers should beware of abnormal, ‘too good to be true’ offers, or wholesalers vague about the origin of goods.
Where a business fails the ‘fit and proper’ test, HMRC will remove its right to trade in wholesale alcohol. And from April 2017, all businesses who trade in, or retail, alcohol will need to make sure that any UK wholesalers that they buy from are registered with HMRC. HMRC says that it will provide an online look up service.
Meanwhile the Joint Alcohol Anti-Fraud Taskforce has published their first, 2015 annual report, on tackling the illicit alcohol trade. In a foreword to the 19-page document, Jim Harra, Director General, Business Tax at HMRC, said: “Levels of fraud are still too high, and it remains the case that making the world in which the fraudsters operate more difficult requires effective partnership between legitimate businesses, regulatory and enforcement bodies.”
Much of the estimated loss of £1.3 billion a year to alcohol fraud in unpaid VAT and excise duty is thought to come from beer; then wine and spirits. As the JAAT report pointed out, such fraud damages the equity of alcohol brands, and further down the supply chain puts the businesses that do sell alcohol legally at an unfair disadvantage. The report added that profits made by such fraud also drives other frauds, such as the production and sale of counterfeit alcohol and the abuse of the excise duty repayment system.
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The JAAT suggests that the impacts of alcohol duty fraud are felt most acutely by the convenience sector. For the trade body the Association of Convenience Stores (ACS) chief executive James Lowman said: “The work of the task force is essential in the fight against the illicit alcohol trade, which costs around £1.3bn a year in lost revenue every year. Retailers who sell illicit alcohol are damaging legitimate businesses. Our position on these retailers is clear – they should lose their alcohol licence.”
And at the British Beer and Pub Association (BBPA) Policy Director, Andy Tighe, said: “There has been excellent progress and positive tangible outputs across a number of areas. Having HMRC, other Government agencies and industry representatives from across the whole alcohol supply chain around the table has enabled reducing duty fraud to be considered from all angles and from all perspectives.
“Most importantly it has enabled the JAAT activity to be increasingly focussed on effective and practically achievable measures to reduce fraud and a greater understanding of the barriers to success. It has also been an important learning process for all parties who seem genuinely committed to the JAAT process and ultimately achieving the shared goal of a significant reduction in alcohol duty fraud.
“The brewing industry remains fully committed to continuing this process, further streamlining activity now some of the key actions have been completed whilst still fostering an environment that encourages new ideas and innovations to reduce fraud further.”
