Guidance

Penalties for contraventions of the Alcohol Wholesaler Registration Scheme — CC/FS31

Updated 31 March 2022

This factsheet contains information about the penalties HM Revenue and Customs (HMRC) may charge where there’s been a contravention of the Alcohol Wholesaler Registration Scheme (AWRS). What we mean by a contravention is explained later in this factsheet. It does not cover fixed civil penalties for failure to comply with regulatory requirements.

We may have given you this factsheet because we’ve opened a compliance check to check that you have complied with the requirements of the AWRS.

This factsheet is one of a series. For the full list of the factsheets in our compliance checks series, go to www.gov.uk and search for ‘HMRC compliance checks factsheets’.

If you need help

If you have any health or personal circumstances that may make it difficult for you to deal with this check, please tell the officer that’s contacted you. We’ll help you in whatever way we can. For more details, go to www.gov.uk/get-help-hmrc-extra-support.

You can also ask someone else to deal with us on your behalf, for example, a professional adviser, friend or relative. We may however still need to talk or write to you directly about some things. If we need to write to you, we’ll send a copy to the person you’ve asked us to deal with. If we need to talk to you, they can be with you when we do, if you prefer.

The Alcohol Wholesaler Registration Scheme

AWRS has been introduced by us to tackle alcohol fraud. If you’re an alcohol wholesaler, you need to be approved under the AWRS. Trade buyers are also affected by the scheme.

For more information about AWRS, go to www.gov.uk/guidance/the-alcohol-wholesaler-registration-scheme-awrs.

When we can charge you penalties

We can charge you a penalty if you do not comply with the requirements of the AWRS. These failures to comply are called contraventions.

AWRS contraventions are:

• carrying on a controlled activity without an AWRS approval from us
• buying controlled liquor from a wholesaler who should have an AWRS approval

Controlled activity means:

• selling controlled liquor wholesale
• offering or exposing controlled liquor for wholesale
• arranging in the course of a trade or business for controlled liquor to be sold wholesale

Controlled liquor means alcohol on which duty has been charged, at a rate greater than nil, and the duty point is at or before the time of the sale.

For example, a wholesaler sells alcohol to various retail customers. The wholesaler does not have an approval and his customers buy the alcohol without checking their supplier is approved. The wholesaler has committed a contravention. The customers have also committed a contravention.

When we may charge you a penalty for an AWRS contravention

We may charge you a penalty if you commit any of the contraventions shown above. If you ask someone else, such as an employee or adviser, to do something on your behalf you must do as much as you can to make sure that they do not commit a contravention. If you do not do this, you’ll be liable to a penalty.

When we will not charge you a penalty for an AWRS contravention

We will not charge you a penalty for a non-deliberate AWRS contravention if you have a reasonable excuse for the contravention and you complied in full with the requirements of the AWRS without unreasonable delay after the reasonable excuse ended.

What we mean by non-deliberate is explained on page 3 of this factsheet.

A reasonable excuse is something that stopped you from meeting a tax obligation on time which you took reasonable care to meet. It might be due to circumstances outside your control or a combination of events. Once the reasonable excuse has ended, you must put things right without any unnecessary delay.

Whether you have a reasonable excuse depends upon the circumstances of the failure to meet the obligation and your situation and abilities. This may mean that what is a reasonable excuse for one person may not be a reasonable excuse for someone else. If you think you have a reasonable excuse, please tell us. If we accept that you have a reasonable excuse, we will not charge you a penalty.

If there was anything about your health or personal circumstances that made it difficult for you to comply with the requirements of the AWRS, please tell the officer that is carrying out the check. Telling them will mean that they can take this into account when considering whether you had a reasonable excuse.

Disclosing an AWRS contravention before we find it

If you tell us about a contravention before you had any reason to believe that we were about to find it, we call this an ‘unprompted disclosure’.

If you tell us about a contravention at any other time, we call it a ‘prompted disclosure’.

Once we have started a check, a disclosure can only be unprompted if, exceptionally:

• it’s about something that’s unrelated to what we’re checking
• you had no reason to believe that we could have found it during our check

The minimum penalty for an unprompted disclosure is lower than the minimum penalty for a prompted one.

What you can do to reduce any penalties we may charge

We can reduce the amount of any penalty we charge you depending on our view of how much assistance you gave us when you make a disclosure. We refer to this assistance as the ‘quality of disclosure’ or as ‘telling, helping and giving’.

Examples of making a disclosure include:

• telling us about, or agreeing that there’s been a contravention and how and why it happened
• telling us everything you can about the extent of a contravention as soon as you know about it
• telling and giving us help by answering our questions in full
• helping us to understand your accounts or records
• helping us by replying to our letters quickly
• helping us by agreeing to attend any meetings, or visits at a mutually convenient time
• helping us by checking your own records to identify the extent of the contravention
• helping us by using your private records to identify sales or income not included in your tax return
• giving us access to documents we’ve asked for without unnecessary delay
• giving us access to documents we may not know about, as well as those that we ask to see

We will reduce the penalty by the maximum amount possible if you:

• tell us everything you can about any contravention as soon as you know about it or you believe we’re about to find it
• do everything you can to correct it

If you delay in making a disclosure, you may still be entitled to a reduction, but it will be smaller.

If we do not need any extra assistance from you, we’ll give you some reduction for telling, helping and giving.

Letting us know about any special circumstances

If there are any special circumstances that you believe the officer dealing with the check should take into consideration when working out the penalty, you should let them know straightaway.

Your rights when we’re considering penalties

Article 6 of the European Convention on Human Rights (ECHR) gives you certain rights when HMRC are considering penalties for AWRS contraventions that are based on 70% or more of the maximum penalty. Although not all AWRS penalties are covered by Article 6, we will administer all AWRS penalties in the same way.

We always welcome your co-operation with our compliance check and establishing whether any penalties may be due. The extent to which you co-operate with us and provide us with information is entirely your choice. When considering penalties, you have the right under Article 6 not to answer our questions. This is sometimes referred to as the right not to self-incriminate or the right to silence. This right does not cover information or documents that already exist. This means that you must provide us with such information or documents that already exist, if we have a legal right to ask for them.

In making a decision about how much you are going to co-operate with us, you have the right to get help from a professional adviser. If you do not already have an adviser, you may want to consider consulting one.

You have the right to have matters of penalties dealt with without unreasonable delay. If we consider that you’re liable to a penalty, we will explain how it has been calculated and send you an assessment of the penalty.

If we charge you a penalty, you have the right to ask for a review or to appeal.

You have the right to apply for publicly funded legal assistance or Legal Aid. In some circumstances funding may be available to help you bring certain appeals before the tribunal. If you intend to appeal against a penalty assessment, you may want to check whether your case qualifies and the type of help that may be available. We have no involvement in decisions about whether or not your case will qualify. You can get more details or apply for funded legal assistance from Citizens Advice or through a solicitor anywhere in the UK.

If there is anything you do not understand about these rights or what they mean for you, please tell the officer who is dealing with the compliance check straightaway.

How we work out the amount of a penalty

The maximum penalty for each AWRS contravention is £10,000. The amount of each penalty we charge depends on the behaviour, which is explained below, whether your disclosure was prompted or unprompted, and the quality of your disclosure.

If you’re liable to a penalty, we start with the maximum penalty and then there are 7 stages in working out the amount of the penalty we are going to charge. The 7 stages are below.

1. Determining our view of the ‘behaviour’

When there’s an AWRS contravention, we will work with you to find out what caused it. We refer to this as the ‘behaviour’. The type of behaviour will affect the amount of the penalty. The 3 different types of behaviour are:

Non-deliberate

This is where you contravened the AWRS, but the contravention was not deliberate or deliberate and concealed.

Deliberate but not concealed

This is where you knew that you had contravened the AWRS.

Deliberate and concealed

This is where you knew that you had contravened the AWRS and you also took active steps to hide the contravention from us.

2. Deciding whether the disclosure was unprompted or prompted

This determines the minimum penalty percentage that we can charge you. The section titled ‘Disclosing an AWRS contravention before we find it’, on page 2 of this factsheet, explains this in more detail.

3. The penalty ranges

The penalty percentage will fall within a range. This range will depend on our view of the type of behaviour and whether the disclosure was unprompted or prompted. The following table shows the penalty ranges.

Type of behaviour	Penalty range for unprompted disclosure	Penalty range for prompted disclosure
Deliberate and concealed	30% to 100%	50% to 100%
Deliberate	20% to 70%	35% to 70%
Non-deliberate	10% to 30%	20% to 30%

If you have a reasonable excuse for a non-deliberate contravention, we will not charge you a penalty.

4. Working out the reductions for the quality of disclosure (telling, helping us and allowing us access)

The quality of disclosure (or telling, helping us and allowing us access), determines where the penalty will fall within the penalty range. The reduction we give depends on how much assistance you give us. For:

• telling — we give up to 30%
• helping us — we give up to 40%
• allowing us access to records — we give up to 30%

5. Working out the penalty percentage rate

The penalty percentage rate is determined by the penalty range and the reduction for the quality of disclosure.

Example

During a compliance check, we found a non-deliberate AWRS contravention that the customer did not know about before we started our check. When we told them about the contravention, they agreed with us that they had committed it. This was therefore a prompted disclosure.

The penalty range for a non-deliberate contravention with a prompted disclosure is 20% to 30% of the maximum amount.

The total reduction for quality of disclosure (telling, helping us, and allowing us access) was 70%.

Steps	Calculation
To work out the penalty percentage rate, we first calculate the difference between minimum and maximum penalty percentages.	30% minus 20% = 10%
We then multiply that figure by the reduction for quality of disclosure to arrive at the percentage reduction.	10 × 70% = 7%
We then deduct the percentage reduction from the maximum penalty percentage we can charge.	30% minus 7% = 23%
This gives us the penalty percentage rate.	23%

6. Working out the amount of the penalty

To work out the amount of the penalty, we multiply the maximum amount by the penalty percentage rate. In the example above the penalty would be £10,000 × 23% = £2,300.

7. Considering other reductions

After working out the amount of the penalty, we then take into account any other reductions that are necessary. For example, where we’ve already charged another penalty on the same tax or duty. This then gives the amount of penalty that we’ll charge.

How we tell you about a penalty

We will write to tell you how much the penalty is and how we’ve worked it out. If there’s anything about the penalty that you do not agree with, or if you think there is any information we have not already taken into account, you should tell us straightaway. After taking account of anything you have told us, we’ll send you a penalty assessment notice.

When a company officer may have to pay some or all of a company’s penalty for a deliberate AWRS contravention

A company officer may have to pay some or all of the company’s penalty if the penalty is due to their actions, and one or more of the following applies:

• they have gained, or attempted to gain, personally from a deliberate contravention
• the company is, or we believe it is, about to become insolvent — even if the officer did not gain personally from the deliberate contravention

If the company pays the penalty, we will not ask the individual officers to pay.

A company officer is a director, shadow director, company secretary or manager of a company, or a member of a limited liability partnership.

If you’ve deliberately done something wrong

We may carry out a criminal investigation with a view to prosecution if you’ve deliberately done something wrong, such as:

• give us information that you know is not true, whether verbally or in a document
• commit a criminal offence under the AWRS legislation

Managing Serious Defaulters

If you’ve deliberately got your tax affairs wrong, we may need to monitor your tax affairs more closely.

We have an enhanced monitoring programme called Managing Serious Defaulters. You can find more information about this in factsheet CC/FS14, ‘Managing Serious Defaulters’. Go to www.gov.uk and search for ‘CC/FS14’.

What to do if you disagree

If there’s something that you do not agree with, please tell us.

If we make a decision that you can appeal against, we’ll write to you about the decision and tell you what to do if you disagree. You’ll usually have 3 options. Within 30 days, you can:

• send new information to the officer you’ve been dealing with the check and ask them to take it into account
• have your case reviewed by an HMRC officer who has not been involved in the matter
• arrange for an independent tribunal to hear your appeal and decide the matter

Whichever you choose, you may also be able to ask for an HMRC specialist officer to act as a neutral facilitator to help resolve the dispute. We call this Alternative Dispute Resolution (ADR).

ADR is only available for disputes that relate to specific tax areas. The officer dealing with the check will tell you if ADR is available for your dispute. For more information about appeals and ADR, read factsheets:

• HMRC1, ‘HM Revenue and Customs decisions — what to do if you disagree’
• CC/FS21, ‘Alternative dispute resolution’

Go to www.gov.uk and search for ‘HMRC1’ or ‘CC/FS21’.

When AWRS penalties apply

The penalty rules in this factsheet apply to AWRS contraventions from the following dates:

• 1 January 2016 — carrying on a controlled activity without an AWRS approval
• 1 April 2017 — buying controlled liquor from a wholesaler who should have an AWRS approval

More information

You can find more information about AWRS in Excise Notice 2002: Alcohol Wholesaler Registration Scheme. Go to www.gov.uk/government/publications/excise-notice-2002-alcohol-wholesaler-registration-scheme.

Our privacy notice

Our privacy notice sets out the standards that you can expect from us when we ask for information or hold information about you. Go to www.gov.uk and search for ‘HMRC Privacy Notice’.