The Association of Convenience Stores and the Federation of Wholesale Distributors have urged the government to lift pre-budget allocation rules which restrict the sale of tobacco products to avoid fuelling the illicit market.
The purchasing restrictions for retailers and wholesalers apply every year for the couple of months before the Budget. They are aimed at preventing businesses from stockpiling tobacco products ahead of a rise in duty.
However, there is confusion this year around the rules as there is no formal Budget statement planned and no planned duty increase, albeit this being supposed to increase each year as part of the Treasury’s duty escalator policy.
Despite this, the restrictions kicked in on 1 September and were based on sales between July 2019 and June 2020.
ACS and FWD argue these do not fully reflect the impact of the sales spike during the pandemic and therefore could leave wholesalers and retailers short of stock as we move through the latest lockdown.
In a letter to the Treasury this week, they were expecting lockdown to result in a further spike in tobacco sales, citing the 18% growth for the category during the first lockdown earlier this year.
ACS chief executive James Lowman said the continued clampdown on allocations could result in demand outstripping supply and “we must do everything to ensure that customers are not forced to seek out tobacco products on the illicit market”.
FWD chief executive James Bielby added: “Wholesalers have to anticipate demand well in advance in order to offer retailers the stock they need, so delays in giving legitimate distributors a clear steer on allocations is a gift to illicit tobacco traders who will pick up any shortfall in supply.”
However, an HMRC spokeswoman said: “Nothing has been ruled out. Because increases to tobacco duty are still possible in the coming period the forestalling restrictions remain in place.
“Businesses are given allocations of how much goods they can clear that reflect their anticipated real business needs, however, in exceptional cases these businesses can apply for additional allocations. While HMRC cannot give detail on individual cases, there have been recent cases where allocations have been adjusted in response to evidence presented of increased demand due to the coronavirus. HMRC would similarly consider any new requests it may receive while the restrictions remain in place.”
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