dodgy distributors
Illicit trade

The illegal trade in alcohol and tobacco represents the biggest threat to the profitability of law-abiding wholesalers in the food and drink sector.

Duty-avoided beers, wine and spirits cost the Exchequer £1.3bn in lost revenue in 2015/16 as criminal gangs have taken trade away from legitimate wholesalers.

Since the introduction of the Alcohol Wholesaler Registration Scheme in April 2017 (a scheme which was proposed to Government by the FWD) we’ve seen a marked decline in the illicit trade in alcohol. Consequently sales are returning to responsible, registered wholesalers and at the same time revenue is rightly returned to the Exchequer.

The tax gaps report that is produced annually by HMRC is a useful indicator to demonstrate the progress of AWRS. FWD are aware that HMRC are looking to scrap part of the tax gaps report that breakdowns the beer, spirits and wine market by the illicit market, legitimate market and cross border shopping. FWD are lobbying to maintain this crucial part of the report.

Trace and trace

FWD are supportive of ensuring tobacco products are safe from fraudulent activity, but members shared concerns about the timeframe for registering for identifier codes, as well as concerns about the recovery cost of the scanning equipment needed for this new system, and the need for a soft landing in terms of HMRC enforcement in the first year.

Whilst the timeframe for registering for identifier codes was not changed, HMRC agreed that a 12 month soft landing enforcement period would take place.

Wholesalers need to obtain equipment to record the movement of these products. The tobacco industry is responsible for providing the equipment and has appointed a third party provider, SGS, to act as the single point of contact.

Some wholesalers are experiencing some challenges in that the SGS fund seems to allow recovery only of hardware, not the additional costs of training or extra time resulting from the introduction of track and trace which are harder to quantify. It is entirely likely that the full cost will not be recovered. The funding may also not even cover the initial cost of implementation.

To add even further complexity to the implementation of the new system and unintended consequences for wholesalers, some wholesalers wishing to integrate the scanning process within their existing systems to avoid double scanning and to be able integrate data have been quoted a cost by their scanning provider which is far greater than the identified contribution SGS would make. This is based on a standalone hardware system that would lead to double scanning.

FWD recently asked the Government what opportunity for appeal exists for economic operators in the event that the compensation offered by tobacco manufacturers for the equipment and software for the recording and transmission of product movement and transactional events to the data storage systems does not cover the cost to that operator implementing the Tobacco Products (Traceability).

FWD has been working extensively to ensure that wholesalers concerns about the implementation of this new system are acknowledged. This work has taken place through meetings and regular calls with HMRC, submitting written questions to Parliament and working with the Association of Convenience Stores on joint representations to the Government.



Side effects of sugar tax
Soft drink smuggling

Following the introduction of the Soft Drinks Industry Levy on high sugar products in April 2018, we are now concerned about the rise of a soft drinks grey market.

There is a risk that unscrupulous importers will bring stock into the UK that has not been subject to the levy.

These products will then be sold directly to retailers, possibly via white van sales. FWD is working closely with industry partners to call on Government for greater enforcement measures and to provide HMRC with adequate resources to conduct spot checks regularly and to invest in inspectors.

What you can do: If you notice any drop off in sales of high sugar soft drink skus, or retailers say they’ve been offered these lines at very low prices, please let us know, or report it to the Customs Hotline