Spirits and wine

HT & Co Drinks has failed in its bid to overthrow an HMRC decision effectively preventing it from storing and distributing alcohol for export.

The wholesaler, which has a turnover of £218m, has also been refused permission to apply for a judicial review against HMRC.

HT & Co and its associated company Matthew Cowen appeared at the High Court earlier this month to argue against HMRC’s decision to revoke its licence to trade in so-called ‘duty suspended goods’.

The judgement of Mr Justice Cobb, who heard the case, revealed HMRC had been investigating HT & Co’s trading activities since 2013 due to concerns over “the extension of credit limits and the receipt of large cash payments in its duty-suspended business”.

He said HMRC “does not allege the companies have been involved in fraudulent or dishonest trading”.

Following a series of meetings, in 2014 HT & Co was granted authorisations as registered owners but with certain ‘conditions’ ensuring the company conducted due diligence of its customers. HMRC warned HT & Co in July 2014 of six alleged failures to comply with these conditions.

HMRC then issued a letter in December 2014 revoking HT & Co as registered owners of duty-suspended goods with immediate effect. A letter sent last month also confirmed its approval as a tax warehouse would cease on 16 March.

HMRC claimed its actions were a “proportionate response given the evidence of sustained non-compliance”, “continuing resistance” to comply over an eight-month period and HT & Co’s assertions they were unable to comply.

The wholesaler countered that the alleged breaches of the conditions were “merely ‘purported’ and ‘perceived’ ‘administrative/technical’ shortcomings in nature”; they had “not been given a proper opportunity to answer the alleged inadequacies”; and the conditions were in breach of EU law to permit free movement of goods and right to freedom from interference with property.

But Mr Justice Cobb said he was “wholly satisfied” HT & Co had been given “more than ample notice of the dissatisfaction of HMRC with the due diligence compliance” and HMRC had “over time, reasonably ratcheted up its enforcement measures”. HT & Co had also “failed to demonstrate HMRC had acted procedurally unfairly”.

An HMRC spokesman told The Grocer: “We never take the decision to withdraw approval to trade in duty suspended goods lightly, but we have to protect duty that might otherwise be at risk. Businesses in this position are still free to trade in duty paid alcohol.”

A spokesman for HT & Co said: “At present, HT & Co is in the process of appealing a decision made by HMRC to revoke its WOWGR; it would therefore be inappropriate to comment while proceedings remain on-going. Notwithstanding this, HT & Co continues to operate its substantial business and, to that end, continues to work closely with HMRC to ensure that it remains a high quality supplier within the alcohol industry. HT & Co continues to draw down goods from [its] bonded warehouse on a duty paid basis.”

The ruling comes in the same week Chancellor George Osborne confirmed in the Budget the Alcohol Wholesaler Registration Scheme would come into effect from October. Through this scheme, wholesalers will have to prove, through stringent tests and due diligence of their suppliers, they are trading legally.