Operators could face financial ruin if they unknowingly handle excise goods on which the duty has yet to be paid, the UK Warehousing Association has warned.
Chief executive Roger Williams said: “We are seeking urgent talks with HM Revenue and Customs in an attempt to force them to clarify the situation. We are extremely concerned that, rather than tackling the real fraudsters, HMRC will take the easy option and look to other parts of the alcohol supply chain to recover lost duty.”
Since April, HMRC rules have allowed it to: “assess anyone for duty on goods illegally diverted from bonded movements who was ‘aware or should reasonably have been aware’ of the diversion at any point in the supply chain”.
In addition, it can issue severe “wrongdoing” penalties against anyone in the supply chain who has supplied, sold or at any time “held” excise goods on which duty has not been paid, whether the wrongdoing was deliberate or not.
This means that if an organisation has been involved at any stage in the supply of goods that have been illicitly diverted from a bonded supply chain, it could be liable for duty – even if that organisation is not directly responsible for the diversion but has “means of knowledge”.
Based on legal precedent in VAT law, this could simply include knowledge of fraud in the market.
UKWA’s advisor on excise duty matters, Alan Powell of Alan Powell Associates, said: “Beyond carrying out the usual due diligence when entering in to a contract, there is not much that a company can do to protect themselves… Even then, if VAT precedent is followed, due diligence may be no protection if HMRC alleges knowing participation in a market tainted with fraud.”
HMRC’s anti-fraud powers give authority to impose harsh penalties on anyone found to have held or dealt in duty-unpaid excise goods, including an absolute liability to a penalty of up to 100 per cent of the duty as “potential lost revenue” on the goods.
It can also detain and seize the goods and refuse to restore them, meaning the overall cost of those goods becomes a loss, in addition to losing the physical stock. HMRC can also make an assessment for any and all stock put through a business that it believes to be duty unpaid.
“HMRC’s action plan and its enforcement is not theoretical. It is happening now and businesses who believed themselves to be simply ‘naïve’ are facing financial ruin.” said Powell.
UKWA is warning its members to take extra care when handling or in any way dealing in such products.