Issue 41: what’s happened to the AWRS?

The government’s new registration scheme for alcohol wholesalers was meant to be in full swing by this point. Instead, the launch been postponed till the New Year. So what exactly has gone wrong?

The official line from HMRC is that “technical issues need to be fixed before the service is launched”. Wholesalers were supposed to start applying to join the Alcohol Wholesaler Registration Scheme from October 1, with inspections beginning on January 1. The delay has caused irritation at the Federation of Wholesale Distributors, which had lobbied hard for the new regime on behalf of its members – operators such as Booker, Bestway, Palmer & Harvey and the Today’s Group.

Page 1Chief executive James Bielby complained: “This late change is very frustrating for us and our members. Members have volunteered to test the application process over the past six months, and we have put considerable effort into informing them and other stakeholders of their obligations and the original timeline.”

It may well be that IT niggles are the genuine reason for the delay – indeed HMRC has said that it is now inviting selected operators to test-drive the registration system to iron out whatever problems lurk in the machinery. But perhaps part of the issue is that many of the businesses that will be caught in the net of the new regime have no idea that they are expected to register.

The FWD wanted the AWRS for perfectly understandable reasons. For decades, its members have been undercut and undermined by dodgy warehouse operators with a somewhat relaxed view of VAT returns and excise duty obligations.

The success rate in dealing with such bad apples has been notoriously low: businesses have a tendency to disappear as quickly as they spring up, and the costs involved in pursuing prosecutions test HMRC’s finite and already stretched resources. Suspicious stock gets impounded in the occasional raid, but it’s not unknown for it to be handed back due to insufficient evidence being compiled, and even for wholesalers that wriggle out of punishment to pursue an opportunistic civil action against HMRC.

On the face of it, the AWRS is a masterstroke as it turns the tables on rogue operators: it’s up to them to convince HMRC they are fit and proper people to wholesale drinks. If they fail to do so, their names don’t go on the central register and it’s illegal for retailers to buy from them.

The system was essentially drawn up to deal with the sale of duty-dodging lager and unfeasibly cheap branded wine. Specialist wine merchants are the nuts that this particular sledgehammer is hitting in the process, which is accepted by some independents but resented by others.

Although relatively few specialists are currently losing out directly to the duty cheats, as they compete in a different area of the market, it’s a comfort to some independents that efforts are being made to clean up the wholesale sector as a whole and to ensure that those who do play by the rules are not disadvantaged.

But if the new regime is to work correctly, the entire industry needs to be better informed about the AWRS, how it affects individual businesses and the penalties for not complying. A straw poll of independents by The Wine Merchant in advance of the original October 1 opening date for registration found that about a third of businesses knew nothing about the new system.

The majority of independents have some wholesale interests, and on average derive 20% of their turnover from such trade, so there is clearly a publicity problem that officials need to address. And almost all merchants buy at least some of their stock from suppliers who will themselves need to register on the AWRS. Buying from a source without HMRC’s seal of approval will soon be a criminal offence.

Might that lack of awareness be part of the reason for the sudden decision to halt this autumn’s registration process? Has HMRC acknowledged that, during the busiest trading period of the year, even merchants who did know about the scheme might forget to enrol?

The FWD may be fuming at the delay, after campaigning so long for the AWRS to be adopted. But if the scheme is to function as intended, it needed to avoid the chaotic start that it almost achieved.

HMRC may yet get it right in 2016, but for that to happen it doesn’t merely need to tinker with the IT – it needs to think long and hard about how it communicates a system that a significant percentage of drinks suppliers still don’t recognise or understand. Punishing a few non-compliant merchants to get the message across would be an unfair alternative to proper advance publicity.

This article appears in the October edition of The Wine Merchant – click here to access the digital version of the magazine.

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