Harrow booze raid

Illegal alcohol costs the Treasury £1.3bn in lost revenue

The UK needs new measures to tackle the rising cost of the black market trade in alcohol, the Federation of Wholesale Distributors (FWD) has warned.

Alcohol duty and VAT fraud cost the Treasury £1.3bn in lost revenue in the last financial year, up from £1.2bn the year before, according to the report Measuring Tax Gaps 2014 (PDF), published by HMRC today.

Fraud on wine alone saw a steep increase - from £240m to £340m.

HMRC estimated that 5% of wine sold in the UK is duty avoided, and 12% of beer.

“Today’s figures demonstrate how badly we need new measures to control the supply of alcohol in the UK,” the FWD’s chief executive, James Bielby. “Duty-evading wholesalers operate quite openly in many parts of the country and are severely damaging the profitability of our members, as well as exposing retailers who buy from them to prosecution and loss of their licence.”

The findings come just days after representatives from the FWD and the Association of Convenience Stores met exchequer secretary to the Treasury Priti Patel to pass on members’ comments about the illegal trade in alcohol and tobacco.

Bielby said the trade group was working with HMRC to design a registration scheme to prevent criminals entering the supply chain, and new due diligence requirements would put a responsibility on retailers to ensure they bought from legitimate sources.

“HMRC has also increased its enforcement resources, and has started to show a return on this investment. However, there is more still to be done to restore control of the supply chain to legitimate distributors, and we are calling on the government to keep up the pressure on this growing area of criminal activity,” Bielby said.

One recent HMRC success saw 14 people arrested on 7 October on suspicion of laundering the proceeds of an estimated £40m alcohol fraud.

Another, last month, saw HMRC, working with Border Force, Trading Standards and Kent Police, seize 137,124 litres of illegal alcohol as part of a Europol intelligence-led operation.