The Alcohol Wholesaler Registration Scheme – How Does it Affect Your Business?

The Alcohol Wholesale Registration Scheme (“AWRS”) is a scheme which has recently been introduced by HM Revenue and Customs (“HMRC”), to regulate the sale of alcohol to other businesses on or after the point at which excise duty is payable. Registration must be completed by the end of March 2016.

The Alcohol Wholesaler Registration Scheme – How Does it Affect Your Business?

The Alcohol Wholesale Registration Scheme (“AWRS”) is a scheme which has recently been introduced by HM Revenue and Customs (“HMRC”), to regulate the sale of alcohol to other businesses on or after the point at which excise duty is payable. Registration must be completed by the end of March 2016.

The AWRS has been introduced by HMRC in an attempt to combat alcohol duty fraud, which HMRC estimates costs UK taxpayers £1.3 billion each year. This article seeks to consider the new obligations and registration requirements that the AWRS places on wholesale traders selling to other businesses.

Who needs to apply to register for AWRS?

All businesses established in the UK which sell, offer for sale, or arrange to sell alcohol to other businesses will be subject to the AWRS. The AWRS specifically applies to alcohol which has been supplied at or after the point at which excise duty becomes due. The AWRS requires such businesses to apply for approval from HMRC prior to conducting any trade. Once a business has successfully sought registration from HMRC they will be provided with an AWRS Unique Reference Number (“URN”) to confirm its registration.

The AWRS applies to both businesses that were established prior to the AWRS coming into force and to those that will be established after the AWRS.

Are there any exclusions to AWRS?

The following are specifically excluded from the AWRS, and so will not be required to seek registration from HMRC:

  • Intra-group sales such as sales between members of the same,
  • Corporate group as defined in the Companies Act 2006; and
  • Retailers who trade with the intention of making sales solely to the general public (and does not cover incidental sales such as wholesale sales that are not made knowingly or intentionally by the retailer).

The AWRS does not apply to any alcoholic liquor that has been exempted from excise duty, granted as specific duty relief or is duty fee.

What are the key timescales?

If you are an existing alcohol wholesaler you will need to apply for online registration between 1 January 2016 to 31 March 2016. If you start a business after 31 March 2016, you must apply for registration under the scheme at least 45 calendar days before you intend to start trading. You must wait until you get approval from HMRC before you start trading.

From 1 April 2017, there will be two further obligations for businesses. Firstly, all registered wholesalers will need to include their URN number on all sales invoices. Systems will need to be put in place to ensure compliance. Secondly, all trade buyers who purchase alcohol from wholesalers, with the aim of selling it to their own customers, will be required to check HMRC’s central database to ensure that they are purchasing from approved and registered businesses.

Procedure for Approval

Any business wishing to apply to apply for registration pursuant to the AWRS must apply using the HMRC online service. Prior to registering it is advisable that you prepare the following:

  • Ensure your business records are in order and accessible,
  • Review your processes and supply chains to make sure you are sourcing only legitimate alcohol; and
  • Ensure your corporate due diligence policy and procedures are robust and up to date.

The application for registration must be submitted by a ‘responsible person’ within the business, who will be required to demonstrate they are fit and proper to carry out wholesale trading. HMRC will need to be satisfied that the business is genuine and that all persons with an important role or interest in it are law abiding, responsible and do not pose any significant threat to potential revenue and fraud.

Approval of your Application

HMRC have advised that they will deal with applications as soon as possible upon receipt, however, because of the large number of applications HMRC are expecting, it might take several months before you are given a decision.

If HMRC grants the application, you will receive notification via the government gateway account and these details will be entered onto HMRC’s central database. If the application is refused, you will not be permitted to lawfully trade as a wholesaler of alcohol. HMRC will give you reasons for the refusal and if you are not satisfied with the decision, you can ask for a review or appeal the decision to the First-tier Tax Tribunal.

Once approved, you will be required to comply with certain obligations that will apply to all businesses that are approved under the scheme, such as the requirement to keep books, accounts and returns for the business at the principle place of business. 

Sanctions and Penalties for non-compliance

New criminal and civil sanctions will be introduced for both wholesalers and trade buyers caught purchasing alcohol from non-registered wholesalers. Please note that penalties for wholesalers trading without having submitted their application to HMRC will start from 1 April 2016. Penalties for trade buyers who by alcohol from unregistered wholesalers will start from 1 April 2017.

Penalties can include a fine up to £10,000, imprisonment for up to 12 months or both. Regulatory penalties may also be incurred by an approved wholesaler for the failure to fulfil their legal obligations and this may result in a restriction of the approval, revocation of the approval or the imposition of a financial penalty of £500 for each breach of the Regulations. In addition, any goods concerned may be liable to forfeiture.

Conclusion

If you are an alcohol wholesaler or trade buyer, you need to be prepared for AWRS and have appropriate systems in place to ensure compliance. It is important to ensure strict adherence to the time frames for registrations as failing to do so can result in civil and criminal sanctions and also forfeiture of goods.

If you would like to discuss how this could affect your business and ensure a successful application, please contact the Tax Advisory, Disputes and Litigation Team on 0207 612 2530 or info@thekhanpartnership.com.