Difficult conversations ahead as 1300 ‘dodgy distributors’ put out of business by AWRS
Long-established business relationships have been put in the firing line thanks to tighter regulations on wholesalers – but this is a necessary evil retailers must face, an industry insider has warned.
HMRC’s Alcohol Wholesaler Registration Scheme (AWRS) went live on April 1 in order to crack down on duty fraud, which costs the Treasury approximately £1 billion each year.
According to the Federation of Wholesale Distributors (FWD), 1300 ‘dodgy distributors’ failed to obtain registration under the scheme, meaning they are no longer authorised to trade in the UK.
As a result, the FWD reports that their members have seen an upsurge in sales of wine and beer from passed-on business.
But the FWD is warning that retailers could face equally severe penalties as wholesalers including fines and imprisonment if they don’t check a supplier’s AWRS approved URN – even if it means disrupting close business and friendship ties.
“The illicit supply of alcohol is drying up thanks to the scheme,” said David Visick, director of communications at the FWD, which proposed the AWRS framework to HMRC five years ago.
“Around 1300 wholesalers weren’t approved by AWRS, but some of that number might still try to hoodwink buyers into buying from them, and there are also wholesalers who didn’t apply in the first place.
“Retailers need to be aware that even if you’ve been buying from the same company for years, if they don’t have a URN, you must not buy from them.”
As reported in Harpers last week, there has been some backlash from wholesalers who weren’t approved under the scheme, and a group of eight suppliers were subsequently granted an injunction to continue trading while their appeal was underway.
Harpers has also heard of complaints from some areas of the supply chain who weren’t notified that they were being denied approval until a few days before the April 1 deadline.
HMRC has reported that 17% of the 7,400 businesses that applied for alcohol wholesaler registration had not met the scheme’s ‘fit and proper trader’ requirements when the scheme went live on April 1, 2017.
In those cases, it isn’t known how late those wholesalers submitted their applications, and as Visick points out, wholesalers had a year from April 2016 to apply and make sure their paperwork met the required standards.
In some late notification cases, HMRC has granted a grace period for wholesalers to dispose of noncompliant stock, although it isn’t clear if those companies have been issued with a temporary URN to use in the interim.
Five years ago, the FWD pushed for duty marks similar to those used on spirits to be used on beer, but this was deemed too complicated by HMRC.
Instead, the AWRS was born.
The URN is a vital component of the newly introduced scheme, Visick said, because it provides retailers with a way to proactively check the authenticity of their trading partners.
Historically, a major part of the problem has come from bonded stock finding its way into the domestic market, thus avoiding excise duty which is suspended from one bonded warehouse to another while awaiting exportation.
The discrepancy between under bond trading figures and the amount of exports products being sold abroad was part of the impetus for the AWRS.
“If you look at the amount of beer being exported from the UK to France compared to how much is being drunk in France, there’s a big difference. There’s not much Carling on the shelves of Carrefour,” Visick said.
Suppliers who hold bonded stock must obtain certification under the Warehousekeepers and Owners of Warehoused Goods Regulations (WOWGR).
WOWGR predates the AWRS.
Previous refusals of WOWGR licences were taken into consideration by HRMC while deciding whether or not to grant AWRS approval.
HMRC’s approved wholesalers can be found at https://www.gov.uk/check-alcohol-wholesaler-registration.