The NEW Alcohol Wholesaler Registration Scheme
Alcohol duty fraud is said to cost the treasury an estimated £1 billion per annum. HMRC has stated that ‘the wholesale sector is the major point where illicit alcohol is diverted by organised criminals into retail supply chains…this link in the supply chain is vulnerable because it is the only activity not required to be authorised by HMRC...Introducing a requirement for wholesalers to register with HMRC will address this and reduce opportunities for fraud…’
In response, the Government has introduced the Alcohol Wholesaler Registration Scheme (‘AWRS’). Under the AWRS, anyone who wishes to engage in the wholesale trading of alcohol must register with and be approved by HMRC. To become registered, the trader will need to satisfy HMRC that he is a ‘fit and proper’ person to hold such an approval. The ARWS commences 1 October 2015.
Peter Hastings, a leading specialist in disputes with HMRC and Border Force comments “The legislative provisions underpinning the AWRS can be found in Part 6A of the Alcoholic Liquor Duties Act 1979 (ALDA) (inserted by s.54 of the Finance Act 2015) and the Wholesaling of Controlled Liquors Regulations 2015 (due to come into force on 1 October 2015). Further secondary legislation should follow. All alcohol wholesalers (including those who already hold excise approvals under, for example, the Warehousekeepers and Owners of Warehoused Goods Regulations 1999 [‘WOWGR’]) must apply for approval in the window 1 October 2015 to 31 December 2015. Wholesalers who apply in this window will be able to continue to trade until HMRC determine their approval application. This may take some time given that HMRC anticipate in excess of 20,000 applications (although HMRC has said that all applications will be determined by 1 April 2017). For those who wish to commence trade after 31 December 2015, an application must be made no later than 45 days before the date on which trading is due to start. Such new entrants to the market must not begin trading until HMRC has given its approval. Knowingly trading without requisite approval will be a criminal offence. Significant civil penalties can also be imposed. Where a penalty is imposed on a company, officers of the company may be personally liable to pay up to 100% of the penalty. There will also be powers to seize alcohol (even if it is duty paid) from unapproved wholesalers.
From 1 January 2017, it will also be a criminal offence for businesses (wholesalers and retailers) to purchase alcohol from unapproved UK wholesalers where the buyer knew or had reasonable grounds to suspect that the seller was not approved. Again, significant civil penalties are applicable and company officers may be liable. There will also be powers to seize alcohol (even if it is duty paid) if it was purchased from an unapproved UK supplier".
In commenting on the fit and proper test, Peter adds “HMRC will, in due course, issue a public notice giving guidance on their approach to the issue of ‘fit and proper’ for the purposes of the AWRS. It is expected that that public notice will largely replicate the ‘detailed guidance’ that was issued by HMRC on 23 March 2015. That guidance sets out 10 factors that HMRC will consider when assessing whether a business is ‘fit and proper’. HMRC may refuse approval for reasons other than those listed if there are concerns that the applicant is a serious risk to the revenue. However, any concerns must be considered. Further, HMRC must act proportionately and should consider whether any concerns that exist about an applicant could be allayed by granting an approval subject to conditions”.
Challenging HMRC’s decision
If HMRC determine that a trader is not ‘fit and proper’ or impose conditions on the approval that the trader feels are unjustified, the first step will be to take advantage of the statutory review mechanism and issue an Appeal to the First Tier Tax Tribunal (FTT). Once such an application is made, an officer who was not involved in the original decision must decide whether that decision should be upheld, varied or overturned. In reaching that decision, the review officer must not confine himself to considering only whether the earlier decision was reasonable but rather should undertake a fresh consideration of all material before him.
If the review upholds the original decision (or varies it in a way that is not acceptable to the trader) or if no response is received from the review officer within the statutory period, an appeal lies to the FTT. The FTT can allow an appeal if it is satisfied that the decision is an unreasonable decision and a decision will be unreasonable in particular if the decision-maker took account of irrelevant factors, or failed to take account of relevant factors, or if the decision is irrational. The problem for traders is timing and the serious consequences to the business. If the application was made on or before 31 December 2015, the trader will be able to continue to operate until HMRC reaches its decision.
However, the position is different for those who file an application after 31 December 2015 and, until HMRC grant their approval, such traders may not engage in wholesale trade. For traders in this position, HMRC delays could be seriously damaging and, as no decision has yet been reached, no appeal will lie to the FTT. The only avenue (other than negotiation with HMRC) open to a trader that finds himself in this position is to bring judicial review proceedings and seek an expedited hearing.
Wholesalers and retailers alike should take the AWRS very seriously. Peter also expects to see an increase in the detention and seizure of goods and adds “We have the experience and resource to act on applying for a Judicial Review and seeking an injunction, appeals to the First Tier Tax Tribunal (FTT) and dealing with the detention of and seizure of goods through condemnation proceedings in the High Court and Magistrates Court, and restoration appeals to the FTT”.
Peter has extensive experience of acting for businesses in disputes with HMRC and UK Border Force in VAT, customs duty and excise related matters. He is experienced in Appeals to the First Tier Tax Tribunal and restoration appeals, Judicial Reviews, Injunctions, High Court and Court of Appeal, Magistrates’ condemnation proceedings and Crown Court Appeals. Recent cases have included acting for the liquidator of Abbey Forwarding, and Checkprice.
For more information please contact:
Tel. 01603 675603 Mob. 07500 958170