Ascot Ales Limited – AWRS Policy

AWRS Policy
EXCISE DUE DILIGENCE POLICY - AWRS URN XQAW00000103038
July 2023

Ascot Ales Limited is fully aware of its obligations under the AWRS. A due diligence process is in place which considers the likelihood of excise duty evasion as well as other commercial/criminal risks when undertaking trading activities. Ascot Ales Limited fully supports any action to drive out illicit trade in alcohol and reduce the risk to businesses. Alcohol duty fraud is a serious problem that harms not only the UK taxpayer but also legitimate businesses, communities and the wider economy. Without effective safeguards in place, there are considerable risks to all businesses along alcohol supply chains of becoming implicated in illicit trading. Any business in the supply chain which trades in alcohol is potentially at risk of becoming implicated in the illicit alcohol trade unless it undertakes due diligence checks as set out by HMRC in Excise Notice 2002: Alcohol Wholesaler Registration Scheme. The AWRS is designed to reduce fraud and under the scheme, any business which falls within the definitions in the Notice as being required to register, must do so. From March 2017, it will be an offence to purchase alcohol from an unregistered wholesaler. Ascot Ales Limited may ask for your Unique Reference Number (URN) or AWRS application reference number in addition to any other questions that may be pertinent in order to document and satisfy the requirements of due diligence as set out by HMRC. Ascot Ales Limited will not deal with any customers or suppliers where it is felt that there is a possibility that such trade will involve fraud. If Ascot Ales Limited suspect fraud, HMRC will be notified. Ascot Ales Limited maintains its obligation to:
  • Objectively assess the risk of alcohol duty fraud within the supply chain
  • Establish reasonable and proportionate checks in day-to-day trading in order to ensure that transactions do not lead to fraud and do not involve duty-evaded goods
  • Establish processes and procedures to take timely and effective action where the risk of fraud has been identified
  • Put in place audit and governance procedures to ensure that due diligence processes are, and continue to be, carried out
For the purposes of AWRS, suppliers or customers may need to document their own due diligence regarding Ascot Ales Limited. The Unique Reference Number (URN) for Ascot Ales Limited will be placed on all invoices for reference. Ascot Ales Limited is committed to trading in full compliance with all relevant national, EU and International laws, although we only source products from reputable businesses within the UK. We do not import alcohol-based products from the EU and non-EU countries. All products we supply will have had its appropriate duty paid.

1. FOR A RETAILER TO OPEN AN ACCOUNT:

In order for a business to register for trade, Ascot Ales Limited will require the following documents:

A completed account application form which is available online or which can be posted on request.

  • Copy of Incorporation Certificate (if Applicable)
  • Copy of VAT Certificate (If applicable)
  • Company Bank Details
  • Owner Photo ID Details such as Passport & Driving License
  • Copy of Business Utility Bill (Less than 3 months old)
  • Copy of Lease agreement or proof of Freehold of the business premises (Proof of contract if using third party distribution hub)

Once Ascot Ales Limited has collated this information, the necessary checks will be conducted before opening the account. Payment methods are cash, card, bank transfer or direct debit only. Ascot Ales Limited does not accept cheques. Note that photo ID may be requested for card payment at the time of payment. Third party card payments will not be accepted.

2. FOR A WHOLESALER TO OPEN AN ACCOUNT:

In order for a business to register as a wholesaler, Ascot Ales Limited will require the following documents:

A Completed account application form which is available online or can be posted/emailed

  • Copy of Incorporation Certificate
  • Copy of VAT Certificate
  • Company Bank Details
  • Owner Photo ID Details such as Passport & Driving License
  • Copy of Business Utility Bill (Less than 3 months old)
  • Copy of Lease agreement or proof of Freehold of the business premises (Proof of contract if using third party distribution hub)
  • Signed account forms
  • Picture of business address, if applicable

Once the information has been gathered, the appointed officer Christopher Davies – Director or another qualified member of staff will complete a risk assessment. Any customers identified as high risk will undergo further questioning. High risk customers that are accepted will be evaluated every three months; all other customers will be reviewed on an annual basis.

All customers who do not pass the internal check will be notified that their account will not be opened and customers with suspicious behaviour will be reported to HMRC within 5 working days.

3. FOR A SUPPLIER TO OPEN AN ACCOUNT:

As a part of the Alcohol Wholesaler Registration Scheme (AWRS), Ascot Ales Limited is required to conduct due diligence checks on partners involved in the supply chain for alcoholic drinks. Ascot Ales Limited will require the following documents for a supplier to open an account to start trading:

  • Company Introduction stating nature of business and products available
  • Completion of ‘FITTED’ questionnaire.
  • Copy of Incorporation Certificate
  • Copy of VAT Certificate
  • Owner/Director’s/ Proprietor’s ID Details
  • Company Bank Details
  • AWRS number if this has been issued and UK based supplier
  • Headed paper or business card
  • If you are a UK duty paid supplier, please provide us with copies of form

W-5 (or similar document) showing evidence of duty payment.

The FITTED questionnaire includes all information that is required for our checks as well as points to upload evidence. This will be sent directly to a new supplier prior to an initial order being placed.

Once the supplier has sent the above information, Christopher Davies or another member of the team will review it. The overall risk of the supplier will be established. If the business is identified as a high-risk supplier, further questions will be asked, and site visits will be conducted as appropriate. Any suspicious retail pricing at uneconomic levels or improper trading patterns will be reported to HMRC within 5 working days.

All high-risk suppliers will be reviewed every three months; all other suppliers will be reviewed on an annual basis.

4. DUE DILIGENCE CODE OF CONDUCT (DDCOC):

Our Due Diligence Code of Conduct (DDCOC) sets out the basic rules we will follow and the values that will guide our decisions. It also points us to more detailed processes and procedures relating to the purchase and supply of alcoholic products.

The DDCOC is built on the premise of ‘knowing your customer or supplier‘ and the commercial transactions that will be involved. Supply chains are only as strong as the weakest link and the purpose of the Ascot Ales Limited DDCOC is to prevent entering into commercial transactions with any illicit customer or supplier. The policy will aid in ensuring all customers and suppliers are regularly reviewed so any changes of activities are identified, and the appropriate action taken.

Specific guidelines have been developed for customers and suppliers. All customers and suppliers must provide the required list of documents and completed questions for Ascot Ales Limited to undertake a risk assessment before any account is open. Ascot Ales Limited will only trade with a customer or supplier if they have passed the necessary risk assessment checks.

Christopher Davies or another authorised member of the team will review the submitted information on a case-by-case basis and will conduct the final sign off. Any customer or supplier who fails to pass the risk assessment will immediately have all transactions ceased pending review. If the review is unsatisfactory, the account will be closed indefinitely.

Regular reviews of customer and supplier information will be conducted by Christopher Davies or another authorised member of the team and the final sign off will be conducted by Christopher Davies

All initial checks and further reviews will be documented in the customer or supplier file and maintained on an ongoing basis. 

The DDCOC will be implemented and maintained by Christopher Davies who has experience working with Ascot Ales Limited customers, suppliers and methods of business.

Part of the DDCOC is to ensure day-to-day checks are in place to identify transactions that may lead to fraud or involve goods on which duty may have been evaded. Checks in purchase order processing and customer orders are two areas where daily checks are performed.

5. PURCHASE ORDER PROCESS FOR NOMINATED SUPPLIERS:

The purchase order process we currently use will help assist in ensuring fraud does not take place. All orders are raised through official purchase orders for approved suppliers on Breww. The orders are emailed across directly to the supplier with the full details of product and price. Once the goods are received into our warehouse or bonded warehouse, the goods are booked into the Breww system. This process highlights any errors in quantity and costings.

If any order has not been received in the expected delivery window, we will raise a query with the supplier, haulier if we have instructed them and destination warehouse. If anything fraudulent has been identified we take the necessary actions.

 The same principle applies to the delivery address requested on the customer’s purchase order. Ascot Ales Limited ensures copies of delivery notes for each order are received to help prove delivery to the requested delivery address.

Any changes to the form of ordering or delivery address have to be made in writing by the customer on company letterhead or company email.

Existing suppliers who are already supplying Ascot Ales Limited at the date of this policy will need to provide Ascot Ales Limited with the relevant documents (as above) to continue as a supplier. As with new suppliers, each supplier’s risk will be established. Regular visits to the supplier’s premises may also be made by Ascot Ales Limited representatives to verify business records.

Existing Customers who are already purchasing from Ascot Ales Limited at the date of this policy will need to provide Ascot Ales Limited with the relevant documents (as above) to continue as a customer. As with new customers, each customer’s risk will be established. Regular visits to the supplier’s premises may also be made by Ascot Ales Limited representatives to verify business records.

FITTED Due Diligence for Alcohol Wholesalers – What is FITTED? Does yours pass the test?

HMRC due diligence requirements are known by the name FITTED. They are also referred to as “the due diligence condition”. HMRC Excise Industry FITTED was introduced to the duty suspended Excise industry in Nov 2014 as part of WOWGR compliance and was applied to the AWRS scheme in 2017. It is set out in HMRC’s Excise Notice 196 and Notice 2002.

HMRC Excise Industry FITTED

  • F =Financial Health
  • I =Identity
  • T=Terms of contract
  • T=Transport
  • E=Existence of goods
  • D=Deal

FITTED applies to duty paid traders as part of AWRS (Alcohol Wholesalers Registration Scheme). Enhanced Due diligence checks are here to stay and are Tax Tribunal approved.

Many companies in the Alcohol wholesale industry are now very familiar with HMRC’s FITTED Due diligence condition. It stands as part of the Alcohol Wholesalers Registration Scheme (AWRS). For those that are unfamiliar, read HMRC Public Notice 2002 to bring yourself up to speed. We have seen the quality of due diligence checks improve significantly since the introduction of FITTED.

The Due Diligence condition is split into 3 parts.

  1. The identity of the trading entity;
  2. The Risk Assessment;
  3. The Continuous Monitoringof this entity and the trading relationship.

The following should be high priority considerations.

  • There is no defined list of checks that must be carried out. However, the checks must reflect the risks posed by the trading relationship. Many of the larger companies within the Excise and Drinks industry, now have either departments or individuals tasked to deal with these queries.
  • If a company has a Bond account or has a direct supplier account with a producer doesn’t mean FITTED can be ignored. Each company sets its own due diligence and risk assessments to a level of risk that it is willing to take. This is a commercial decision, made by that company. The directors will be held accountable to HMRC. This would be in the case of the company is found to not be ‘assisting in the administration, collection and protection of the revenue’.
  • For companies trading in the Duty paid sector. If HMRC deny or revoke an AWRS number, this means the company if it trades solely in wholesaler alcoholic drinks, will be forced to cease operating. If this puts the company out of business, then in the context of reducing the overall burden of excise duty fraud on the UK taxpayer. This has been deemed as acceptable by the Tribunal system.

To Assist Those who are Still Working on their Due Diligence. 

Due diligence documents should be scrutinised. They should be checked by the business requesting them. It is not sufficient to merely ask for documents, and then store them away at the business. Failure to carry out sufficient checks on a business, could leave you at risk of assessments and wrongdoing penalties being raised. It can also result in having stock seized.

Always remember that the test of your due diligence is one of hindsight. Based on the paperwork, and the operations of a trading partner. Ask yourself, should you, or ought you to have known that there was a problem or a concern?

1:Have a Process

Go through the same steps every time you want to work with a new supplier, or customer as this helps with consistency. You know what you do as part of your checks. Other companies now need to confirmation you are meeting FITTED standards. HMRC will also ask you details of the process you go through as part of your Alcohol Wholesalers Registration Scheme (AWRS) interview. It is easier to write this down in the form of a policy, as this will give you a standard question form and checklist. This will also reduce the opportunity for mistakes. If staff assist with completing these checklists, a written policy will assist with training and consistency.

2:Check the Paperwork

It sounds basic but, you cannot rely upon the paperwork given to you. You must confirm its contents. If you are given a Certificate of Incorporation, go onto Companies House or the appropriate state registry (gov.uk contains a list of key states) and confirm the company exists. Check the VAT number matches and is valid online (VIES or gov.uk). Confirm the directors. Confirm the registered address are as per your conversations; Carry out website checks. Check passports and utility bills you have received (there are various websites which permit you to confirm the validity of documents such as passport or ID cards and addresses).

3:Do a Site Visit, do an Identity Check and a Credit Check

You should meet an individual face to face. If this simply isn’t possible use Zoom, FaceTime, WhatsApp, or one of the other online platforms. If you haven’t met the individual in person or seen them, how can you be sure that the person on the paperwork is who they say they are? You want a visual facial match to the documentation in front of you. Online credit checks are easily available and can be sourced on a one-off basis for around £10 for UK registered entities, or £30 for non-UK companies. This will provide you with another independent check and a recommended credit rating. Many agencies also provide monitoring services for a monthly fee. You can then create a portfolio of companies, based upon their risk ratings.

4:Duty Status and Supply Chain

For commercial confidentiality reasons you cannot force another company to provide you with details of their supplier. However, you can ask about where their goods are sourced from. Do they buy from manufacturers, other wholesalers?  Is it within the UK or from mainland EU? Are those goods duty paid, or duty suspended? These answers can help form a defence if the goods are found to be non-duty paid. Remember that a refusal to provide this information is itself an indicator of a potential risk.

5: Confirm who Actually Controls and Owns the Company

There is a difference between beneficial and controlling ownership. If another company owns the company you want to do trade with, you need to review that company’s ownership as well. Anyone who owns more than 25% of a company needs to be identified, and ID obtained. Additionally you need to understand who controls the company. If they know what they are doing, e.g. a director who has a history in the industry or has had some exposure in a previous but similar type of company. You are looking to ensure that you are confident the company is run by the person or people you have met. You are checking that there isn’t someone in the shadows controlling the business.

6: Do you know who is Moving the Goods and, why?

Understand who will be moving your goods. Whether they have what is required to do this correctly.  This could assist if any issues are raised at a later stage. This area is often disputed.  But HMRC cannot require FITTED level due diligence to be undertaken on Hauliers by wholesalers. This is unless they are directly instructed. They however are companies involved in the supply chain of Alcohol, some due diligence on Hauliers must be undertaken.

7:The Deal – Is it too Good to be True

How much are the goods? Does it make commercial sense? These are questions that only those in the industry who know the market pricing can answer.  Markets go up and down. This is depending on demand and product quality. Law firms, accountants, tax advisors are not commercially trading in your market. They cannot comment accurately on the commerciality of a deal.