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Deadline Approaching for Alcohol Wholesalers

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With the coming into effect of the Wholesaling of Controlled Liquor Regulations 2015 (WCLR) all existing wholesalers of alcohol must have submitted their application to HMRC to apply for the Alcohol Wholesaler Registration Scheme (AWRS) no later than 1 April 2016.

Wholesalers who continue to trade from 1 April 2016 without first making the application to HMRC will be subject to criminal liability which can result in a fine or imprisonment of up to seven years.

31 March 2016 is the first date of the bringing into effect of the Alcohol Wholesaler Registration Scheme (AWRS) which will be fully implemented from 1 April 2017. It is widely accepted by wholesale providers of alcohol and other interested parties that a wholesaler’s ability to avoid the requirement of a license under the Licensing Act 2003 is open to abuse by less reputable suppliers.

Tackling Alcohol Fraud

The AWRS is specifically designed to allow HMRC to tackle alcohol fraud within this sector. Under the HMRC guidelines, in relation to the AWRS, all companies established in the UK which supply alcohol to other businesses at or after the point at which Excise Duty becomes due whether by selling (to businesses or the general public), arranging the sale or offering or exposing for sale, will be required to obtain approval under the AWRS.

The HMRC application is deliberately wide to ensure the greatest level of compliance and to ensure companies which seek to undertake alcohol fraud can no longer hide in what was perceived to be an area with lax regulation. Under the scheme each company or business must apply to HMRC for approval by 31 March 2016 or 45 days prior to the business commencing its operation.

The application itself can be undertaken online using the HMRC website and the Government Gateway accounts system.

Obtaining AWRS Approval

Once a company has made the application to HMRC they will undertake checks to ensure the information given is a full and accurate representation of the business. Such checks will include assessing whether or not the company has abided by all of its tax obligations or requirements of a corporate body such as submitting accounts to Companies House on time. HMRC have asserted that within the application process they do intend to check the criminal records of all applicants or the officers of individual companies and, depending on the information which HMRC finds, there may be a decision to visit the premises to understand the trading activities or to find out information regarding suppliers, customers, stock control and financial viability. This process is ultimately aimed at establishing whether or not each applicant can satisfy the fit and proper test. The criteria for this test is wide ranging and not simply limited to the business as a corporate identity but also to the individuals or directors in control of the business. Ultimately, HMRC must be satisfied that the business is genuine and all persons with an important role or interest in it are law abiding, responsible and don’t pose any significant threat in terms of potential revenue, non-compliance or fraud.

Once the company passes the fit and proper test and obtains approval from HMRC the company will receive an AWRS unique reference number and inclusion on to HMRC’s registrar database of approved wholesalers. This database itself will play an important role in the supply of alcohol. In April 2017 purchasers of alcohol must ensure that the alcohol supplier they use has an AWRS unique reference number and is registered on the HMRC database. In practice customers will be able to use the database to check a wholesaler’s credentials, ensuring their compliance.

If a company does fail the fit and proper test they do retain the right to appeal directly to HMRC before court action is necessary.

Potential Penalties

It should be noted that the fit and proper test and the criteria behind it is not a one off test for each company but rather to ensure set standards are maintained within the industry. The AWRS will contain two civil or ‘behavioural’ penalties for carrying out the wholesale supply of alcohol without approval or the purchasing of alcohol from an unapproved wholesaler. In each circumstance a maximum penalty of £10,000 can be imposed. Furthermore, regulatory penalties of £500 can be imposed for failing to comply with set conditions such as record keeping or the failure to notify HMRC of a variation to an approval.

Without doubt, however, the strongest penalty will be that of the criminal law where current businesses or individuals could be liable to a fine or imprisonment of up to seven years for knowingly selling alcohol without the proper approval.

On 1 April 2017 it will also be an offence to buy wholesale alcohol from a person or company who is not approved under the AWRS.

While industry leaders may look at this scheme as an ever increasing encroachment of regulatory activities which only go to place further pressure on law abiding companies it is clear this scheme heralds a major sea change in how alcohol is supplied by wholesalers and also underlines HMRC’s intent on ensuring compliance within this area.

If you or your business require any advice in relation to the Alcohol Wholesaler Registration Scheme, whether that be advice regarding application, appeal, sanctions or application, Fishers Solicitors are ready to support you and your business.