Independent retailers tempted to buy cigarettes or alcohol from ‘white van’ wholesalers face new reprisals which could put them out of business.

HMRC now has the power to force any business caught handling black market tobacco or alcohol to pay the duty due itself – unless it can prove that tax and VAT has been paid on the goods. Where previously it could only confiscate the stock, the new ‘wrongdoing penalties’ tighten up Customs’ powers.

The penalties for being caught in possession of large stocks of illicit goods could cause severe cash-flow problems to small businesses. However, the penalty may be waived if the retailer can prove they made sufficient efforts to establish that the purchase was legitimate.

“We aim to support people who take care to pay the right amount of tax,” said Mike Eland, director of enforcement and compliance at HMRC. “Part of the support is to come down hard on those who deliberately evade paying. These new penalties are tougher and more consistent.” 

Federation of Wholesale Distributors (FWD) chief executive James Bielby said the measures “give Customs an extra weapon and send out the message that businesses should not touch duty-avoided stock.”

Retailers may also be the innocent victims of suspected fraud by a wholesaler. Customs officers recently seized 96 crates of beer worth £1,700 from Hans Kukreja of Parkway News in Darlington, despite Hans having paperwork to prove VAT was paid. His wholesaler has now left its premises (see Dear Jac, p17).

An FWD proposal for a register of wholesalers, which would reassure retailers that duty had been paid on goods, was rejected by HMRC as it said it did not have the resources to police the scheme properly.