A worrying new question has emerged for excise warehouse keepers. What happens when a company changes hands? A revised policy statement from HMRC seems to suggest that neither an excise warehousekeeper authorisation, nor Registered Owner status, can be transferred from one business to another.
The main issue is that an existing business must be bought before the new owners can apply for or obtain authorisation or approval. Not only is this a convoluted legal and procedural process, but it would interrupt the duty-suspension privileges of tax warehousekeepers, making such transactions very high risk for both the seller and purchaser of a duty-suspended facility.
Here at UKWA we are fortunate to have the support of excise expert Alan Powell, who has reported several cases relating to what he describes as “HMRC’s impossible policy”, which, he argues, represents an unjustified material interference with the workings of the entire excise industry.
Part of the problem, according to Alan, is that HMRC’s policy on selling or acquiring an excise business was introduced without consultation in December last year. Seen as a serious risk by many of our members, it could affect all excise businesses and represents a significant barrier to the sale, purchase or inheritance of any excise approved company, many of which are multi-generational with a rich history behind them.
HMRC’s policy statement is neither reasonable nor practicable. For example, it prevents the purchase by approved persons of premises, or parts of a business such as a distillery, a warehouse with maturing stocks, or a brand and its associated brewing premises. All production would need to cease, all stored goods would need to move elsewhere pending the re-approval by HMRC before they can return – if they are even capable of moving.
Further, the VAT rules for a VAT-free transfer of a going concern (TOGC) require the buyer to continue the business or be capable of doing so, but if HMRC refuse the excise licence, then the TOGC test would fail and the seller would be liable for VAT, interest and penalties on the full value of the assets transferred. It is hard to believe that anybody would buy or sell a business in such circumstances.
Of course, HMRC may argue that they would use discretion to apply a pragmatic approach to the sale and purchase of on-going businesses. But the problem for UKWA Members operating bonded warehouses is that the current text of the policy remains unclear, imprecise and impractical.
As UKWA has repeatedly shown, warehousing is key to a range of government policies, including levelling up the economy, introducing freeports and achieving net zero. Accordingly, as well as responding to HMRC’s current consultation on WOWGR (Warehousekeepers and Owners of Warehoused Goods Regulations 1999), we are recommending other Departments pay attention to HMRC’s propensity to create unnecessary barriers to trade, since it potentially undermines other policy objectives too.