The scheme: exclusions from the scheme
The law specifies certain exclusions from the scheme.
It is not the purpose of the scheme to capture businesses who are primarily retailers, yet may make occasional, and potentially unwitting, trade sales of alcohol, for example, a restaurant owner who runs out of a certain type of wine, and so buys a couple of bottles from the local corner shop.
In ALDA 1979 S88A(4) a sale is incidental if
- the seller makes authorised retail sales of alcoholic liquor of any description and
- the sale is incidental to those sales.
This exclusion only applies to businesses who are retailers who hold a relevant authorisation, for example, an alcohol retail licence under the Licensing Act 2003 in England and Wales or equivalent in other areas of the UK.
The key to whether a business is making wholesale sales or incidental wholesale sales is their intent; are they intentionally setting themselves out to make wholesale sales? You should consider whether the wholesale sale is made knowingly or intentionally. If the business is making regular wholesale sales and could reasonably be expected to know that they are wholesale sales, you should consider whether they should be approved as a wholesaler. Some indicators might be:
- How they hold out their business in terms of advertising/what do customers think their business is?
- Do they have separate processes for wholesale sales e.g. invoices instead of cash/separate accounting procedures?
- Are wholesale sales part of their business model?
- Does the business initiate the sale rather than being approached by another business to make a sale without the business’s prior knowledge?
These indicators are not exhaustive and each case will have to be judged individually on its merits.
Note: Actual quantity is not a factor in determining whether someone is making wholesale sales. A wholesale sale is “any quantity” of controlled liquor S88A(3)(a) ALDA 1979.
Examples of incidental sales:
- sales through a supermarket checkout or retail outlet where the identity of the customer is unknown and the wholesale sales are made unintentionally
- an occasional sale. Where the customer makes it known they are buying for their business, for example, sales from shops to the local restaurant or village fete or to cover the odd occasion where a business asks a supermarket for their wholesaler registration number. The concept of “occasional” is a difficult one and what may seem occasional for one business, could be a regular occurrence for another when viewed in relation to their business as a whole. For that reason, every case will have to be considered individually.
It does not exclude from the requirement to be approved:
- businesses such as cash and carries who hold a retail licence but also hold themselves out as wholesalers
- supermarkets who set out to make wholesale sales for example, selling surplus stock to other retailers
- smaller retailers who set out to make wholesale sales, for example, bulk buy and sell on to other retailers.
Intra Group sales
Sales of alcohol which take place between members of the same corporate group (as defined in S88J of ALDA) are excluded from the scheme.
For the purposes of the AWRS, bodies corporate are members of a corporate group if each one is established in the UK and
- they are controlled by one member of the group, or
- one ‘person’ (for example body corporate or individual) controls all of them, or
- two 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.
Transactions where there is no duty point
AWRS only applies to alcoholic liquor that has been charged with excise duty and is sold at, or after, the duty point.
Any alcoholic liquor that has been exempted from excise duty, granted a specific duty relief or is duty free is not caught by this scheme. Examples include:
- supplies of denatured alcohol or alcohol sent from an excise warehouse to a licensed denaturer for denaturing. See Excise Notice 473: production, distribution and use of denatured alcohol
- alcohol sent from an excise warehouse to an authorised user of duty-free spirits for any of the approved uses in Excise Notice 47: duty free spirits - use in manufacture or for medical or scientific purposes.
- alcohol supplies falling under the relief provided for in the Customs and Excise Duties (General Reliefs) Act 1979 s13A, for example to diplomats and visiting forces
- alcohol supplied as ships stores, for aircraft stores etc. unless they are supplied duty paid. See Excise Notice 69a: duty free ships’ stores; Excise Notice 198: duty free aircraft stores) and Excise Notice 202: Registered Mobile Operators.
- cider and perry manufactured by small producers that are exempted under the Cider and Perry (Exemption from Registration) Order 1976, see Excise Notice 162: cider production.
Also, AWRS does not apply to supplies of duty-suspended alcohol moving from a UK tax warehouse to another EU tax warehouse or duty suspended alcohol for immediate export outside of the EU, as there is no UK excise duty point for the supplies in question. Anyone who makes wholesale sales that fall solely within these duty suspension arrangements will not need to be approved.
Note, supplies of duty paid alcohol which are later subject to a drawback claim are caught by the scheme. This also applies to supplies of alcohol to other businesses that subsequently submit a claim for alcohol ingredients relief. The alcohol supplied is not covered by the exclusions because, at the time of sale there is or has been a duty charge. In such circumstances, business to business sales would therefore require approval even though the UK duty may be eventually repaid later in the supply-chain.