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The Due Diligence Exchange Ltd

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Recent revisions to guidance issued by HM Revenue & Customs ("HMRC") in relation to the Money Laundering Regulations 2017 ("MLR") and Notice 2002: Alcohol Wholesaler Registration Scheme ("AWRS") illustrate their commitment to ensuring fraudsters do not gain access to controlled activities through the backdoor.

HMRC have amended both the MLR and AWRS guidance to clarify that these registrations are none transferable. This means that any one acquiring an existing business with these registrations would be required to cancel the active registrations and apply for new ones.

This is of course an effective tool in ensuring that fraudulent traders are not able to simply purchase registrations that they would otherwise not qualify for. The industry as a whole is therefore better protected from interaction with supply chains vitiated by fraud and the impact that duty evaded goods have on legitimate businesses profits is reduced.

However, these requirements can potentially have a significant negative impact on the salable value of these businesses and the ability for owners and Directors to form an exit strategy that rewards them with the true value of their hard work.

With registrations being none transferable and at the same time an absolutely essential requirement for the business to continue trade it is hard to envision how a registered business could ever hope to achieve it true value when sold.

This poses serious issues and considerations for any owners of a regulated business. Will entrepreneurial and talented business owners want to dedicate years of hard work and effort to a business which can realistically never achieve it's true potential and value when sold? Will this have a negative impact on the growth and establishment of new businesses within this sector?

Only time will tell as to the implication of these revisions. One thing that is clear however is that HMRC need to give further consideration as to how the spirit of these amendments can be achieved without putting business owners in a position never being able to achieve the true value of their hard work and commitment.

#HMRC #Notice2002 #AWRS #MLR2017 #Entrepreneurialspirit
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HMRC have now added administration charges to issuing penalties under the Money Laundering Regulations 2017 ("MLR"). The cost of non-compliance with the MLR's was already significant and extremely detrimental to any business found to be non-complaint, however these penalties will now come with added costs.

HMRC will introduce a penalty administration charge for all anti-money laundering supervision penalties issued from 25 July 2018. The charge is for costs of issuing penalties to businesses that do not comply with the Money Laundering Regulations.

Compliance penalties

HMRC will charge up to £1,500, as well as the penalty for breaches of the Money Laundering Regulations such as failures for:

> customer due diligence
> risk assessment
> policies, controls and procedures
> record keeping

All other penalties

HMRC will charge up to £350, as well as the penalty for failures to, for example:

> register
> tell HMRC of changes to your business
> provide information

Any business caught by the MLR's should of course always seek to achieve the highest level of compliance and instill a compliance culture within their operating practices. The above penalties only go to further illustrate HMRC's commitment to enforcing these regulations.
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Notice 2002: AWRS Registration - Fit and Proper Test

The Alcohol Wholesaler Registration Scheme ("AWRS") approval is granted upon both the business and key individuals passing the ‘fit and proper’ test. Any rejected applications are held against you in subsequent applications and it is therefore always good practice to ‘put your best foot forward’ with your initial application. The ‘fit and proper’ test covers three main areas that you need to satisfy in order to be granted registration which can be surmised them as follows:

1) Previous issue with HMRC – HMRC will look at issues relating both the legal entity and all key individuals for a period of the last 6 years. For individual’s this would include issues relating to any other businesses that they have had involvement with in the last 6 years as well. Issues that would deemed to be relevant would include any previous seizures, penalties or assessments, registrations that have been revoked, criminal convictions, tax loss letters, un-managed debts with HMRC and failure to comply with HMRC record-keeping requirements.

2) Commercial viability – The business must evidence that the proposed trading activity is commercially viable and that there is sufficient funding in order for the business to commence trade. This means that you need to evidence significant headway has been made in substantiating how the business will commence trade once granted approval, marketing strategies in order to enter the market place, analysis of competition to illustrate a gap in the market for the proposed business, financial forecasts and letters of intent from potential trading partners. In essence you must illustrate to HMRC that you will be able to commence trade as soon as registration is granted and this will be heavily scrutinised. HMRC's stand point is essentially that they will not grant registrations to a business that is likely to not be able to make use of the registration.

3) FITTED due diligence procedures and controls – You are legally obliged to have FITTED due diligence controls instilled within your operating practices as a legal requirement under Notice 2002: AWRS. This however also forms part of the test applied by HMRC to assess whether they should grant registration or not. In essence you need to evidence that controls are in place and ready to be used to ensure you meet you legal obligations for FITTED due diligence as soon as registration is granted. HMRC stance is essentially that in granting the registration you gain access to a controlled activity and that they must therefore be given confidence that controls are in place to prevent this registration being abused for fraudulent activity before they can grant you AWRS registration.

We are able to assist with all elements of preparation for AWRS registration and have assisted numerous businesses of all sizes in obtaining this critical registration. If you would like to discuss your potential AWRS registration, how best to prepare and how we may be able to assist please call us today for a free 15 minute consultation on 0844 561 6852 or email us on

#AWRS #Notice2002 #Alcoholwholesalerregistrationscheme #HMRC
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PfP have released an interesting article that further illustrates the harsh treatment of small businesses by HMRC. HMRC appear to be unfairly targeting businesses with less resource to recover larger amounts of tax irrespective of whether this is fair or proportionate:

Small businesses feel penalised by “intensive” HMRC investigations

Research commissioned by HMRC showed that over half of small businesses find HMRC investigations too intensive and disruptive. Research commissioned by HMRC revealed discontent among smaller businesses around the nature of HMRC’s tax investigations.

The research showed that 52% of small businesses find HMRC tax investigations to be too intensive, and 56% said they did not believe that HMRC attempted to minimise disruptions caused by the cost, time and effort required by the inquires.

Insurance firm PfP said that smaller businesses are disproportionately affected by HMRC investigations, as they can be hugely disruptive and a massive strain on much needed resources and funds.

The research also said that 48% of businesses do not believe HMRC’s penalties are fairly distributed, and that smaller businesses are unfairly targeted.

Kevin Igoe, Managing Director at PfP, said: “Small businesses think they are getting rough treatment from HMRC and are making this clear.”

PfP said that smaller businesses are often targeted as their reduced resources mean they are less able to negotiate with tax inspectors and manage the inquiries. Furthermore, HMRC nets large amounts of extra tax from investigations into smaller businesses.

The firm said this was evidenced by the fact that the investigation units at HMRC that focus on small businesses and individuals collected an additional £16 in taxes for every £1 spent on their investigatory staff in 2016/17.

Igoe added: “Although some small businesses responded positively when asked about their impressions of HMRC’s investigations, we need to get to a point where an overwhelming majority are happy with what’s happening.”
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We know at the DDE what we're checking out this weekend! Drink with a bit of history in the pub gardens. Grade II quirky pubs
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