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Alcohol Wholesalers Registration Scheme

Alcohol Wholesaler Registration Scheme (AWRS)

Changes to trading in alcohol are taking place from October 2015. If you’re an alcohol wholesaler, or trade buyer of alcohol, you’ll need to start thinking about preparing very soon.

 Who does this scheme apply to?

The scheme will apply to existing, and new, wholesalers of alcohol, trading at or after the point at which excise duty has become payable. In addition, all businesses who trade in or retail alcohol will need to make sure in future that any UK wholesalers that they buy from are registered with HMRC. The types of business who will be affected include:-

·         alcohol wholesalers

·         brokers

·         auctioneers

·         alcohol retailers

The scheme does not apply to private individuals purchasing alcohol from retailers.

What is changing?

From October 2015, all alcohol wholesalers will apply online to HMRC for AWRS registration, then from April 2017, all businesses who trade in or retail alcohol will need to make sure that any UK wholesalers they buy from are registered with HMRC

Alcohol for wholesale or retail being purchased directly from abroad, or from another retailer whose wholesale sales are purely incidental to their retail business, is not affected.

What the registration scheme will do

Alcohol fraud costs UK taxpayers approximately £1.3billion each year in lost duty and VAT. The new scheme will introduce measures designed to prevent the wholesale of duty evaded alcohol, making it more difficult for organised criminals to distribute their products in the UK. HMRC wants to remove illicit alcohol from alcohol supply chains, reduce the amount lost in duty and VAT and level the playing field across the alcohol trade for all legitimate traders.

What alcohol wholesalers will need to do

All alcohol wholesalers, including those who already hold other excise registrations, will have to submit their AWRS application between October and December 2015. In January 2016, HMRC will begin assurance work to determine whether the applicants are ‘fit and proper’ to be accepted onto the register and by definition continue to trade in the alcohol sector.

For a business to be considered ‘fit and proper’ HMRC will assess its application and then, if necessary, carry out a pre-registration visit.

Fit and proper

HMRC will be looking to make sure that:

  • there is no evidence of illicit trading
  • the applicant, or any person with an important role in the business has not previously been involved in any significant revenue non-compliance or fraud
  • there are no connections between the business, or key persons involved in the business, with other known non-compliant or fraudulent businesses
  • key persons involved in the business have no unspent criminal convictions which we consider relevant - for example offences involving any dishonesty or links to organised criminal activity
  • the application is accurate and complete and there has been no attempt to deceive
  • there have not been persistent or negligent failures to comply with any HMRC record-keeping requirements
  • the applicant has not previously attempted to avoid registration and traded unauthorised
  • the business has provided sufficient evidence of its commercial viability and/or credibility
  • there are no outstanding, unmanaged HMRC debts or a history of poor payment
  • the business has in place satisfactory due diligence procedures to protect it from trading in illicit supply-chains.

The criteria above are not necessarily exhaustive. HMRC may refuse approval to a wholesaler for reasons other than those listed if they have concerns that the applicant is a serious risk to the revenue.

Now is the time for businesses to review their processes and supply chains to make sure they are sourcing only legitimate alcohol. This is vital because HMRC will look for evidence that applicants have good standards of record keeping and robust safeguards to avoid exposure to the illicit trade. This includes effective due diligence on their suppliers and, where appropriate, their customers.

HMRC will check all applications and carry out any necessary visits between January 2016 and April 2017. Wholesalers will therefore hear the outcome of their applications at different times, but certainly by April 2017. Critically, where a business fails the scheme’s ‘fit and proper’ test, HMRC may remove its right to wholesale alcohol at any time during the introduction of the scheme. After April 2017, wholesalers and alcohol trade buyers (for example brokers, auctioneers, alcohol retailers) must also source alcohol only from HMRC approved businesses (unless they are buying direct from abroad or from another retailer whose wholesale sales are purely incidental to their retail business).

 What alcohol trade buyers need to do

HMRC is currently asking trade buyers to review their supply chains to satisfy themselves they are doing all they can to only source genuine tax-paid alcohol.  Buyers might check that their own wholesalers are aware of the scheme, so they can prepare for the changes. From April 2017 trade buyers must only buy alcohol from HMRC approved wholesalers. HMRC will provide an online look-up database of approved traders for buyers to use and  using this  to check the validity of wholesalers will form part of the buyer’s ‘due diligence’ processes.

Penalties

New criminal and civil sanctions will be introduced for wholesalers and trade buyers caught purchasing alcohol from non-registered wholesalers. Penalties for wholesalers will start from 1 January 2016, while penalties for buyers will start from April 2017. In addition, any alcohol found in the premises of unregistered businesses may be seized, whether or not the duty has been paid.

Businesses will have a similar right to review and appeal, as they do for other HMRC regimes, for any civil penalties raised or decisions related to their approval.