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Important warning to brewers as new compliance standards introduced
Alcohol Wholesaler Registration Scheme (AWRS) – what does it mean for brewers?
HMRC introduced its ‘Tackling Alcohol Fraud’ strategy to reduce the effects of the illicit trade in alcohol:
- £1 billion cost to UK tax payers every year (7% of yearly UK alcohol sales).
- Reduction of fair competition in the brewing industry.
As a consequence, the Alcohol Wholesaler Registration Scheme (AWRS) comes into force in April 2017. The scheme was announced in George Osborne’s 2013 Autumn Statement and membership became a legal necessary in the Finance Bill 2015.
The scheme wants the alcohol industry to police itself on tax evasion, tax avoidance and fraud at the wholesaler-retailer point of purchase.
It will likely make the trade of illicit alcohol more difficult and create more certainty in the brewing industry, whilst raising nearly £200,000 for HMRC.
1 January 2016 - 31 March 2016 (this was previously 1 October 2015 – 31 December 2015)
- You must submit your AWRS application to HMRC online within this 3 month registration period.
- HMRC will release the details on how to do this within the next few months.
1 January 2016 - 31 March 2017
- HMRC will scrutinise all applications and carry out site visits if they need further confirmation that you are a ‘fit and proper’ wholesaler.
- New brewers must submit an application to HMRC at least 45 days before their first day of operation. This may need to happen before 1 January 2016.
From April 2017
- Retailers purchasing beer must verify their suppliers’ approval status through the online register.
- Financial penalties apply if retailers cannot demonstrate that they have bought their beer from an HMRC approved brewer.
- Your HMRC approval reference number must be clearly displayed on every invoice involving alcohol sales.
Penalties for operating after 1 April without registering
- £10,000 – if deliberate and concealed
- £7,000 – if deliberate but not concealed
- £3,000 – in any other case
- HMRC may hold you personally liable to pay any portion of the fine if you do not register
- HMRC may seize your stock with new powers – even if you have paid your duties!
Submit your online registration application to HMRC before 31 March. There will be up to 20,000 applications, meaning the review process will take over a year to complete. HMRC will provide the outcome of each application at a different time. Please note that HMRC may carry out a visit to your brewery.
Once you have submitted your application, HMRC will look to make sure:
You are a ‘fit and proper’ wholesaler
- There is no evidence of illicit trading.
- There is no evidence of an attempt to deceive.
- You do not have a director that has been caught committing tax evasion, tax avoidance or fraud.
- You have no connections with other businesses/consultants that have been caught committing tax evasion, tax avoidance or fraud.
- You do not have a director that has been in prison for more than 2 ½ years for a ‘dishonest’ or ‘organised crime’ conviction.
- Your application is accurate and complete.
- You have complied with HMRC’s ‘good financial record keeping’ standards in the past
- You have kept financial records for 22 months (business income and costs, as well as employee expenses and benefits).
- You have not attempted to avoid registration or trade unauthorised.
- You have provided sufficient evidence of your commercial viability.
- You have no outstanding HMRC debts or a history of poor payment.
- HMRC believes you are trying to deceive them.
You are using ‘legitimate supply chains’
- You have taken reasonable steps to avoid trading with illicit supply chains.
- You have implemented robust monitoring safeguards.
What should you do?
It may be time for an internal audit to help you prepare for the application. At least try to ensure you are within the above criteria to increase your chance of HMRC finding that you use ‘legitimate supply chains’ and are a ‘fit and proper’ wholesaler. Remember that ignorance is no longer an excuse!