HMRC estimates that £1.2 billion worth of duty and VAT is lost through alcohol fraud every year. The Alcohol Wholesaler Registration Scheme (AWRS) was introduced to combat this fraud. AWRS is being introduced in two stages:
- Stage one _ required UK businesses selling alcohol to other businesses to have registered with AWRS by 31 March 2016.
- Stage two _ which comes into force on1 April 2017, requires business buying alcohol from a UK wholesaler to check that the wholesaler is AWRS registered.
Failing to register with AWRS and, from April 2017, buying from an unregistered wholesaler, will attract a penalty of up to £10,000 and / or seven years' imprisonment, along with forfeiture of the alcohol.
Registration timetable
The initial registration window was open between 1 January 2016 and 31 March 2016. Wholesalers entering the market from 1 April 2016 are required to register with AWRS at least 45 days before commencing trading.
HMRC has until 31 March 2017 to process applications and approve businesses that have passed its 'fit and proper person' test.
From 1 April 2017, all applicants must display their Unique Reference Number (URN) on their wholesale alcohol invoices. Trade buyers must use the online look-up service to confirm their suppliers' registration.
Who must register?
Businesses that are established _ e.g. have a head office or branch _ in the UK and supply alcohol to other businesses by way of:
- sale;
- arranging the sale of; or
- offering / exposing for sale.
You can follow the HMRC flowchart to see if your business should be registered.
Intra group exclusion
Sales between members of the same corporate group can be covered by a single registration under which the group nominates one representative to deal with HMRC and receive a single group URN.
Penalties and self-reporting
The penalties for failing to comply with AWRS can be severe and include:
- fines of up to £10,000 and / or imprisonment for up to seven years as a 'behavioural penalty' (e.g. tradingwithout approval, buying from unregistered sellers);
- seizure and forfeiture of goods; and
- restriction / revocation of AWRS approval.
Providing that a business applied for registration before 31 March 2016, it can trade while the application is pending. It only becomes an offence if the application is refused and the wholesaler continues to trade.
A failure to apply for approval means that a business will be automatically considered as trading without approval and exposed to the potential sanctions. HMRC has the option to reduce penalties for businesses that notify it of non-compliance and co-operate with its investigations. This provides a strong incentive for businesses to proactively manage suspected breaches by reporting them to HMRC promptly and fully.
Conclusion: another supply chain risk
The AWRS adds another layer of supply chain compliance for alcohol wholesalers with which businesses will need to contend.
Non-compliance with the AWRS will carry significant reputational risk, impede your business' ability to trade and can lead to significant financial penalties.
Brodies recommends a holistic but proportionate approach to compliance, to ensure that these supply chain risks are effectively managed.
If you would like to discuss any of the issues covered in this article or require any advice about supply chain compliance issues, please contact Paul Marshall or your usual Brodies contact.
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