General: why has HMRC introduced this condition
The due diligence condition is an anti-fraud measure to help address UK alcohol fraud. To introduce illicit goods into legitimate markets, criminals capitalise on the demand for popular brands, and use complex supply routes (with sophisticated finance, procurement and logistics arrangements) to mask the origin of goods.
The due diligence condition places a requirement on excise registered businesses at all key stages of a supply chain to:
- consider tax fraud risks
- make checks in relation to those risks
- establish the level of risks and whether they are acceptable to their business
- take effective action to reduce exposure to fraud risks identified
This ensures that due diligence is carried out within each alcohol supply route. Where registered businesses identify and react appropriately to fraud risks, this will help reduce criminals’ access to, and restrict avenues for onward sale of, illicit goods. It also reduces the risk of legitimate businesses unwittingly handling illicit goods. Therefore, risk assessments and due diligence checks must be carried out to a reasonable standard across the sector. Where it is not, you should react robustly and consistently.