Independent retailers who buy cheap alcoholic products from illegitimate wholesalers are putting their business at risk as HM Revenue and Customs (HMRC ) adds new powers and extra resources to its fight against duty fraud.
New penalties introduced earlier this year and increased funding mean that anyone handling products on which UK duty and VAT have not been paid could face a fine, the confiscation of suspect stock and a bill for the missing duty – a triple hit to cash flow which could put them out of business.
All stages of the supply chain, including manufacturers, hauliers, wholesalers and retailers, face prosecution and penalties as the Government acts to stem the estimated £1.2billion annual loss in revenue from duty fraud.
In addition, the Government confirmed in its Comprehensive Spending Review that HMRC is to be allocated a further £900m to crack down on tax avoidance and evasion, a move the Treasury says will create an additional £7 billion a year in tax revenues by 2014-15.
With a specific request that resources should be put to tackling alcohol duty fraud, and a call for a five-fold increase in criminal prosecutions to act as a deterrent to others, the pressure is mounting on retailers to ensure they buy from reputable sources, said Federation of Wholesale Distributors Chief Executive James Bielby.
“Small store owners who find themselves tempted by suspiciously low prices, particularly for beer, should know they are playing roulette with their business’ future. The penalties for avoiding duty are severe and the chances of being caught out are increasing,“ he added.
“The only protection against having stock seized and suffering severe financial penalties is to buy stock from reliable and trusted suppliers and wholesalers. The message to alcohol retailers is clear – if a deal looks to be good be true, it probably is.”
Duty fraud expert Alan Powell warned that HMRC now had the power to assess for duty on goods illegally diverted from the legitimate supply chain on anyone who was “aware or should reasonably have been aware” of the diversion. “If HMRC follows the precedents in VAT, it could argue that this includes wholesalers and retailers who turn a blind eye to a good deal that cannot be offered by mainstream suppliers and cash and carries,” he said.
“Just because HMRC has not yet taken action against wholesalers offering suspiciously good deals does not mean Customs will give up on the duty. Anyone ‘contaminated’ within the supply chain will be liable.”
HMRC recommends that retailers and wholesalers report any suspicious activity to its hotline, 0800 595000