The illicit trade in counterfeit alcohol in the UK currently costs the Government about £1.2bn a year in lost revenue. It is a thriving black market but the Government hopes that new legislation about to come into force will bring about change. From 1 October all companies involved with the sale of alcohol will be expected to apply for the new alcohol wholesaler registration scheme (AWRS).
The new legislation, which has been brought in by the HMRC, is designed to stamp out fraudulent activity in the alcohol market, in particular sales of counterfeit alcohol and non-payment of duty. Dipali Buch is a Corporate Finance Associate at Alliotts Chartered Accountants based in London and specialises in the food and drink market.
Here she looks at who will be affected and how the new legislation will be enforced.
No current legislation applies to registration of wholesalers and no legislation applies to purchases of alcohol from a wholesaler. As a result, there is a thriving market in counterfeit alcohol. However, it’s all change from next month when businesses who sell alcohol as a retailer or wholesaler will need to register for the new alcohol wholesaler scheme (AWRS) and there will be penalties and possible criminal proceedings against all those who don’t comply.
In summary, the new scheme will apply to existing and new wholesalers of alcohol, trading at or after the point at which excise duty has become payable. Not only will businesses have to make sure that they are registered but they must also make sure that those they buy from are also registered with HMRC under the scheme. The types of business who will be affected include:
- alcohol wholesalers;
- alcohol retailers.
From next month (October 2015) alcohol wholesalers will need to apply for their licence online through the HMRC website. There is only a three-month window of opportunity to do this– between 1 October and 31 December 2015 – so wholesalers need to be ready to apply now. After December 2015, new alcohol wholesalers will need to allow plenty of time to register under the new scheme because they will not be able to trade until they have been cleared by the HMRC and this is likely to take at least 45 days. Anybody trading without the all clear from HMRC will be subject to a penalty.
The second stage of the process starts in January 2016 when HMRC will begin assurance work to determine whether the applicants are ‘fit and proper’ to be accepted onto the register and therefore able to continue to legitimately trade in the alcohol sector. If you do not pass this test, you will not be able to sell alcohol so it is vital that your application passes this test. When HMRC review the applications for registration they will look for evidence that applicants have good standards of record keeping and proper safeguards in place to avoid exposure to counterfeit goods. This includes effective due diligence on their suppliers and, where appropriate, their customers. Make sure that you check your supply chains carefully and have safeguards in place to only trade in genuine alcohol. HMRC will be providing an online service that you can check that your buyer or wholesaler is registered with the HMRC. It will be up to you to make sure that you are complying with the law.
By April 2017 all wholesalers will know whether they have been accepted onto the scheme. Beware – if your business is found to be trading with illicit tradesmen, then you will not be allowed to trade in alcohol at all in future.
If you have any concerns about the new system and whether your systems are robust enough or if you need advice on dealing with the HMRC, you should consult a financial advisor to ensure that you are within the HMRC rules. Don’t leave it until it is too late – it could cost you your livelihood.
Dipali Buch provides financial and advisory advice and specialises in the food and drink sector. She also works as part of the food and drink team within Corporate Finance at Alliotts Chartered Accountants. If you would like more information about the AWRS or would like and finance related advice please contact Dipali Buch at Alliotts Accountants on 0207 240 9971 or visit www.alliotts.com