One of the many successes of the FWD in recent years has been the work done with HMRC on duty fraud on alcohol.
Alcohol sold on the “grey market” has caused FWD members real problems in terms of lost sales over the years. Intensive lobbying seemed to have stemmed the tide of the problem and new regulations introduced in June withdrawing the warehousing for export element of the excise drawback system were introduced, thanks in no small part to the efforts of the FWD.
Unfortunately, as you will have read in ProWholesaler in July, the problem hasn’t gone away and some members are reporting that things are “worse than ever”.
Members have reported being offered prices on wine which are well below legitimate wholesalers’ best promotional cost price.
So why is this happening and what are HMRC doing about it?
The second part of that question can be answered quite simply: not very much.
The first part is more complicated. Our evidence suggests that fraudsters are using the “direct export” drawback system, in which they pay duty on alcohol supposedly being exported overseas but then divert that product into the UK market. In short, it doesn’t ever reach its destination.
The FWD last month raised with HMRC its concerns over the increase in fraudulent activity members are seeing, asking what HMRC is doing to combat this escalating alcohol duty drawback fraud.
Our members need to see evidence of alcohol fraud being tackled effectively and with at least the same rigour that HMRC applied, and continues to apply, to combat VAT fraud.
HMRC is conducting a wide-ranging review of its operating model in respect of alcohol fraud and has embarked on a new initiative to work with producers, wholesalers and retailers to better understand alcohol supply chains and thereby restrict fraudsters’ access to non-duty paid alcohol.
The FWD will be meeting HMRC during September to discuss the wholesale sector element of that work and also to reiterate its concerns over duty fraud.
Alcohol is absolutely key to FWD members and fraud in this sector causes severe damage, as well as harming net revenue receipts.
We will continue to press HMRC to find a robust solution to this problem.
In the meantime, if you have any information which will help FWD in its fight against duty fraud, please let me know.