Notice

Excise Notice 2002: Alcohol Wholesaler Registration Scheme

Updated 13 February 2024

Foreword

This notice explains the Alcohol Wholesaler Registration Scheme (AWRS). Certain paragraphs of this notice have the force of law under:

• The Finance (No.2) Act 2023
• The Wholesaling of Controlled Liquor Regulations 2015 (WCLR)

Text in this notice which has the force of law is indicated by being placed in a box, for example:

The following requirement has the force of law

Review and appeal procedures (from 1 April 2009)

Other notices and guidance on this or related subjects

Excise Notice 41: Alcoholic Ingredients Relief

Excise Notice 196: excise goods — registration and approval of warehouse keepers, warehouse premises, owners of goods and registered consignors

Excise Notice 197: receipt into and removal from an excise warehouse of excise goods

Excise Notice 203a: registered consignees This applies only to Northern Ireland

Notice 204a: Temporary Registered Consignees This applies only to Northern Ireland

Commercial importers, certified traders and tax representatives — EU trade in duty paid excise goods (Excise Notice 204b) This applies only to Northern Ireland

Excise Notice 207: Excise Duty drawback

Excise Notice 209: civil penalties: fixed, geared and daily

Notice 275: Customs export procedures

Notice 431: visiting forces

VAT guide (VAT Notice 700)

Apply for temporary approval for the Alcohol Wholesale Registration Scheme

1. Introduction

1.1 What this notice is about

This notice is about the AWRS which is a requirement for anyone who sells, offers or exposes for sale or arranges to sell alcoholic product to other businesses on or after the point at which excise duty is payable, to be approved by HMRC.

This notice will help you to understand:

• whether you’re required to be approved as a wholesaler
• how to apply for approval
• your obligations under the scheme
• what records approved wholesalers will need to keep
• any exclusions from the scheme
• the obligations for your business if you buy alcoholic product from wholesalers
• the sanctions and penalties that will be imposed for failing to comply with the scheme

1.2 Who should read this notice

You must read this notice if you trade, or wish to trade, in alcohol at or after the point at which excise duty has become payable.

1.3 The law

You’ll find primary legal provisions applicable to the contents of this notice in:

• The Finance (No.2) Act 2023
• Value Added Tax Act 1994 (VATA)
• Customs and Excise Management Act 1979 (CEMA)
• Rehabilitation of Offenders Act 1974 (ROA)

You’ll find detailed requirements in The Wholesaling of Controlled Liquor Regulations 2015 (WCLR).

Other legislation referred to in this notice are Revenue Traders Accounts and Records Regulations 1992 (RTAR).

2. The Alcohol Wholesaler Registration Scheme

2.1 Background

The AWRS requires businesses who wholesale alcoholic product at or after the point at which excise duty is payable (the ‘duty point’) to be approved by HMRC. Businesses are required to apply to HMRC for approval and need to pass a ‘fit and proper’ test in order to be approved to trade. It’s an offence to trade without approval.

HMRC maintains a register of approved wholesalers. Businesses purchasing alcoholic products from an Alcohol Wholesaler Registration Scheme should check that the wholesaler is approved by using HMRC’s online look up service. For the purposes of this notice, HMRC refers to these businesses as ‘trade buyers. Further details are set out in section 8. It is an offence to buy alcoholic product from an unapproved wholesaler.

2.2 Who is affected by the scheme

Businesses with a UK establishment who sell, offer or expose for sale or arrange to sell, alcoholic product to other businesses at or after the duty point must apply to HMRC for AWRS approval. Read paragraph 3.9 for some examples of the types of businesses that fall within the scope of the scheme.

From 1 April 2017, trade buyers who buy their alcoholic product from UK wholesalers for resale need to make sure that these wholesalers are approved by HMRC. The confirmation can be made using HMRC’s online look up service, to check the validity of wholesalers approvals; this forms part of these businesses’ ‘due diligence’ processes.

The scheme only covers sales that are made in the course of a trade or business to other businesses. For example, it does not apply to private individuals purchasing alcoholic product from retailers for their own use.

2.3 Alcohol Wholesaler Registration Scheme timeline

All alcoholic product wholesalers who were trading prior to 31 March 2016 should have applied for approval between 1 January 2016 and 31 March 2016. If you were trading and have not yet made an application, do this now.

Any wholesalers intending to commence trading from a future date need to apply at least 45 calendar days before they intend to start trading. New businesses should ensure that they have sufficient business planning in place for HMRC to be able to test they meet our fit and proper criteria (read section 6). They should not start to trade until approval has been granted. This also applies to new owners of an existing business with Alcohol Wholesaler Registration Scheme approval.

From 1 April 2017 obligations commenced on trade buyers. The online look up service is available for trade buyers to check the approval status of their suppliers.

2.4 Exclusions from the scheme

Read section 4 for details.

2.5 What you need to do if you think you need to be approved for AWRS

Unless you meet one of the exclusion criteria, you must be approved to wholesale alcoholic product. Applications are made online using the Register as an alcohol wholesaler or producer service. For further details on how to apply read section 6.

2.6 How the scheme will work

Alcoholic product wholesalers who are required to be approved should not be trading unless they have applied for approval with HMRC. Once approved, the wholesaler will be allocated a unique reference number (URN) and they must provide this to their customers and include their URN on all wholesale alcoholic products sales invoices.

From April 2017, trade buyers who purchase alcoholic product from wholesalers with the aim of selling it on to their own customers should, as part of their own due diligence processes, check the wholesaler’s URN via HMRC’s online look up service, to ensure that the wholesaler they are purchasing from has been approved.

2.7 When you should apply for the scheme

For wholesalers trading on or before 31 March 2016, the window for applications ran from 1 January 2016 to 31 March 2016.

Failure to have applied on time may mean you’re liable to heavy penalties and possibly forfeiture of stock if you continued to trade after 31 March 2016. Failure to apply for approval means you’re automatically considered as trading without approval.

If you plan to start trading as an alcoholic product wholesaler from a future date you must apply at least 45 calendar days in advance of the date you intend to start trading, to allow HMRC to process your application. To apply, you need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you apply.

New businesses should ensure that they have sufficient business planning in place for HMRC to be able to test they meet our fit and proper criteria (read paragraph 6.9) before making their application. Read section 6 for further information on what you will need for HMRC to consider your application.

New owners of existing AWRS approved businesses should make sure that they apply at least 45 days in advance of the date they intend to start trading. See paragraph 6.2 and paragraph 6.5 for more information.

You will not be permitted to trade in wholesale alcoholic product until your approval has been granted. If you do trade without approval, you’ll be liable to heavy penalties and your stock may be seized as being liable to forfeiture. Read section 16, section 17 and section 18.

The obligations for trade buyers to check the approval status of their suppliers came into effect on 1 April 2017. For further details read section 13.

2.8 Refusing an application

As part of the application process, your business must pass a fit and proper test. If it fails the fit and proper test you will not be approved and you will not be able to lawfully trade as a wholesaler of alcoholic product. For further details read paragraph 6.9.

HMRC may also revoke any approval given if they have reasonable cause.

3. The scope of the scheme

3.1 Who is liable to be approved under the Alcohol Wholesaler Registration Scheme

Chapter 7 of The Finance (No. 2) Act 2023 sets out the scope of the Alcohol Wholesaler Registration Scheme. Businesses will need to consider if they:

• are established in the UK (read 3.2 to 3.4)
• carry on a controlled activity (read paragraphs 3.5 to 3.11).

You need to read all of these sections to decide whether you need to be approved. You also need to consider whether you may fall under any of the specific exclusions from approval which are outlined in section 4. Where approval is given, the approved business is known as an ‘approved person’.

Further information on how to apply for approval is available.

3.2 What is meant by ‘UK established’

A person or business is considered to be UK established if they have a business establishment, or some other fixed establishment in the UK in relation to a business carried on by them.

3.3 What is meant by a ‘business establishment’

The business establishment is the place where the main functions of the business’s central administration are carried out. This will usually be the head office, headquarters or ‘seat’ from which the business is run. This is where essential day to day decisions concerning the general management of the business are taken.

3.4 What is meant by a ‘fixed establishment’

A fixed establishment is an establishment other than the business establishment, which has the human and technical resources necessary for providing or receiving services permanently present. A business may have several fixed establishments, which may include a branch or agency. If you have a temporary presence of human and technical resources, this does not create a fixed establishment in the UK.

Examples of a fixed establishment include:

• an overseas business sets up a branch comprising staff and offices in the UK to arrange wholesale sales of alcoholic product imported from outside the UK, the UK branch is a fixed establishment
• an overseas business sets up a UK subsidiary to act in its name to arrange wholesale sales in the UK, the overseas business has a fixed establishment in the UK created by the agency of the subsidiary

Examples where there’s not a fixed establishment include:

• an overseas company that registers or is incorporated at their accountant’s address but has no other offices or staff in that country
• the presence of computer servers alone within a country
• the existence of a UK VAT registration without any supporting resources in the UK

3.5 Finding out if you carry on a controlled activity

A controlled activity means:

• selling controlled alcoholic product wholesale
• offering or exposing controlled alcoholic product for wholesale sale
• arranging, in the course of a trade or business, for controlled alcoholic product to be sold wholesale

Read paragraph 3.6 and paragraph 3.8 regarding the definition of ‘controlled alcoholic product’ and when it is ‘sold wholesale’.

What is meant by ‘offering or exposing for sale’

For the purposes of AWRS, the words ‘offering or exposing for sale’ have the following meaning:

1. Offering — where a wholesaler makes a specific proposal to enter into an agreement to sell controlled alcoholic product to another trader. For example, the wholesaler approaches a potential buyer and makes an offer to supply controlled alcoholic product under specific terms.

2. Exposing — where alcoholic product is displayed to induce people to enter into a contract to buy it and in circumstances in which, if the sale were made, it would be a wholesale sale.

Exposing covers ‘invitations to treat’. For example, displaying controlled alcoholic product on premises for the purpose of inviting offers to buy it

It would not be necessary for anyone to actually buy the alcoholic product for it to be considered as being offered or exposed for sale.

What HMRC means by arranging a sale

This refers to traders who are involved in negotiating sales, often in return for a fee or commission, without taking physical possession or ownership of the goods. The person therefore often acts as an agent for the principal who owns the goods.

There has to be an action of contacting prospective customers and negotiating on behalf of the person selling goods or taking actions to ensure a sale is obtained in order for a person to be considered as arranging sales.

When considering whether someone is arranging a sale take the following factors into account:

• what the contract says and what the customer thinks they’re paying for, just goods or for the service provided
• if the invoice is for goods issued by the supplier directly to the customer rather than an intermediary
• is the broker taking physical possession or ownership of the alcoholic product — if they do, they are a wholesaler in their own right, if they do not — they’re arranging a sale

The following are examples of the types of activity which fall under the definition of ‘arranging a sale’:

• an intermediary who does not take title to the goods and is therefore providing a service and being paid commission rather than buying and selling in their own right
• a person who acts on behalf of the supplier to find customers
• a person responsible for bringing 2 parties together to allow a sale to take place — for example, an auctioneer

These type of traders are not considered to be arranging a sale:

• an importer who is responsible for accounting for duty only
• a haulier who only delivers the goods and plays no part in arranging the sale

3.6 What is meant by ‘controlled alcoholic product’

Controlled alcoholic product is alcoholic product on which duty has been charged (at a rate greater than nil), and the duty point is at or before the time of the sale.

This means that, for example, sales where the recipient will continue to hold in duty- suspension, duty-free and denatured alcohol would not fall into the scheme as the alcohol has not passed a duty point. Read section 4 for more information on exclusions.

What is meant by ‘the duty point’

Alcoholic product is a dutiable product. This means that somewhere in the supply chain for alcoholic product which is sold in the UK, unless there’s a specific exemption or relief that has been granted for the goods in question, duty must be paid to HMRC.

The duty point is the time at which the requirement to pay any duty chargeable on the product takes effect whether or not payment of the duty is deferred. This is often also referred to as the time the goods are ‘released for consumption’.

For example, the time the goods are released from an approved tax warehouse or regulated import regime such as the Registered Consignee Scheme, (the Registered Consignee Scheme applies only in respect of Northern Ireland) or imported into the UK outside of a duty-suspension arrangement.

HMRC already regulates people who trade in alcoholic product on which the duty has not been paid, for example, held in a duty- suspension arrangement, so AWRS covers anyone who is trading from the time excise duty becomes payable with the aim that all wholesalers who are trading in duty-paid alcoholic product are included in the scheme.

Alcoholic product received in duty- suspense

Duty-suspended movements of alcoholic product or sales within the duty- suspension regime where the recipient will continue to hold in duty- suspension are not within the scope of the scheme as no excise duty point has occurred.

Note that some products, eligible under the Alcoholic Ingredients Relief Scheme, are also defined as controlled alcoholic product — see paragraph 2.2 of Excise Notice 41: Alcoholic Ingredients Relief for further information.

3.7 Duty-paid alcoholic product deliveries to customers where the exact time of the sale happens while the goods are still in duty-suspension

If you have alcoholic product delivered from a tax warehouse or other suspension arrangement duty- paid to your customer, but the exact time of the contract of sale happens to be prior to the time of the duty-point, the sales in these particular circumstances are also regarded as sales of controlled alcoholic product.

For example, where an owner of wine is storing products in an excise warehouse and arranges for the duty-paid delivery to a customer to occur after the time of sale, the sale should be treated the same way as if it had occurred at the excise duty-point and the wholesaler would be required to be approved.

3.8 What is meant by the selling of controlled alcoholic product ‘wholesale’

Controlled alcoholic product is sold wholesale if:

(a) The seller is carrying on a trade or business and the sale is made in the course of that business.
(b) The sale is to a buyer carrying on a trade or business, for sale or supply in the course of that business.
(c) The sale is not an incidental sale, a group sale or an excluded sale. Read section 4 for more information on exclusions.

3.9 The types of businesses that fall within the scope of the scheme

Here are some examples of wholesale activity which would require approval, this is not an exhaustive list and also applies to internet based traders, read paragraph 5.3:

• a cash and carry selling UK duty-paid alcoholic drinks to for example, off-licences, supermarkets, restaurants, hotels, public houses, and so on, or to another wholesaler for resale
• a merchant who buys alcoholic drinks direct from a producer or supplier and then supplies them UK duty-paid to retailers for resale to the public
• a merchant or broker who specialises in supplying UK duty-paid alcoholic drinks to the on or off-trade
• a drinks merchant, such as a specialist wine merchant, supplying UK duty-paid alcoholic product to a business enterprise for resale
• a drinks producer such as brewers, wine producers and cider-makers supplying their own products duty-paid to trade buyers
• a retailer with a wholesale arm to their business
• owners of goods in warehouse or warehousekeepers who are trading their own goods at or past a duty-point
• auctioneers that are arranging a wholesale sale
• businesses who act as an agent between a supplier and another business to arrange, or offer for sale alcoholic product to other businesses — these agents often do not take physical possession of the goods and are known in the industry as ‘dry brokers’

3.10 Applying for approval if you already hold an approval for a different excise regime

Even if you hold one or more excise approvals for other regimes, you’ll still be required to be approved if you’re carrying on, or intend to carry on, a controlled activity. This is to ensure that the fit and proper test is applied to the entire population who wholesale duty-paid alcoholic product.

3.11 Applying for approval if you already hold an alcohol retail licence

If you already hold an alcohol retail licence, you’ll still have to be approved if you wish to carry on a controlled activity. However, refer to paragraph 4.2 on the ‘incidental sales’ exemption.

4. Exclusions

4.1 Sales between members of a corporate group

Intra-group sales, that is, sales made between members of the same corporate group as defined in section 106 of the Finance (No. 2) Act 2023, are excluded from the scheme.

There is no requirement to apply for approval to cover these sales. This covers sales between members of a qualifying group.

There’s no requirement to form an AWRS group in order for this exclusion to apply. For more information on groups and intra group sales, read section 14.

4.2 If you unknowingly or unintentionally make an occasional wholesale sale

The Alcohol Wholesaler Registration scheme is not designed to capture retailers who trade with the intention of making sales solely to the general public. An ‘incidental sale’, that is, a wholesale sale that is not made knowingly or intentionally by the retailer is excluded from the scheme.

4.3 What is meant by an ‘incidental sale’

A sale is incidental (and therefore excluded) if the:

• seller makes authorised retail sales of alcoholic product of any description
• sale is incidental to those sales

The purpose of the incidental sales exclusion is to exclude, for example, a retailer who makes a wholesale sale unknowingly or unintentionally in the course of their day to day retail activity.

For example, often where the purchaser is unknown to them, the only indication a retailer may have that the purchase is being made for commercial purposes is if a tax invoice is requested.

This exclusion only refers to persons who are authorised retailers who hold a relevant authorisation for example, an alcohol retail licence. If you do not hold an alcohol retail licence or relevant authorisation and are carrying out, or intend to carry out, a controlled activity, then you must be approved under the scheme.

Examples of incidental sales:

• a supermarket that sells to another business through the checkout and would not know at the time of sale that they were selling to another business, this would be unintentional and therefore an incidental sale
• a small corner shop that does not in any way set out to make wholesale sales but is aware that the local pub landlord may exceptionally run out of a particular line and call in the shop to make an ad hoc purchase — this would be an exception rather than the rule and would be classed as an incidental sale

Further information to help you decide if your business is covered by the incidental sales exclusion is available.

4.4 When a retailer might also be considered a wholesaler for the purposes of Alcohol Wholesaler Registration scheme

Retailers who only make retail sales to the general public are not required to be approved. But, some retailers may also have a separate wholesale arm to their business, or set out knowingly and intentionally to make wholesale sales. If they do, then they must be approved.

Some examples are a:

• supermarket advertises on their website that they sell alcoholic product to other businesses and perhaps offers a reduced price for bulk purchases — in this example the supermarket is intentionally setting themselves out as a wholesaler as well as a retailer and would need to be approved
• cash and carry makes wholesale and retail sales of alcoholic product to both the trade and the general public — customers have to be members of the cash and carry in order to make purchases (in this case the incidental sales exclusion does not apply as the cash and carry set themselves out as making wholesale as well as retail sales — they would be required to be approved)

4.5 Disposal of stock by businesses whose AWRS application has been refused

This section has the force of law under Regulation 10 of the Wholesaling of Controlled Liquors Regulations 2015.

Sales made by an alcohol business which was a wholesale trader of alcohol before 1 April 2016, and whose application for approval is refused, are excluded sales if they also meet the following criteria:

• they are made on or after 28 March 2017
• they are sales of controlled alcoholic product which the trader makes in the course of winding down their alcohol business
• where the total retail value of the controlled alcoholic product held by the business on the date of refusal is:
  • £3 million or less, the sales are made in the 30 calendar days immediately following the date of refusal
  • more than £3 million, the sales are made in the 45 calendar days immediately following the date of refusal

5. Sales outside the scope of the scheme

5.1 Circumstances where sales are outside the scope of the scheme

The Alcohol Wholesaler Registration scheme only applies to alcoholic product where both of these apply:

• it has been charged with excise duty
• it is sold at, or after, the duty-point — with the exception of the situation explained in paragraph 3.7

Any alcoholic product is not caught by this scheme if any of these apply:

• it has been exempted from excise duty
• it has been granted a specific duty relief
• it is duty-free

Examples include:

• alcoholic product sent from an excise warehouse to an approved denaturer for denaturing or denatured alcohol that has been exempted from — see Excise Notice 473: production, distribution and use of denatured alcohol
• alcoholic product sent from an excise warehouse to an approved user of Duty Free Spirits (DFS) for any of the approved uses in Excise Notice 47: duty-free spirits — use in manufacture or for medical or scientific purposes
• alcoholic product supplies falling under the relief provided for in the Customs and Excise Duties Act 1979 S13A, for example to diplomats and visiting forces
• alcoholic products supplied as ships stores, for aircraft stores, and so on, unless they are supplied duty-paid — see Excise Notice 69a: duty free ships’ stores and Excise Notice 198: duty free aircraft stores
• cider manufactured by small producers that are exempted under the Cider and Perry (Exemption from Registration) Order 1976 — see paragraph 2.4 of Excise Notice 162: cider production

This is also the case for duty-suspended alcoholic product moving from a Northern Ireland tax warehouse to an EU tax warehouse or duty-suspended alcoholic product for immediate export outside of the UK , as there’s no UK excise duty-point for the supplies in question.

These sales are outside the scope of the scheme. Anyone who makes wholesale sales that fall solely within these categories will not need to be approved under the scheme.

5.2 Supplies that may become eligible to duty relief after the duty-point

Wholesalers supplying duty-paid alcoholic product that may subsequently become eligible for duty relief or repayment after the duty-point, for example, alcoholic product which qualifies for Alcoholic Ingredients Relief (AIR) or drawback, are not excluded as duty has become payable at the duty-point.

Relief from excise duty is only given once all the conditions for repayment have been subsequently satisfied. The wholesaler of the duty-paid alcoholic product must be approved under the scheme. For example, a trader that wholesales duty-paid alcoholic product which is destined for export out of the UK, must hold an approval. Approval is needed, even though they may later claim drawback on this alcoholic product.

5.3 Internet sales

Internet sales from a UK established internet wholesaler to a UK trade buyer fall within the scheme in the same way as any other wholesale business. Read paragraph 3.2 for definition of established. Internet sales to private individuals are not wholesale supplies and do not fall within the scope of the scheme.

Overseas internet vendors, with no UK establishment, do not fall within the scope of the scheme. However, they must ensure that they use one of the appropriate methods for importing alcoholic product into the UK. Read paragraph 5.5.

If you’re importing alcoholic product, you only need to be approved under the scheme if you’re carrying on, or intend to carry on, a controlled activity. If you’re an import agent accounting for duty only, you do not need to be approved under the scheme.

5.4 If you’re a supplier or a trade buyer based in the Isle of Man

For the purposes of this scheme any reference to ‘UK’ includes the Isle of Man and therefore any wholesale suppliers based in the Isle of Man and any trade buyer in the Isle of Man sourcing their supplies from a wholesale supplier (in the UK or the Island) must follow the same rules and procedures as set out in this notice.

For more information including how to apply see the Isle of Man Customs and Excise website.

5.5 Imports from overseas wholesalers

The Alcohol Wholesaler Registration Scheme will not extend beyond the boundaries of the UK, so wholesalers with no establishment in the UK do not have to be approved.

If you’re importing alcoholic product for commercial purposes directly from an overseas supplier you must do so using the appropriate method. For more information on the various schemes for importing goods into the UK, read Import alcohol into the UK.

5.6 Sales of alcoholic product abroad

If all your trade in alcoholic product takes place abroad you do not need to be approved. For example, if the alcoholic product you’re selling is always situated outside of the UK, there will never be any liability to pay UK excise duty which means the sales are outside the scope of AWRS.

6. Applying for Alcohol Wholesaler Registration scheme approval

Before applying for approval, you should make sure that you’re aware of the obligations and conditions which HMRC imposes upon alcoholic product wholesalers.

Do not assume that HMRC will automatically approve you as a wholesaler.

6.1 Who needs to apply

All businesses that are carrying on, or intend to carry on, a controlled activity need to apply for approval. Read paragraph 3.5 for more information.

6.2 When you need to apply

Existing businesses trading before 31 March 2016

All businesses that were trading as an alcohol wholesaler on or before 31 March 2016 should have applied during the 3-month application window from 1 January 2016 to 31 March 2016.

If HMRC did not receive your completed application by the deadline and you continued to trade from 1 April 2016 onwards, you’ll be treated as trading without approval and will be liable to a civil penalty or could even face criminal prosecution.

New owners of an existing Alcohol Wholesaler Registration scheme approved business

New owners of existing businesses must apply at least 45 calendar days in advance of the date they wish to start trading. The existing approval will not transfer to the new owner upon the sale of a business. The new owner must be able to show that they meet ‘The fit and proper test’ described in section 6.9.

The new owner will not be able to trade in wholesale alcoholic product until they have been granted approval. If they do so, they will be treated as trading without approval.

This only applies where there has been a complete change in ownership. Where, for example, a new Director is appointed but everything else (including the ownership of the assets, liabilities and obligations) remains in place, there is no need for a new approval. However, you must tell HMRC of significant changes, such as the appointment of a new Director.

For information on how to apply, see paragraph 6.5.

New businesses

New businesses must apply at least 45 calendar days in advance of the date they wish to commence trading. New businesses should ensure that they have sufficient business planning in place for HMRC to be able to test they meet our fit and proper criteria (see section 6) before making their application.

You will not be able to trade in wholesale alcoholic product until you’ve been granted approval. If you do, you’ll be treated as trading without approval which means that your stock could be seized and you’ll be liable to a civil penalty or could even face criminal prosecution.

When HMRC refers to new businesses, this includes existing businesses who are already trading, but the wholesale of duty-paid alcoholic product is a new aspect of their business, for example a food wholesaler who decides to branch out into selling alcoholic product.

6.3 Applying for approval if you operate from more than one premises

As part of your application for approval, you’ll need to submit details of all of your business premises from which you are, or will be, carrying on a controlled activity. The approval HMRC subsequently gives would normally be for all of these premises.

In some cases HMRC may decide that it’s necessary to place conditions or restrictions on your approval regarding the premises from which you can carry on a controlled activity. If HMRC do, they will explain the reasons to you. It’s a condition of approval that you notify HMRC of all premises from which you carry on a controlled activity.

Failure to do so would be a contravention of the conditions of approval and you would be liable to a regulatory penalty and seizure of any goods on those premises. It’s also likely to lead to HMRC re-assessing whether you’re fit and proper to be approved.

Your trading premises are all those business premises from which you’re carrying on or intend to carry on a controlled activity, whether these are owned by you or a third party.

This includes any premises from which you’re selling, arranging, exposing or offering alcoholic product for wholesale sales, except where the premises in question are authorised for retail purposes and the sales are only incidental in nature, read paragraph 4.3 for an explanation of incidental.

It also includes any storage premises, including an excise warehouse or a third party brewery, from which you directly deliver or supply the alcoholic drinks you sell to your customers.

If you use any other premises for storing alcoholic product you’re required to keep records of these and provide them to HMRC on request.

6.4 Processing your application

Applications from new businesses will usually be processed within 45 calendar days. HMRC may need to contact you in writing or by telephone, with further queries and you may receive a pre-approval visit from HMRC to obtain further information to assist in the processing of the application.

Your application may take longer to process if HMRC asks you for further information.

6.5 How to apply

The following parts of the notice have the force of law under Regulation 17 of the Wholesaling of Controlled Liquor Regulations 2015

To apply to register for the AWRS service, you need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you apply.

If you’re a limited company or an unincorporated association, you’ll need the Government Gateway user ID and password you used when you registered for Corporation Tax.

If you’re a sole trader or self-employed, you’ll need the Government Gateway user ID and password you used when you registered for Self Assessment.

If you’re a general partnership, limited partnership, or limited liability partnership, you’ll need the Government Gateway user ID and password you used when you registered for Self Assessment as a partnership.

If you want to apply for approval as an Alcohol Wholesaler Registration scheme group, you need to create a new Government Gateway user ID and password. You cannot use an existing Government Gateway user ID and password.

If you are purchasing or have purchased an existing Alcohol Wholesaler Registration Scheme approved business, you should tell HMRC of the change of ownership in line with paragraph 10.4. Once you have done this, HMRC will assist you in applying for Alcohol Wholesaler Registration Scheme approval. You must tell HMRC of the change of ownership at least 45 days in advance of the date you intend to trade.

6.6 Information you’ll need when you apply for approval

This will depend upon what kind of business you are, however all applicants will need to provide the following as a minimum:

• legal entity name
• trading name
• VAT registration number if registered
• Self Assessment or Corporation Tax Unique Taxpayer Reference (UTR) number if registered
• registered business address and how long at that address
• contact telephone number
• email address and postal address
• your estimated annual turnover (for new businesses)
• types of customer you sell to, for example pubs, restaurants
• products sold
• how many trading premises you operate and their addresses
• business names, addresses and VAT numbers (if registered) of main suppliers
• whether or not you import or export alcoholic goods

Find your UTR number.

Sole proprietors will also need to provide their:

• National Insurance number
• date of birth
• Self Assessment UTR (if they have one)
• VAT number (if they have one)

Partnerships will also need to provide full names and details as for sole proprietors, for all of the partners.

Limited liability partnerships will also need to provide:

• details of partners
• company name
• trading name
• company registration number
• date of incorporation

Corporate bodies (for example, limited companies) will also need to provide directors and company officials details, names, addresses, National Insurance numbers, and so on.

Groups of companies can apply for a single approval. You can find further details in section 14. You’ll need to provide the information required for corporate bodies for each member of the AWRS approval group.

You may be asked to send HMRC additional information, not mentioned on the list above, following your initial application.

It’s important you understand that some of the contact details you’ll be asked to provide in the application will appear in the online look up service. This is so your customers can contact you as part of their due diligence checks, for example to verify the identity of their suppliers.

6.7 Who should complete the application

The application must be submitted by a responsible person within the business. This will either be:

• the sole proprietor of the business
• one of the partners if the business is a partnership
• a director or the company secretary or an authorised signatory if the business is a corporate body
• the representative member of a group, for group approvals

The applicant should be aware that they may be prosecuted if they make false declarations.

6.8 How HMRC will process your application

When HMRC receives your application they’ll check it has been completed correctly and in full. If it’s incomplete, or is in any way unclear, they’ll ask you to supply the missing detail or clarify certain information. HMRC will not be able to process your application until that has been done.

HMRC will then perform checks to confirm the information you have given is full and accurate and that you’re suitable for approval. These will involve checks of their records to ascertain whether you have been compliant with your tax obligations and, in the case of a corporate body, are likely to include checks with Companies House.

They may include checks with other government departments and agencies, and with credit reference agencies. HMRC will also check the criminal records of applicants for any relevant convictions.

HMRC may also decide that they want to visit your premises to look at your trading activities. They will ask you for details about (but not limited to) your:

• suppliers
• customers
• business plans
• accounting and stock control systems
• premises and financial viability

For further information on what to expect, read Compliance checks: Excise visits — CC/FS16.

If HMRC discovers that the information you have given to them is untrue or incomplete in any important aspect, your approval may be refused and you could be prosecuted or liable to penalties.

If HMRC’s checks do not provide sufficient assurance that you’re suitable to be approved, they may ask you for more information. Until this information is received and verified, your application will not be processed further.

6.9 The fit and proper test

Only applicants who can demonstrate that they’re fit and proper to carry on a controlled activity will be granted approval. This means HMRC must be satisfied the business is genuine and that all persons with an important role or interest in it are law abiding, responsible, and do not pose any significant threat in terms of potential revenue non-compliance or fraud.

HMRC will assess all applicants (not just the legal entity of the business but all partners, directors and other key persons) against a number of ‘fit and proper’ criteria to establish:

• there’s no evidence of illicit trading indicating the business is a serious threat to the revenue, or that key persons involved in the business have been previously involved in significant revenue non-compliance, or fraud, either within excise or other regimes, some examples of evidence HMRC would consider are:
  • assessments for duty unpaid stock or for other underdeclarations of tax that suggest there’s a significant risk that the business would be prepared to trade in duty unpaid alcoholic product
  • seizures of duty unpaid products
  • penalties for wrongdoing or other civil penalties which suggest a business do not have a responsible outlook on its tax obligations
  • trading with unapproved persons
  • previous occasions where approvals have been revoked or refused for this or other regimes (including liquor licensing, and so on)
  • previous confiscation orders and recovery proceedings under the Proceeds of Crime Act
  • key persons have been disqualified as a director under company law
• there are no connections between the businesses, or key persons involved in the business, with other known non-compliant or fraudulent businesses
• key persons involved in the business have no criminal convictions which are relevant (for example offences involving dishonesty, or links to organised criminal activity). HMRC will disregard convictions that are spent under the terms of the Rehabilitation of Offenders Act 1974. Where the person in question has a spent conviction, HMRC will disregard the conviction and assess that person on the remaining fit and proper criteria in this paragraph
• the application is accurate and complete and there has been no attempt to deceive
• there have not been persistent or negligent failures to comply with any HMRC record-keeping requirements, for example poor record keeping in spite of warnings or absence of key business records
• the applicant, or key persons in the business, have not previously attempted to avoid being approved and traded unapproved
• the business has provided sufficient evidence of its commercial viability and/or credibility — HMRC will not approve applicants where they find that they cannot substantiate that there’s a genuine plan to legitimately trade from the proposed date of approval
• there are no outstanding, unmanaged HMRC debts or a history of poor payment
• the business has in place satisfactory due diligence procedures covering its dealings with customers and suppliers to protect it from trading in illicit supply-chains, see section 12 for more information about due diligence

This list is not exhaustive. HMRC may refuse to approve you for reasons other than those listed, if they have justifiable concerns about your suitability to be approved for AWRS.

HMRC is also unlikely to approve an application if the applicant has previously had their application for AWRS approval refused if the reasons for the previous refusal are still relevant.

6.10 What HMRC means by ‘key persons’

Key persons are those who play a key role in the operation of the business to the extent that they can be seen as one of its ‘guiding minds’.

For example, they have authority and responsibility for directing and controlling the activities of the business or day to day management. It also includes significant beneficiaries of the business who are not directors or partners.

6.11 If your application details change before it’s been processed

You must tell HMRC about any changes or inaccuracies in the information supplied on your application for approval immediately.

You’ll need the Government Gateway user ID and password you used when you applied for AWRS. From the summary page, select the section you want to change and submit your changes.

7. Approval

7.1 If your application is approved

If HMRC approves your application, you’ll receive a notification from HMRC advising you that you have been approved. Your details will be entered onto a central register maintained by HMRC.

The notification will advise you of your AWRS URN and of any specific conditions which HMRC may impose, read section 10. One notification will be sent in respect of all your premises even if you’re trading from more than one location.

7.2 The AWRS unique reference number (URN)

The format for the URN will be made up of 4 alpha characters and 11 numeric characters, such as:

XXAW00000123456

You will be required to include this on your wholesale sales invoices.

8. The register

8.1 What the register includes

All approved wholesalers’ details, including those whose approvals have been deregistered, will be maintained on an HMRC database. Trade buyers can access this through the HMRC online look up service.

8.2 How the register is used

From 1 April 2017 anyone purchasing duty-paid alcoholic product from wholesalers for resale will need to use the register and check the unique reference number provided by the supplier to ensure they are dealing with an approved wholesaler, as part of their due diligence processes, read section 13.

9. Refusal

9.1 What happens if your application is refused

HMRC will refuse your application if they have reasonable cause including where there’s a potential threat to the tax revenue. You will not be permitted to carry on a controlled activity. HMRC will advise you if the application is refused, giving the reasons for refusal.

Refusal of an AWRS approval may also lead HMRC to review whether you’re fit and proper in relation to any other approvals you hold.

9.2 Appealing if your application is refused

If you’re not satisfied with HMRC’s decision, you can ask them for a review, or appeal. The appeal process is set out at section 19.

10. Wholesalers — conditions and restrictions

10.1 Additional conditions or restrictions that may be applied to your approval

Any business approved under AWRS must comply with the conditions and restrictions detailed in this notice. In addition, HMRC may decide to apply specific conditions or restrictions in particular cases where they consider that a wholesaler is fit and proper to be approved but some additional controls are still needed.

These would be designed and used to address specific concerns HMRC might have regarding the circumstances of your business. If subsequent changes to your business mean they no longer have these concerns, HMRC will remove the conditions from the approval.

If HMRC considers a wholesaler is not fit and proper to be approved, they will refuse or revoke approval rather than allow that wholesaler to trade subject to added conditions.

10.2 Your responsibilities after you’re approved

Once approved, wholesalers will be required to comply with certain obligations that will apply to all businesses who are approved under the scheme. This is to:

• make sure that businesses continue to be fit and proper to trade as an approved wholesaler
• be vigilant and help to reduce the number of opportunities for fraudsters to infiltrate the sector

These conditions are set out in paragraph 10.3, paragraph 10.4, paragraph 11.1 and section 12.

10.3 Notifying customers of your unique reference number (URN)

This section has force of law under Regulations 6 of the Wholesaling of Controlled Liquor Regulations 2015

If you’re approved as a wholesaler of alcoholic product, you’ll have to include your unique reference number on all sales invoices involving controlled alcoholic product, and provide your URN on request to anyone purchasing alcohol from you. You may also include your unique reference number on any other commercial documentation you deem appropriate.

10.4 If your details change

This section has force of law under Regulations 5 of the Wholesaling of Controlled Liquor Regulations 2015

To make changes to your details before a decision has been issued, see paragraph 6.11.

To vary your approval after you have been approved, you must notify HMRC. You’ll need the Government Gateway user ID and password you used when you applied.

Tell HMRC as soon as possible and no later than 14 calendar days of the change having occurred, for changes of key personnel (including partners and Directors), phone number, email address, trading name and VAT number.

You must tell HMRC of any changes to the addresses of your principal place of business and any of your trading premises (if different to principal place of business) at the very latest by the date you first intend to use any new premises for a controlled activity. You should also tell HMRC immediately if you intend to cease use of any of your trading premises.

If you use any other premises for storing alcohol you’re required to keep records of these and provide them to HMRC upon request. If you directly deliver or sell alcohol from the storage premises, you must inform HMRC at the very latest by the date you first intend to do this.

For changes to any approved AWRS group read paragraph 14.13.

Depending on the type of changes that are made it could be necessary for HMRC to carry out further checks to assure that you’re still fit and proper to be approved. Once these checks are complete HMRC will either issue an amended letter of approval or advise you of any concerns they have.

If the legal status of the business changes, for example a sole proprietor becomes a limited company, the approval will not transfer to the new legal entity. The original business must de-register using HMRC online services and the new business must submit a new application for Alcohol Wholesaler Registration Scheme approval. If the ownership of the approved business changes but its legal status stays the same, the new owners must notify HMRC.

If the ownership of the business changes but its legal status stays the same, the approval will not transfer to the new owner. The original owner must de-register using HMRC online services and the new owner must submit a new application for Alcohol Wholesaler Registration Scheme approval. Where the change of ownership is a transfer of a going concern and there is no break in trading between the original owner and the new owner, the new owner must tell HMRC of the change and HMRC will assist the new owner in applying for an approval. The new owner should apply at least 45 days before the date they intend to trade as they cannot trade under the original owner’s approval.

Examples of when a change of ownership takes place and a new application is required include:

• share sales involving a complete transfer of shares from the original owner to the new owner, including all assets, liabilities and obligations
• business sales involving a complete transfer of all assets, liabilities and obligations

Note that a partial sale of shares or a business’s assets or liabilities, where an original owner remains in place may not need a new application, but you must tell HMRC of any changes as set out in this section.

These examples are not exhaustive. Contact HMRC for help if you are unsure on whether a new application is needed.

Failure to comply with any of these conditions regarding notification of changes may mean you’re liable to a regulatory penalty as set out in section 17. It may also lead HMRC to reassess whether you’re fit and proper to be approved.

10.5 If you breach any conditions set on your approval

If you do not comply with any additional conditions of your approval, HMRC may add to or vary those conditions, withdraw your approval and consider imposing financial penalties. HMRC will write to you giving you notice of any action they wish to take. If you disagree with any sanction HMRC imposes you have the right to appeal, read section 19.

11. Record-keeping requirements for wholesalers

11.1 Records wholesalers must keep

This section has force of law under Regulations 8 of the Wholesaling of Controlled Liquor Regulations 2015

As an approved wholesaler, you’re legally obliged to keep and make available the records contained in Annex A of this notice. Any record that is required to be kept must be preserved for a period of 6 years.

These are in addition to any other records that a revenue trader may be legally required to keep under The Revenue Traders (Accounts and Records) Regulations 1992.

11.2 Where you need to keep your records

Books, accounts and returns for a business are usually kept at the principal place of business. Normally, the principal place of business is the place where orders are received and dealt with and the day to day running of the business takes place. But you can keep these records elsewhere if you want to.

HMRC can require that you make records available for inspection at your principal place of business or approved premises.

If you keep all or part of your records and accounts on a computer or other storage technology, you must make sure that copies can be easily produced and that there are adequate facilities for allowing HMRC officers to view them when required. If your system does not meet HMRC requirements they can ask you to change it.

11.3 HMRC’s rights to see your records

HMRC has the legal right to check your records and take copies of any books, accounts, records or other documents relating to the business.

12. Excise due diligence

One of the conditions of approval requires wholesalers to carry out reasonable due diligence checks on their supply chains. Full details of the due diligence condition is set out below.

12.1 What HMRC means by ‘due diligence’

Due diligence is the appropriate reasonable care a company exercises when entering into business relations or contracts with other companies, and how it responds to specific trading risks it identifies.

Without effective safeguards in place, all businesses are exposed to considerable risks along alcohol supply chains and may become implicated in illicit trading.

This condition requires all excise registered businesses operating in the alcohol sector consider the risk of excise duty evasion as well as any commercial or other risks when they are trading.

Doing so will help to drive illicit trading out of alcohol supply chains, and reduce the risk to businesses of financial liabilities associated with goods on which duty has been evaded.

12.2 What you need to do

It’s a condition of your approval as an alcohol wholesaler that you:

• objectively assess the risks of alcohol duty fraud within the supply chains in which you operate
• put in place reasonable and proportionate checks in your day to day trading to identify transactions that may lead to fraud or involve goods on which duty may have been evaded
• have procedures in place to take timely and effective mitigating action where a risk of fraud is identified
• document the checks you intend to carry out and have appropriate management governance in place to make sure that these are, and continue to be, carried out as intended

12.3 Assessing risks and carrying out checks

The fraud risks within a supply chain are unique to each business, and objective assessment of the likelihood of your trading activities contributing to fraud is an essential first step to developing effective due diligence procedures.

You’ll need to consider the full range of trading relationships you have established and the potential for fraud in each one.

The main risks within the alcohol sector include:

• involvement in the supply of goods for fraud
• receiving goods that have been smuggled or diverted into the UK

Import and warehousing procedures are often exploited to provide cover for the illicit movement of goods. Fraudsters will seek to distribute duty evaded goods as well as counterfeit alcoholic product into legitimate retail supply chains. It’s often the point of wholesale in the supply-chain at which these goods are distributed.

To assess your exposure to this risk you will need to consider objectively whether the supply chain and trading activity is credible which includes knowing who you trade with.

Risk indicators

Possible indicators of risk include goods being received from unusually complex or apparently uneconomic supply routes. You’ll also need to consider the credibility of suppliers and the level of evidence you can obtain to demonstrate the provenance and duty status of goods.

Paragraph 12.6 provides further detail on risk indicators.

Once you’ve established the main risks of fraud you may be exposed to, your regular checks during trading should be of a type and level sufficient to establish the integrity of the excise transactions and supply chains you’re trading in.

The type and level need to be reasonable and proportionate to the risk.

Depending on the nature of your business and complexity of your transactions, checks will need to be individually tailored. In particular, they must be sufficiently sensitive, yet robust enough, to pick up potential fraud risks.

These checks should provide protection from the threat of fraud or you becoming inadvertently involved in fraudulent activity.

As a general rule ‘fitted’ checks should normally focus on:

• financial health of the company you intend trading with
• identity of the business you intend trading with
• terms of any contracts, payment and credit agreements
• transport details of the movement of the goods involved whether or not you’re directly involved in this
• existence/provenance of goods — where goods are said to be duty-paid you should normally seek sufficient detail to satisfy yourself of the status of the goods
• the deal, understanding the nature of the transaction itself, including:
  • how the cost of the goods is built up, for example, whether it includes appropriate taxes, transport, and so on
  • why is it being offered
  • whether it’s too good to be true
  • how the deal compares to the market generally

Paragraph 12.7 provides more examples.

12.4 Responses to identified risks

It is expected that your due diligence procedures will provide effective control over the risks of fraud within your supply chains. Where your checks indicate real concerns, HMRC would expect aspects of your supply chain to be changed to address this, for example, the supplier or the destination of the goods.

However, a decision about whether or not to trade with another party remains a commercial decision for your business to take.

If your checks lead you to suspect duty fraud you should also contact the Customs Hotline.

12.5 Review of due diligence procedures

As part of HMRC’s approval process and general audit programmes, they will consider whether or not the steps you have taken to embed anti-fraud due diligence into your trading activity are sufficient and timely to address fraud risks in your supply chains.

HMRC will aim to establish whether you have objectively assessed the risks in your supply chain, and you must be able to demonstrate that you have put in place reasonable and proportionate checks and effective procedures to respond to fraud risks when they arise.

If your due diligence procedures are considered insufficient to address fraud risks, HMRC will carefully consider the facts of the case before taking further action, but where appropriate they will seek to support you to strengthen your procedures.

In more serious cases such as a failure to consider the risks, undertake due diligence checks or respond to clear indications of fraud, HMRC will apply appropriate and proportionate sanctions.

For serious non-compliance, such as ignoring warnings or knowingly entering into high risk transactions, they may refuse your application or revoke your AWRS approval.

You’re also reminded that holding goods liable to excise duty outside a duty- suspension arrangement on which UK excise duty has not been paid may cause you to become liable for any excise duty payable on those goods and an excise wrongdoing penalty. Any of those goods you hold could also be liable to forfeiture.

Paragraph 12.6 and paragraph 12.7 provide further details on risk indicators and outline some of the checks that you may carry out to identify high risk transactions. Note these are not intended to be prescriptive or exhaustive.

Once you’ve established the most appropriate due diligence tests for your business, these should be used to test both new and existing transactions and supply chains linked to your business. Some checks may be more appropriate to your business than others.

12.6 Examples of due diligence risk indicators

You should be concerned about a prospective transaction where you identify one or more of the following indicators in both suppliers and customers, the presence of which may lead you to make further inquiries.

Financial health of the company you intend trading with

If:

• there’s no, or poor credit ratings but it’s still able to finance substantial deals
• there are high levels of debt
• they are buying high value goods on extended credit
• they are a new company with little or no trading history
• there are little or no fixed assets

Identity of the business

If:

• you’re unable to confirm the validity of their Alcohol Wholesaler Registration scheme approval status, for example, they do not provide an AWRS unique reference number, or it appears to be for a different wholesaler
• there’s a lack of detail about the business’s identity, for example, no address details, or HMRC approval number
• they do not appear to be on Companies House records as originally described
• they are dealing in high value goods from short term lease accommodation and/or residential addresses
• there’s no general visibility of the company you intend trading with, for example, they do not appear to advertise or have a website
• they have returned only partly completed application or trading forms

Terms of contract, payment and credit agreements

If:

• there’s an insistence on dealing in cash, especially where the transaction is a high value one
• cash payments are made using money couriers
• offers of credit appear to be outside normal business practice — payment terms are normally 21, 31 or 45 days but high risk transactions may have short payment terms, for example, 48 hours
• you’re asked to make payment to an account or person which does not appear to be linked to the seller, or other unusual payment arrangements requested by the seller — the same applies to customers
• a valid pro-forma or purchase invoice is not, will not be provided
• the circumstances of the trading arrangement seem false or contrived — for example, a supplier provides you with the details of a customer for the goods they’re selling to you, or offers you a contract with no financial loss to you

Transport

The goods are to be received from an unusual source or supply route, for example, UK produced goods are sourced from another country and directly compete with those from a more direct supply route.

Existence or provenance of goods

If:

• the goods are claimed to be duty-paid but your supplier (or person on whose behalf you are storing the goods) cannot provide reasonable evidence of duty payment to support the status of the goods — (for further detail about what constitutes evidence of duty payment refer to Excise Notice 207: Excise Duty drawback)
• individuals in the company have little knowledge of your trade sector
• the company has only been trading for a very short period of time but has still managed to achieve a large income
• where samples are provided or the goods have been received:
  • for spirits there’s no duty stamp in circumstances where there should be one or the duty stamp does not fluoresce (read paragraph 5.1 of Excise Notice DS5: UK Duty Stamps Scheme)
  • the goods appear counterfeit, in that the quality of labels and or packaging is poor when compared to the genuine article
  • the supporting paperwork seems false
  • the goods are older than supporting evidence (such as documents demonstrating duty payment) suggest, for example, the best before dates indicate an earlier production date whereas documentation gives the impression you were buying newer stock

The deal

These indicators are not exhaustive:

• the goods are to be moved in an unusual supply route that in itself would add significant logistic costs and bring into question the economics of that trade (unless duty was to be evaded)
• supplies are offered via unsolicited emails or flyers received
• goods are offered at very low prices that seem too good to be true
• free gifts of similar or other excise goods not fully documented and in themselves would place a question over the deal as a whole
• there are other incentives such as contingency discounts which overall make the deal seem too good to be true

12.7 Examples of due diligence checks

Financial health:

• you should undertake credit checks or other background checks on the business you intend trading with
• where a poor credit rating is identified, establish how the transactions will be funded — what security can be offered that you will be paid
• where credit is offered by the business, confirm who’s providing the credit facility
• check what payment terms are offered and if they’re commercially viable

Identity:

• check company details provided to you against other sources (for example, websites, letterheads and telephone directories)
• ask whether your customer or supplier is a member of a relevant trade association
• obtain copies of certificates of incorporation, VAT registration certificates and excise registration certificates where appropriate and where a trade class is quoted on these check whether or not it relates to the type of trade you’re engaging in
• verify VAT and excise registration details with HMRC, including checks of the online look up system for AWRS approved wholesalers (HMRC recommends that these checks are undertaken regularly for new trading arrangements and proportionately longer for trusted ones, unless you suspect a problem)
• obtain signed letters of introduction on headed letter paper and references from other customers or suppliers
• insist on personal contact with a senior official of the prospective supplier and where necessary, make an initial visit to their premises — you should use this opportunity to confirm the identity of the person you intend doing business with and keep a record of your meeting
• establish what your customer’s or supplier’s history in the trade is — and if this can be evidenced
• obtain the prospective customer’s or supplier’s bank details — in the case of an import or export, check if the supplier or recipient share the same country of residence as their bank
• establish who you’ll be paying and if this is the same company as the one you’re directly dealing with
• if you’re providing a service check who will be paying for it

Terms of any contracts, payments and credit agreements:

• carefully consider the terms of any contracts and credit agreements before entering into these and challenge elements which appear unusual
• confirm what recourse there is if the goods are not as described
• if payment is to be made to or from a third party, check if there’s a sound commercial reason for this
• if payment is to be made to or from a third party, confirm if it’s to or from an off shore account
• check if there are there normal commercial arrangements in place for the financing of the goods
• where payment is made from an overseas business confirm how it’s to be made
• check if your supplier has referred you to a customer who is willing to buy goods of the same quantity and brand as being offered by the supplier
• confirm if your supplier offer deals that carry no commercial risk for you, for example, no requirement to pay for goods until the payment is received
• consider if the goods are adequately insured
• check are high value deals offered with no formal contractual arrangements
• where you are buying from a broker, consider:
  • what overall value does this link in the supply chain add
  • is it possible to source more directly
  • how competitive is the broker’s pricing to those from a more direct route
  • how are the savings made in a longer supply chain to make it viable
• where transactions are being financed by a third party, check if this person is a regulated financial body such as a bank

Transport

Check:

• who is responsible for the transport and if the cost of the goods is inclusive of transport — if so, does this mean that the potential logistical costs make the unit price unrealistic
• that details of delivery vehicles are retained and if necessary, any variations to expected transport arrangements recorded

Existence or provenance

Consider:

• how the trader contacted you
• if the goods exist
• if can you inspect the goods before purchasing them
• if they’re in good condition and not damaged
• if the quantities on offer seem credible for the type of business you intend trading with
• getting sufficient detail to satisfy yourself that the goods are duty-paid — this will be easier the closer you are in the supply chain to production

The deal

Review:

• the nature of the transaction, including:
  • does it just look too good to be true
  • if the alcoholic product has come from abroad but is of UK origin, how did this occur and why
  • where incentives are offered, when these are taken into consideration does this make the overall deal seem too good to be true
  • why is it being offered
  • have normal commercial practices been adopted in negotiating prices
  • how does the price compete with that offered by competitors
  • what is the age of the goods — if the stock is old you should seek an explanation as to its provenance
  • does the price seem realistic — you should be aware of unit cost when duty and VAT values are removed
• if you’re already established in a trading agreement HMRC would also recommend that you continue to monitor correspondence and business paperwork to identify changes in those arrangements and take any follow up action as necessary

13. Trade buyers obligations

It is an offence to buy alcoholic products for re-sale from unapproved UK wholesalers. With the exception of purchases direct from overseas suppliers and purchases from licensed retailers who are making only incidental sales, trade buyers will need to ensure that the wholesalers they purchase from have been approved by HMRC.

To ensure your purchase is legitimate, as a trade buyer you’ll need to carry out sufficient due diligence. You must demonstrate to HMRC that you requested a wholesaler’s unique reference number and checked its authenticity before you did business with them.

You should also periodically refresh these checks to the extent that you consider it necessary to ensure that a wholesaler’s approval has remained valid.

As part of your checks to verify the registration and unique reference number you should also consider whether the number you have been given relates to the wholesaler you are dealing with. AWRS numbers are displayed on invoices and other business correspondence so it’s possible that an attempt to use a legitimate number could be made by someone who is not approved.

HMRC may seize stock supplied from an unapproved UK wholesaler, apply penalties of up to £10,000, or even prosecute so you’ll need to satisfy yourself that you’re not at risk of that. In addition to using the online look up service to verify the unique reference number, reasonable checks may include, but are not limited to, considering:

• how you know the supplier
• if the supplier acts like a legitimate business
• how the supplier contacted you
• if you have the suppliers contact details (names, phone numbers, business address) and if these match the AWRS record
• how payment will be made
• who you will make payment to
• if the name of the business you are paying match the name on the AWRS record
• if the business only accept cash
• if you get a receipt

If a trade buyer is found to have purchased from an unapproved wholesaler, they could face prosecution, be liable to a penalty, and alcohol stock may be seized. If the trade buyer also holds a retail licence, HMRC may also apply to the relevant licensing authority, for them to consider sanctions to the trader’s retail licence to sell alcohol.

13.1 Checking a wholesaler is approved

HMRC provides an online look up service that allows trade buyers to look up the details of their alcohol suppliers to ensure that they’re approved for AWRS.

The user will be able to enter the AWRS URN of the wholesaler and the service will return sufficient details to allow the user to confirm that the wholesaler is approved.

This will include the wholesaler’s approval number, their date of registration, the business name and trading name, and their principle place of business. For groups it will also show details of the representative member and other members of the group and their trading names and addresses.

If a wholesaler has been approved, but has since ceased trading, the look up will return the dates that the wholesaler was removed from the register.

13.2 Accessing the AWRS online look up system

The online look up service is available on GOV.UK. You need to search for ‘Check for approved alcohol wholesalers or producers’.

Your wholesaler should have provided you with their unique reference number which can be entered in the search facility. If the wholesaler has been approved you will see a screen which shows ‘approved’ under the name of the wholesaler.

This should then be printed or the page saved for your records, this check will support your normal due diligence checks.

The businesses will be shown on the register until they’re no longer approved either when HMRC revokes the approval or the business ceases to trade.

13.3 What to do if you find a wholesaler you’re dealing with is not approved

If you find that a wholesaler you’re purchasing from is not approved, you should first check to ensure that the sale is not excluded from the scheme, see section 4.

If you’re sure that the purchase should fall within the scope of the scheme, you should not continue with the purchase and you must notify HMRC immediately.

You can notify HMRC at Customs, excise and VAT fraud reporting.

13.4 Trade buyer guidance for making a wholesale purchase from a business not approved for AWRS

The AWRS places a responsibility on retailers and other trade buyers to ensure that they only purchase alcohol wholesale from a business approved for AWRS by HMRC — read section 13 for details on how to ensure your wholesaler has been approved.

There are however, some limited situations where you may be able to buy alcoholic product from a business, such as a supermarket, which is not Alcohol Wholesaler Registration Scheme approved.

This exception applies only where you are buying from a business that does not normally sell alcoholic product wholesale and where both of these apply:

• that business is not aware that you’re buying goods for re-sale
• you’re buying it in the same way as other customers who are taking it home to consume

For example, if you buy from the wholesale branch of a supermarket, you must check it’s approved, and verify its Alcohol Wholesaler Registration Scheme number before purchasing.

Examples of these types of purchases might be a:

• retailer or other trade buyer, who finds it convenient to occasionally purchase alcoholic product through a retail supermarket online or who decides to take advantage of a promotional deal on alcohol when in a store
• local sports club bar who runs out of a particular line unexpectedly during an event so buys small quantities from the local corner shop or other retailer to replenish stock
• restaurant that needs to buy a product it does not normally stock, at short notice, so sends a member of staff to the local supermarket to buy it through the normal checkout till

As with all alcohol purchases, trade buyers should undertake due diligence before they buy from a seller. It’s also very important that you keep evidence of these purchases to demonstrate where the goods were purchased, the quantity and price paid.

13.5 If your supplier says the sale is excluded from the scheme

If the supplier advises that the sale is excluded from the scheme:

• for incidental sales — you should check the guidance at section 4 to confirm that the sale does meet the criteria to be treated as an incidental sale, HMRC recommends you keep a receipt or invoice as part of your record keeping in case they need to check it at a later date, if you consider it’s not an incidental sale you should not proceed with the purchase
• for purchases from overseas — it’s in your interests to keep some proof of the provenance of the goods to demonstrate that they were imported directly from an overseas supplier and that duty has been paid
• for sales made after an application for approval has been refused and in the course of winding down their alcohol business, your supplier will have received written notification from HMRC setting out the period during which these sales may be made — you must make sure that you’re buying those goods within that period for them to be classed as excluded sales, and you should keep proof of this

This evidence could be:

• a purchase invoice
• copies or details of the relevant HMRC document to prove duty payment (example forms HM2, HM4, TRC2)
• a copy of the HMRC letter to your supplier confirming the refusal of their application for approval

You’ll also be expected to have undertaken due diligence checks on the overseas supplier as part of your normal due diligence checks.

13.6 Records you need to keep as a trade buyer

If you’re also an approved wholesaler you’re required to keep the records specified at section 11.

HMRC are not prescribing any additional record-keeping requirements for trade buyers who are not also approved wholesalers over and above what is already required of them as revenue traders or under VAT law.

However, in order to protect yourself from buying from an unapproved wholesaler and any consequential penalties or seizure of alcoholic product, you should ensure that dutiable alcohol in your possession has come from a legitimate source.

You should, in accordance with existing legal requirements be able to provide HMRC, on request, with commercial documentation such as a purchase invoice to demonstrate this.

You may also want to keep records of any checks you perform on the online look up services as you see fit.

14. Group approval

14.1 What HMRC means by group approval

This is a facility which allows 2 or more companies (including LLPs) within the same corporate group to be treated as a single ‘approved person’ for the purposes of Alcohol Wholesaler Registration scheme, under one AWRS unique reference number.

Only companies within the corporate group who wholesale alcoholic product need to be included in the Alcohol Wholesaler Registration scheme group approval. The AWRS group must nominate one of its members to be the ‘group representative’ who HMRC will deal with.

There will also need to be a nominated contact within the Alcohol Wholesaler Registration scheme group representative company who will be responsible for completing the application and for notifying any variations to the approval, and will be HMRC’s point of contact with the group on AWRS matters.

All the companies in the group are jointly and severally liable for any AWRS penalties.

14.2 Who can be in an AWRS group

Before applying for group approval, you should consider the following steps:

Step 1: does a corporate group exist?

To be a corporate group, the following conditions must be met:

• there must be more than one member
• all members must be corporate bodies (for example, limited companies or limited liability partnerships) that are established or have a fixed establishment in the UK — for more information about what HMRC means by established, and so on, read paragraph 3.2
• all members must have a controlling body (see ‘control conditions’ below) in common with each other (for example, a holding company)

The ‘control conditions’

All members of the group must be controlled either by one member of the group or a single other ‘person’ who is not one of the members of the group. That person can be a body corporate, an individual or a partnership.

Where control is exercised by a person that is a partnership that control must be exercised via the partnership and not by the partners as individuals. The company shares will normally be assets of the partnership.

You control a group member if any of the following apply:

• you’re the holding or parent company of the group member within the definition in section 1159 of, and Schedule 6 to, the Companies Act 2006 read Annex B
• you would be a holding or parent company of the group member if you were a company
• you’re empowered by statute to control that body’s activities

If you cannot meet these conditions you will not be able to be approved as a group.

If the controlling body changes you must notify HMRC by signing on to the group’s AWRS account, using HMRC online services.

Step 2: do 2 or more of these corporate group companies make qualifying wholesale sales of alcoholic product?

If so, you can apply for AWRS group approval for those companies making wholesale sales.

The group must nominate a group representative (this will be a member nominated by the group who HMRC will deal with and will complete the application or notify HMRC of any variations on behalf of the group).

14.3 How to apply for AWRS group approval

Applications for AWRS group approval are made using the same electronic application process used for individual wholesale businesses. The application form will ask for the same details for each individual group member as for an individual applicant, to allow the fit and proper test to be applied to all the group members.

As part of the application, the group representative will confirm that:

• they have the consent of all group members to act on their behalf
• all group members agree that they’re jointly and severally liable for any group liabilities
• all group members meet the criteria to be approved and are carrying on an alcohol wholesale business

To apply for AWRS as a group, you need to create a new Government Gateway user ID and password. You cannot use an existing Government Gateway user ID and password.

14.4 When you must apply for AWRS group approval

The nominated group representative must submit the group approval application on behalf of the group and will enter the application details for all the proposed members. The new group will not be treated as a group for AWRS purposes until the application has been approved.

If the group members are not already approved for AWRS, they will not be able to trade until the group has been approved.

14.5 Who needs to submit the application form

The application must be submitted and all declarations made by the appointed group representative member. To submit the application as the appointed group member, you need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you submit the application.

14.6 How you’ll be advised whether you group application has been accepted

If your application is approved, the group representative will receive a notification from HMRC, advising them of the group unique reference number and of the date on which group treatment will commence.

It will be the group representative’s responsibility to notify the other group members.

14.7 What happens if HMRC refuses your group application

HMRC will refuse your application if:

• you do not meet the conditions for group approval
• one or more of the members fails the fit and proper test

HMRC will advise the representative member if the application is refused, giving the reasons for refusal. If you’re not satisfied with their decision, you can ask them for a review, or appeal. The appeal process is set out at section 19.

14.8 If you do not make any wholesale supplies outside the corporate group

Sales within the same corporate group (intra-group sales) where both the seller and the buyer are members of the same group are not captured by the scheme.

Bodies corporate are members of a group if each is established in the UK and any of the following are true:

• they are controlled by one member of the group
• one ‘person’ (for example, body corporate or individual) controls all of them
• 2 or more individuals carrying on a business in partnership control all of them

A group that makes only intra group sales would not fall into the scheme and there would be no requirement to be approved.

14.9 What happens to your original URN if you were already approved under AWRS before joining an AWRS group

When a wholesaler group is approved, any previous URNs that individual members may have had will be cancelled and a new single URN will be issued to the group as a whole.

The unique reference number identifies you as a wholesaler group and will remain unchanged, even if the membership is varied or the representative member is changed. Once approved, the URN must be used by all the group members.

Similarly, if a group is disbanded, its approval will be cancelled and any members still requiring to be approved, will have to re-apply individually (or as a new group if applicable) for new AWRS URNs.

14.10 Being a member of more than one AWRS group

A corporate body may only be in one Alcohol Wholesaler Registration scheme group at a time. If you’re already in more than one group, you must inform HMRC immediately.

14.11 The name the group will be approved under

The group will be approved and shown on the register under the group representative’s name. But trade buyers checking the online look up system will be able to check the register for individual members of the group. The results will show the names of all members of the group.

14.12 What happens once you’re approved as an AWRS group

Once group approval is allowed, the representative member and all the companies in the AWRS group are liable to the same conditions and restrictions as detailed in section 10.

If you fail to comply with these conditions you may be liable to financial penalties. Serious and persistent breaches could result in revocation of the group’s approval to carry out a controlled activity.

As well as the conditions outlined in section 10 any changes to the group structure including companies joining and leaving the group must be notified to HMRC. Businesses with a separate unique reference number joining the group will have to have their individual URN cancelled and cannot use this number once they have been approved for group membership.

Group members leaving the group but continuing to carry on a controlled activity cannot use the group unique reference number after the date their group membership has ceased.

14.13 Notifying any changes to the formation of your Alcohol Wholesaler Registration scheme group

This section explains how to notify HMRC of changes to the formation of an AWRS group. For general changes to individual group members’ details, for example changes of address, phone number and directors, and so on, refer to paragraph 10.4.

The representative group member must notify HMRC of any changes to the formation of the group. To notify HMRC of changes as the representative group member, you need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you notify HMRC. Any changes you make to your group approval are not approved until HMRC confirms this to you.

The group representative will confirm that all group members agree to the changes being made or that the information being provided corrects an inaccuracy.

You must give at least 45 calendar days notice to implement any of the following changes:

• add a new group member — whether newly incorporated or already trading
• add a new group representative who was not previously part of the group

This is to allow the appropriate fit and proper checks to be made. The new member will not be able to trade under the group approval until confirmation has been received that they have been approved.

To change the group representative to a current member of the group, you must notify HMRC of the date you wish the change to come into effect, taking into account that it may take HMRC up to 45 days to consider and process the change.

The new group representative will confirm when submitting the variation that they have the consent of all group members to act on their behalf.

This section has force of law under Regulation 5 of the Wholesaling of Controlled Liquor Regulations 2015

You must notify HMRC no later than 14 calendar days following the change taking place if changes to corporate ownership mean that the controlling body of the group changes or affects your eligibility to form an AWRS group.

If there is a complete change of ownership, the approval will not transfer to the new owner. The new owner must notify HMRC at least 45 days before the takeover so that HMRC can assist the new owners in applying for a new group approval, if needed.

Examples of when a change of ownership take place and a new application is required include:

• share sales involving a complete transfer of shares from the original owner to the new owner, including all assets, liabilities and obligations
• business sales involving a complete transfer of all assets, liabilities and obligations

Note that a partial sale of shares or a business’s assets and liabilities, where the original owner remains in place may not need a new application, but any changes must still be notified to HMRC as set out in this section.

These examples are not exhaustive. Contact HMRC for help, using details at the end of this notice, if you are unsure on whether a new application is required.

You need to remove a group member who no longer satisfies the conditions for being in the group and wants to continue to trade in their own right — it may take HMRC up to 45 calendar days to approve their new application, in the meantime they will continue to operate under the group approval.

To remove a group member that intends to cease trading, you must notify HMRC at least 30 days in advance of the planned date of cessation. If the group representative is to cease trading, you must nominate a new group representative.

14.14 Time limits for notifying variations to the AWRS group member details

HMRC must be notified of other variations to the individual group member details (for example, changes of address, changes to directors, or any other details entered on the application). Read paragraph 10.4 for the time limits for notifying these approval variations.

A penalty of £500 may be chargeable for failure to notify HMRC of a variation within the time limits.

14.15 What happens if an AWRS group is disbanded

If all members of an AWRS group are planning to cease trading the group representative should notify HMRC at least 30 days before the intended date of cessation.

Cancellation of a group approval can also be requested by the group representative at any time. When a group is disbanded, the group unique reference number will be cancelled.

Any members who are still liable to be approved because they’re continuing to trade will need to re- apply for a new Alcohol Wholesaler Registration scheme approval.

It may take HMRC up to 45 days to consider and process the application. In the meantime, the group members will need to continue to trade under the group unique reference number, until HMRC advises the former group members of their new URNs and that the group URN has been cancelled.

From the date of cessation, the online look up service will show that the group unique reference number is no longer valid and the members of the ceased group should make sure they no longer use the group URN on invoices after the date of cessation.

14.16 What happens if HMRC terminates your AWRS group approval

If a group or a group member no longer meets the criteria for group approval, or for any other reasonable cause, HMRC will revoke or change the group approval, depending on the case in question.

If the group representative no longer meets the criteria for group approval or their approval is terminated by HMRC, the group must appoint a new group representative with immediate effect in order to continue to be treated as a group.

If HMRC withdraws your group approval they will inform the group representative and group members individually giving the reasons why. If you’re not satisfied with HMRC’s decision, you can appeal or request a review. The appeal process is set out in section 19. HMRC may also revoke approval for other reasonable causes.

14.17 If an AWRS group member applies to leave a group

If a group member wants to cease to be treated as a member of an AWRS group, they must give notice to the group representative. The group representative or the group member must notify HMRC of the intended change.

If they’re joining another group, the new group representative will need to notify HMRC. If the member wishes to continue to trade on their own they will need to apply for a new AWRS approval.

The group member is treated as leaving the group once the variation has been agreed by HMRC.

15. Cancellation of approval

15.1 What happens if you cease to trade in alcohol

This section has force of law under Regulation 5 of the Wholesaling of Controlled Liquor Regulations 2015

If you’re intending to cease trading alcohol, you must inform HMRC at least 30 calendar days in advance of the date you plan to cease trading and make arrangements to dispose of any wholesale alcohol stock before the cessation date.

15.2 How to give notice of my intention to cease trading

If you wish to de-register, you must notify HMRC by signing onto your AWRS account using HMRC online services and entering the intended date of cessation

15.3 How approval cancellation is processed

If HMRC has been given notice by you of cessation, your details on the register will be changed to show that your business has ceased trading from the date specified in your notification.

HMRC will provide you with confirmation of your approval cancellation online. You’ll need the Government Gateway user ID and password you used when you registered.

You will not be able to carry on a controlled activity after this date therefore it is vital that you allow sufficient time to dispose of any stock used in your wholesale business. You’ll be liable to a penalty and/or forfeiture of all alcohol goods (whether duty-paid or not) if you trade after the date of cessation. In serious cases, HMRC may seek to prosecute you for trading without approval.

15.4 Circumstances where HMRC could revoke your approval

HMRC is likely to revoke your approval if:

• they have reasonable cause, for example, evidence that you have been involved in fraudulent activity or trading in illicit alcoholic product
• in light of any new information that comes to HMRC’s attention, or as a result of changes you make, HMRC is no longer satisfied that you (or partners, directors or key personnel of the business) are fit and proper to hold an AWRS approval
• you persistently fail to meet the requirements of the scheme, for example, you do not fulfil your due diligence obligations
• you have not notified HMRC of cessation, but your business appears to have ceased or been dormant for some time

HMRC will notify you of their intention to revoke your approval. You will not be able to carry on a controlled activity after your approval has been revoked. In these cases, HMRC will set out their reasons for refusing or revoking your approval.

Where HMRC think the circumstances merit, they may allow a reasonable period of time to wind down the business, for example, to dispose of any legitimate stock.

When an approved person becomes part of a group approval, HMRC will cancel the company’s individual unique reference number from the register. Read section 14.

If your approval has been revoked, you may be able to apply for temporary approval.

16. Sanctions and penalties

16.1 The criminal offences that apply to AWRS

From 1 January 2016, it is a criminal offence for a person to knowingly sell, arrange, offer or expose for sale alcoholic product wholesale without approval. From 1 April 2017, it is also an offence to knowingly buy alcoholic product wholesale from a person who should be approved. Penalties can include a fine, imprisonment of up to 7 years or both.

Wholesale businesses that commenced trading on or before 31 March 2016 had until 31 March 2016 to submit their application for approval. Providing you submitted your application by this date, you will not be considered to be trading without approval unless your application is refused and you continue to trade.

16.2 Civil penalties

AWRS has 2 ‘behavioural’ civil penalties for the contraventions outlined in paragraph 16.4, as well as fixed penalties, for breaches by approved wholesalers of the conditions of the scheme. These fixed penalties are usually referred to as ‘regulatory’ penalties.

16.3 What HMRC means by a ‘behavioural penalty’

Behavioural penalties are already in place for other tax regimes across HMRC, for example the VAT and Excise Wrongdoing penalty, and these penalties established what HMRC means by ‘behaviour’.

It means that they will work with you to find out what caused the contravention to occur and the type of behaviour will determine the amount of the penalty. More details of the different types of behaviour are in paragraph 16.4.

16.4 When you will be charged with a ‘behavioural penalty’

HMRC will charge you with a behavioural penalty if you:

• carry on a controlled activity without approval
• buy from an unapproved wholesaler (applicable to all trade buyers, including wholesalers buying from other wholesalers who are not approved)

Wholesale businesses that commenced trading on or before 31 March 2016 had until 31 March 2016 to submit their application for approval. Providing you submitted your application by this date, you will not be considered to be trading without approval unless your application is refused and you continue to trade.

HMRC will look at each individual case to assess whether the criminal or civil routes are appropriate. A criminal offence may not always be a proportionate response. HMRC will consider application of a behavioural penalty where they consider a criminal prosecution is not appropriate.

HMRC will work with you to find out why this has happened. HMRC refers to this as ‘behaviour’. The type of behaviour will affect the amount of the penalty. The different types of behaviour are:

Non-deliberate

This is where you failed to tell HMRC about trading without approval, buying from an unapproved wholesaler, but the failure was not deliberate but not concealed or deliberate and concealed.

Deliberate but not concealed

This is where you knew that you should have told HMRC but you chose not to tell them.

Deliberate and concealed

This is where you knew that you should have told HMRC but you chose not to tell them and, as well as choosing not to tell HMRC, you also took active steps to hide the failure from them.

16.5 Reducing the amount of the penalty you may be charged

HMRC can reduce the amount of any penalty they charge you depending on their view of how much assistance you gave them. HMRC refers to this assistance as the ‘quality of disclosure’ or as ‘telling, helping and giving’.

Examples of telling, helping and giving include:

• telling HMRC about, or agreeing that there’s a failure and how and why it happened
• telling HMRC everything you can about the extent of the failure as soon as you know about it
• telling and helping HMRC by answering their questions in full
• helping HMRC to understand your accounts or records
• helping HMRC by replying to their letters quickly
• helping HMRC by agreeing to attend any meetings, or visits, at a mutually convenient time
• helping HMRC by checking your own records to identify the extent of the failure
• giving HMRC access to documents they have asked for without unnecessary delay
• giving HMRC access to documents they may not know about, as well as those that they ask to see

HMRC will reduce the penalty by the maximum amount possible if you:

• tell them everything you can about any wrongdoing as soon as you know about it or you believe they are about to find it
• do everything you can to help them correct it

If you delay telling HMRC, you may still be entitled to a reduction but it will be smaller. If HMRC do not need any extra assistance from you, they will give you the full reduction that the law allows for ‘telling, helping and giving’.

16.6 When HMRC will not charge a behavioural penalty

HMRC will not charge a behavioural penalty if you:

• have a reasonable excuse and the failure was not deliberate — read paragraph 17.3 regarding reasonable excuse
• notified HMRC without unreasonable delay after your reasonable excuse ended

16.7 Calculate the amount of behavioural penalty charged

The maximum AWRS behavioural penalty is £10,000. The actual penalty to be applied will be calculated based on the behaviour and quality of disclosure.

Further details regarding AWRS behavioural penalties and how they will be calculated can be found in Compliance checks: Alcohol Wholesaler Registration Scheme — CC/FS31.

16.8 Other actions HMRC may take if you receive a behavioural penalty

There may be implications for your own approval application if you’re found trading without approval and subsequently apply. HMRC may also consider revoking an approval from an approved wholesaler where they have bought goods from an unapproved supplier.

Additionally, if a retailer is found to have purchased from an unapproved wholesaler, HMRC may also apply to the relevant licensing authority for them to consider sanctions to the trader’s retail licence to sell alcohol.

17. Regulatory penalties

Regulatory penalties may be charged for contraventions of the Wholesaling of Controlled Liquor Regulations 2015 or of the conditions of an AWRS approval, for example, record keeping breaches or failure to notify HMRC of a variation to an approval.

17.1 When you would receive a fixed regulatory penalty

As an approved wholesaler you have legal obligations, and failure to fulfil these obligations or observe any condition of your approval could result in one or all of the following:

• restriction of your approval
• revocation of approval
• the imposition of a financial penalty of £500 for each breach of the regulations or conditions or restriction of an AWRS approval

In addition any goods concerned may be liable to forfeiture.

17.2 If you’re liable to a regulatory penalty and think you have an excuse

You may not be liable to a regulatory penalty if HMRC, or an independent tribunal, agree that the there is a reasonable excuse for the breach.

17.3 What HMRC means by ‘reasonable excuse’

There is no legal definition of what constitutes a reasonable excuse but HMRC will look closely at the circumstances of each case, and the conduct that led to the breach.

It’s not considered a reasonable excuse if you relied on some other person to perform any task for you, unless you can demonstrate that you took reasonable steps to avoid the contravention.

17.4 How penalties will be notified

HMRC will notify you or, if you’re a member of a group for the purposes of AWRS, the group representative, in writing. You have the right to appeal if HMRC issue you with a penalty,read section 19.

17.5 Other penalties

The new penalties introduced with AWRS do not prejudice any potential liability to other penalties which already exist in the excise regimes, for example:

• regulatory penalties for breaches of an excise approval to produce, hold, store goods in duty-suspension
• failure to notify and excise wrong-doing penalties for handling goods subject to unpaid excise duty that arise under Schedule 41 of the Finance Act 2008

18. Forfeiture

18.1 Circumstances where HMRC will consider seizing goods

HMRC may seize controlled alcoholic product (whether or not the duty has been paid) where you:

• carry on a controlled activity without approval
• breach any of the conditions or restrictions of an AWRS approval
• continue to trade after cancellation or revocation of an approval
• buy alcoholic product from an unapproved wholesaler

19. Reviews and appeals

19.1 If you disagree with HMRC’s decision

Decisions which you can ask to be reviewed and may appeal are decisions to:

• refuse approval or to revoke an approval
• apply a penalty and the amount of any penalty
• apply any additional conditions or restrictions

If you do not agree with any of these decisions, you can:

• tell the person who issued the decision if you have further information or you think HMRC has missed something
• ask for it to be reviewed by an HMRC officer not previously involved in the matter
• appeal to an independent tribunal

19.2 Time limits for requesting a review or an appeal

If you want HMRC to review a decision, you must write to the person who issued the decision letter within 30 days from the date of that letter. Your written request should set out clearly the full details of your case, the reasons why you disagree with the decision, and you should provide any supporting documentation.

You should also state what result you expect from the HMRC review. HMRC will complete a review within 45 days, unless they agree another deadline with you.

19.3 Appealing after HMRC has completed their review

If you still want to appeal to the tribunal after the HMRC review has been completed you should send details of your appeal to the tribunal within 30 days of the date of the HMRC review decision letter.

19.4 Getting more information

You can read further guidance on if you disagree with a tax decision.

You can also:

• obtain a copy of the HMRC1: HM Revenue and Customs decisions — what to do if you disagree
• contact the Excise helpline
• visit the Tribunals Service website to find out about their services

Glossary

Term	Definition
Alcoholic product	Spirits, beer, wine, other fermented products and cider, as defined in Schedule 6 of the Finance (No. 2) Act 2023
Authorised retail sale	An authorised retail sale is one that is made in accordance with the requirements under a retailer’s alcohol licence or similar authorisation
Controlled activity	Any activity which involves sale, arranging to sell, or offering or exposing for sale controlled alcoholic product wholesale
Controlled alcoholic product	Alcoholic product which has duty charged at a rate greater than nil and is passing or has passed a duty-point
Denatured alcohol	Alcohol which has been denatured and marked in accordance with the requirements set out in Production, distribution and use of denatured alcohol (Excise Notice 473)
Duty Free Spirits (DFS)	Spirits delivered free of excise duty under the Finance (No. 2) Act 2023, section 78
Duty point	The time when the duty becomes payable, whether or not payment is deferred
Excise Duty	For the purposes of this notice, an indirect tax on alcoholic product. UK and EU produced and imported goods are subject to excise duty
Fit and proper test	The test applied to applicants, including directors, partners and other key persons in the business, to assess their suitability to be approved to carry on a controlled activity
Group	A group of corporate bodies that apply for a single AWRS group approval to simplify administration and to operate under a single URN
Group representative	A member of a group elected to be the single point of contact for the group’s AWRS affairs
Intra group sales	Sales made between members of the same corporate group
Key persons	Persons that play a key role in the day to day operation of a business to the extent that they can be seen as one of its ‘guiding minds’
Legal entity	An organisation such as a limited company, limited liability partnership, partnership, sole proprietor, and so on
Online look up service	An online system for alcohol buyers to check the approval status of their wholesale suppliers
Trade buyer	Someone who purchases alcoholic product from a wholesaler to either sell on to trade or to sell to private individuals, for example a retailer
Wholesaler	For the purposes of this notice, a trader who sells, arranges to sell, or offers or exposes for sale duty-paid alcoholic product to another trader

Your rights and obligations

Read the HMRC Charter to find out what you can expect from us and what we expect from you.

Contacting HMRC

If you cannot find the information you need in the alcohol duties guidance contact the Excise helpline.

Comments and suggestions

If you have any comments or suggestions to make about this notice, write to:

HMRC
Alcohol Policy
4th floor
Trinity Bridge House
Salford
M60 9LA

Putting things right

If you’re unhappy with HMRC’s service, contact the person or office you have been dealing with. They will try to put things right. If you’re still unhappy, they will tell you how to complain.

Find out more about making a complaint by reading the complaints and appeals guidance.

How HMRC use your information

HMRC is a Data Controller under the Data Protection Act 1998. HMRC hold information for the purposes specified in their notification to the Information Commissioner, including the assessment and collection of tax and duties, the payment of benefits and the prevention and detection of crime, and may use this information for any of them.

HMRC may get information about you from others, or they may give information to them. If they do, it will only be as the law permits to:

• check the accuracy of information
• prevent or detect crime
• protect public funds

HMRC may check information they receive about you with what is already in their records. This can include information provided by you, as well as by others, such as other government departments or agencies and overseas tax and customs authorities. HMRC will not give information to anyone outside HMRC unless the law permits them to do so.

Annex A

(referred to in paragraph 11.1 )

This annex has force of law under Regulation 8(1) of the Wholesaling of Controlled Liquor Regulations 2015

Items and records to be kept and preserved:

(1) An approved wholesaler who receives, prepares, maintains or issues an item described in the list of required records below must:

(a) In the case of a received item, keep and preserve the item.

(b) In the case of an issued item, keep and preserve a copy of the item and

(c) In the case of an item that is prepared or maintained but is not issued or received by the intended recipient, preserve the item. For example, where an invoice is prepared but not issued due to it containing an error, preserve that invoice and mark it accordingly.

(2) An approved wholesaler must keep and preserve a record of:

(a) The production, buying, selling, importation, exportation, dealing in or handling of controlled liquor carried on by him.

(b) The goods (whether or not they are controlled liquor) or services received by him in connection with or to enable him to undertake a transaction or activity described in sub-paragraph (a) of this paragraph and

(c) The financing or the facilitation, made or effected by him, of a transaction or activity described in sub-paragraph (a) of this paragraph (whether or not that transaction or activity was carried on by him).

(3) The record, required of an approved wholesaler by paragraph (2), must include:

(a) In the case of a receipt by him of controlled liquor, the date of receipt, and the name and address of the supplier of those goods to him.

(b) In the case of the disposal by him of controlled liquor, the name and address, except where disposed of by a retail sale, of the person who acquires them, and the date of that disposal and

(c) In the case of a transaction described in sub-paragraph (c) of paragraph (2) (financing or facilitation):

(i) the date of receipt and the name and address of the person making or effecting that transaction, where the approved wholesaler (keeping and preserving a record as required by paragraph (2)) is the recipient of that transaction
(ii) the date of making or effecting that transaction and the name and address of the recipient of it, where the approved wholesaler (keeping and preserving a record as required by paragraph (2) is making or effecting that transaction

(4) The record, required of an approved wholesaler by paragraph (2) of this annex must contain sufficient information, by way of cross referencing or otherwise, to enable an officer to trace readily any payments, made or received by that trader in respect of any controlled liquor or of any financing or facilitation described in sub-paragraph (c) of paragraph (2).

Records which must be maintained

Received, prepared, maintained or issued items:

• an invoice
• a credit note
• a debit note
• a statement of account
• a record relating to an importation or to an exportation
• daily record of payments to suppliers and of receipts from customers
• a journal or ledger
• a profit and loss account, trading account, management account, management report or balance sheet
• an internal or external auditor’s report
• any other record maintained for a trading or business purpose

Additionally, as an approved wholesaler, you’re required to keep:

• copies of delivery documents, accessible to HMRC on-site
• name and unique reference number of suppliers
• an auditable stock control system — this could include invoices, credit notes or other records that allow stock to be identified
• details of any premises used for storage

Annex B

(Referred to in paragraph 14.2)

Companies Act 2006 section 1159 and Schedule 6

1159 Meaning of ‘subsidiary’ etc.

(1) A company is a ‘subsidiary’ of another company, its ‘holding company’, if any of the following apply to that other company:

(a) Holds a majority of the voting rights in it.

(b) Is a member of it and has the right to appoint or remove a majority of its board of directors.

(c) Is a member of it and controls alone, pursuant to an agreement with other members, a majority of the voting rights in it.

Or if it’s a subsidiary of a company that is itself a subsidiary of that other company.

(2) A company is a ‘wholly-owned subsidiary’ of another company if it has no members except that other and that other’s wholly-owned subsidiaries or persons acting on behalf of that other or its wholly-owned subsidiaries.

(3) Schedule 6 contains provisions explaining expressions used in this section and otherwise supplementing this section.

(4) In this section and that Schedule ‘company’ includes any body corporate.