The Alcohol Wholesaler Registration Scheme (AWRS) came into force on April 1. But what is its purpose? And what are the pitfalls for wholesalers and retailers?
HMRC figures show that alcohol duty fraud has resulted in losses of up to £1.2bn per annum to the UK taxpayer. It is unquestionably a very serious problem. The Alcohol Wholesaler Registration Scheme (AWRS) has been established as the solution. It requires all wholesalers to register with HMRC and anyone buying from a wholesaler must verify their registration before commencing trade. The scheme creates liability on both sides of the transaction.
Implementation and consequences
AWRS has been implemented in two phases. Firstly, UK businesses selling alcohol to other businesses at or after the point where excise duty is due had to register with AWRS by 31 March 2016. Now, wholesalers who wish to begin trading must apply to HMRC at least 45 days before they propose to commence trading. Secondly, any business that purchases alcohol from a UK wholesaler must verify that their wholesalers are registered with HMRC and have obtained a Unique Reference Number (URN). This stage came into effect on 1 April 2017.
The penalties for non-compliance are severe. Failing to register with AWRS and buying from an unregistered wholesaler could result in a penalty of up to £10,000 and/or seven years’ imprisonment, along with seizure and forfeiture of the alcohol. This creates a system of dual responsibility which has been praised for acting as a secure self-checking mechanism.
Who needs to register?
Some have questioned whether they need to register as there are various exemptions which apply. The starting point is that all businesses that sell duty paid alcohol to other businesses for resale must register. The surge in spirit producers across the country in the past year has brought many more businesses within the scope of the regulation. Registration is fairly straightforward and at no cost to the applicant and so the burden on a business is for once at a minimum. If any of these businesses fail to submit an application for registration then this will be regarded as ‘trading without approval’ and the business could be subject to penalties. HMRC can lessen penalties for businesses that advise it of non-conformity and cooperate with them, so operators are advised to come forward if they find themselves in this position.
Significantly, if you buy alcohol to then sell on to consumers (e.g. retailer, hotel, pub, restaurant, cafe) you are exempt from registering unless you also sell alcohol to other businesses. Exemptions also apply to authorised retailers, with an alcohol licence, who only makes wholesale sales which are incidental to the main purpose of their business or which are exceptional and uninvited. An ‘incidental sale’ is a wholesale sale which is not made knowingly or intentionally by a retailer. This affords protection to the retailer where the purchaser is not a regular customer and the only indication a retailer may have that the purchase is being made for commercial purposes is if the purchaser requests a VAT receipt. For example, a supermarket selling to another business through their checkout completely unaware that the alcohol will be sold on. This applies to incidental sales only and any business which as part of their model sell to both the general public and other businesses will require to be registered.
Minimising the risk
An online search service will be accessible on HMRC’s website from 1 April 2017. This will allow businesses to check if their wholesaler is registered. The AWRS URN should be used to search for the wholesaler and this number will be visible on wholesaler invoices. Businesses must be able to demonstrate to HMRC that a wholesaler’s URN was requested so evidence of the approval should be maintained. It’s also important to remember that the business landscape is rarely static so checks should be continuously carried out to ensure the wholesaler’s circumstances have not changed. Customers will not be notified of change in AWRS status.
If in doubt, take advice. The alternative would not only be a hassle but could put your entire business at risk.
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