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HMRC urged to step up fight on duty fraud

Published:  25 January, 2012

HM Revenue & Customs needs to do more to fight alcohol duty fraud, which is depriving the UK exchequer of more than £1bn a year, according to The National Audit Office.

It reported the amount lost to alcohol duty evasion could be as much as £1.2bn in 2009-10, a 40% rise from £850m in 2008-09.

Most of the fraud is carried out by organised criminals who exploit weaknesses in supply chains to divert beer and spirits to the UK market without paying the taxes that are due.

The NAO said Revenue & Customs had improved its strategy for tackling alcohol fraud, but needs to do moren a number of areas.

Amyas Morse, auditor-general, said:  "These include establishing reliable estimates of the tax gaps for beer and wine, and achieving tangible success in tackling the illicit diversion of duty-unpaid alcohol back into the UK market."

The NAO said, the department has achieved convictions in six or fewer cases a year, although it has also used civil sanctions and seized almost 10m litres of alcohol in 2010-11.

Margaret Hodge, chairman of the Commons public accounts committee, said the Revenue had not done enough to tackle the problem through actively pursuing criminal sanctions.

"This must improve and HMRC must get tougher on this sort of fraud," she said.

In last year's Budget, the government said it would explore legislative measures to tackle this type of evasion.

One of the options being considered is "fiscal marks" - from the point of production - for beer, which have been successfully used on spirits.

But brewers have expressed concerns about the practicality and costs of the measure, which will soon be the subject of a consultation.

The Revenue estimated that the revenue losses from beer alone could be as high as £800m in 2009-10, although the brewing industry contests this figure.