UK wholesaler scheme is ‘potentially deadly’

New British legislation to end alcohol tax fraud could lead to an explosion of underground bootleggers, job losses in the industry and even deaths, according to legal experts.

Wholesalers could be pushed out of business by the new scheme, according to claims (Photo: LCB)

As of January 1st next year, all those who trade in liquor will have to sign-up to Revenue and Customs’ new Alcohol Wholesaler Registration Scheme (AWRS).

It’s designed to ensure duty is no longer avoided by illegal drinks sellers, with evaded excise thought to be costing the Treasury £100,000,000 every year.

While the AWRS has been welcomed by many, some are concerned there could be unforeseen – and potentially deadly – repercussions for unwitting consumers.

Matthew Whyatt, director and head of corporate recovery and insolvency at UK solicitors Cassell Moore, claims the new rules could push sales of illicit alcohol deep underground.

He also suggests HMRC – which he says is already struggling with a crippling workload – faces months of chaos and confusion, and even force legitimate business to close down.

He explained: “Only time will tell if the scheme is itself fit for purpose, but the HMRC’s recently-highlighted inability to answer phone calls doesn’t inspire optimism for a trouble free introduction of the alcohol wholesalers scheme.

“But there’s also a much more troubling potential outcome here. Estimates for evaded duty stands at around £100,000,000 per annum. To put this into perspective, that represents the VAT and Duty on 2,083,333,333 cans of average strength lager. That’s over 40 cans of illicit lager for every single person in the UK.

“That’s a huge figure and one which is clearly lucrative to the right people. So one possible outcome of the AWRS is that it may simply drive illicit alcohol sales underground, into a completely unregulated environment.”

Deadly bargains

In August this year fake ‘Russian Empire’ vodka was found to contain traces of chloroform – a chemicals used in a string of brutal murders – was discovered for sale in the UK.

While dozens of the bottles were seized by police in Colchester, Essex, a similar discovery was also made in Manchester just days later, which saw vodka laced with chemicals used to make antifreeze being seized by cops.

A spokeswoman for the HMRC’s criminal department admitted at the time: “People buying the counterfeit vodka may have thought they were getting a bargain, but it has been distilled in unregulated conditions and may pose a serious health risk.”

And it’s this scenario Whyatt worries will become more common with the introduction of AWRS.

The Cassell Moore fraud case specialist also questions the manner in which AWRS has been brought-in, suggesting that HMRC has created a monster they won’t be able to manage and which could also lead to thousands of job losses within the industry.

He said: “It hasn’t been implemented well at all so far. HMRC have so far been unable to provide any real guidance as to the cost to each business for complying with the scheme – at the moment it’s somewhere between £0 and £100,000!

“Alcohol traders are already heavily regulated, particularly by the Warehousekeepers and Owners of Warehoused Goods Regulations (WOWGR) and Excise Goods (Holding, Movement and Duty Point) Regulations 2010.

Job losses

“And I simply struggle to see how the HMRC has the resources available to deal all of the issues that will arise with AWRS.

“The department has lost 11,000 posts since 2010, and many of those leaving were the core, experienced staff recruited in the early 70’s at the introduction of VAT.”

“Many thousands of people are employed in this trade sector. Delays could see significant job losses,” he warned.

“And many may also fall foul of the scheme through no fault of their own, having unknowingly purchased illicit goods.

“Businesses with loose family connections to other businesses considered ‘non-compliant’ could be refused registration. At best guest, you could be talking about many thousands of otherwise legitimate businesses being hit.”

A former HMRC senior manager with extensive experience in this area has also voiced concern.

While not wishing to be named, he stated: “There is significant scepticism amongst the already stretched rank and file officers about the benefits of AWRS.”

A spokesman for the HMRC said he would not be commenting on Cassell Moore’s claims.

James Bielby, chief executive of the Federation of Wholesale Distributors welcomed the AWRS.

He said: “AWRS will drive criminals out of the alcohol supply chain and save taxpayers millions of pounds a year.

“Law-abiding businesses have nothing to fear from registration, and we are working with HMRC to make sure they are aware that they need to apply online between January and March 2016.”