ON THE ALCOHOL WHOLESALER REGISTRATION SCHEME TO BE INTRODUCED IN OCTOBER 2015 UNDER THE FINANCE ACT 2015 AND WHOLESALING OF CONTROLLED LIQUOR REGULATIONS 2005
The UK Government is introducing a registration scheme for alcohol wholesalers in order to combat alcohol fraud. Although the registration element of the scheme will apply to traditional wholesalers, alcohol retailers such as pubs, restaurants, shops and so on are also affected because of greater obligations which will be placed on them to ensure their suppliers are registered with the scheme. Applications for registration by existing businesses must be submitted to HMRC between 1 October 2015 and no later than 31 December 2015. New businesses must apply at least 45 days before they expect to commence trading.
The law is being changed by virtue of the Finance Act 2015 which is making changes to the Alcoholic Liquor Duties Act 1979. AS part of the registration process HMRC will conduct a “fit and proper” test which include assessment of a variety of areas including but not restricted to ensuring that:
- there is no evidence of illicit trading
- the applicant, or any person with an important role in the business has not previously been involved in any significant revenue non-compliance or fraud
- there are no connections between the business, or key persons involved in the business, with other known non-compliant or fraudulent businesses
- key persons involved in the business have no unspent criminal convictions which HMRC consider relevant – for example offences involving any dishonesty or links to organised criminal activity
- the application is accurate and complete and there has been no attempt to deceive
- there has not been persistent or negligent failures to comply with any HMRC record keeping requirements
- the applicant has not previously attempted to avoid registration and traded unauthorized
- the business has provided sufficient evidence of its commercial viability and, or, its credibility
- there are no outstanding, unmanaged HMRC debts or a history of poor payment
- the business has in place satisfactory due diligence procedures to protect it from trading in illicit supply chains
Looking slightly further forward, as of 1 April 2017 all alcohol businesses will have a legal duty to ensure that their suppliers are properly registered under this scheme. This will require contractual provisions to be inserted into supplier contracts. The provision is somewhat similar to that already adopted by the UK Gambling Commission which requires confirmation from persons seeking an Operating Licence that they third party businesses they will contract with are themselves licensed if necessary (eg gaming machine supplier companies).
The scheme is supplemented by regulations connected to the Alcoholic Liquor Duties Act 1979, namely the Wholesaling of Controlled Liquor Regulations 2015 (SI 2015/1516). The regulations require affected businesses to complete the statutory application. The definition of sales which are treated as controlled liquor are as follows:
Sales treated as sales of controlled liquor
9. For the purposes of Part 6A of the Act, a sale is to be treated as a sale of controlled liquor if—
(a) the sale of the liquor is made at a time before the excise duty point for that liquor falls;
(b) in relation to that sale, the purchaser takes delivery of the liquor on or after the excise duty point.
Section 54 of the Finance Act 2015 makes provision for exceptions to the requirement to register by introducing a new s.88A(3)(d) to the 1979 Act which states:
(3)Controlled liquor is sold “wholesale” if—
(a)the sale is of any quantity of the liquor,
(b)the seller is carrying on a trade or business and the sale is made in the course of that trade or business,
(c)the sale is to a buyer carrying on a trade or business, for sale or supply in the course of that trade or business, and
(d)the sale is not an incidental sale, a group sale or an excluded sale,
and a reference to buying controlled liquor wholesale is to be read accordingly.
The reference to an “incidental” sale above covers off licence alcohol retailers who may make the occasional trade sale. The effect of this is that licensed shops and supermarkets or even pubs who make the occasional sale to other licensed business will not be caught by the regulations and therefore not require to register as a wholesaler. The explanatory notes to the Finance Act confirm: “an incidental sale [i]s a wholesale sale made by an authorised retailer that is incidental to its retail sales. An authorised retail sale is one that is made in accordance with the requirements under a retailer’s alcohol licence or similar authorisation“.
Any wholesaler businesses should take appropriate advice immediately in order to have their registration prepared lodged before 31 December 2015. Retailers should also start to gear up for ensuring their supplier contracts will be amended prior to 1 April 2017.
If you require guidance or advice on this scheme please contact me at firstname.lastname@example.org.