Illicit beer sales are on the increase, claims HMRC estimates

The loss of revenue to the UK Exchequer due to illicit beer sales increased c10% in the past year, according to the latest estimates from HM Revenue & Customs.

A new report from HMRC estimates that illicit sales increased from £500m to £550m between 2009/2010 and 2010/2011. The upper estimate of the cost is £800m (2009/2010: £700m) and the lower estimate is £300m (2009/2010: £250m).

The amount of illicit beer as a percentage of the total increased from 9% to 10%.

It comes as the Government considers plans to introduce ‘duty-paid’ stamps on beer, a measure that has been criticised by the beer and pub industry for being out of proportion and adding unnecessary burdens.

However, the British Beer & Pub Association (BBPA) has issued its concern about the estimates.

Brigid Simmonds, chief executive of BBPA, said: "While duty fraud is clearly a concern for all of us, these aren’t hard numbers, but a change in HMRC’s estimates of the problem. A ten per cent figure suggests that every beer sold through convenience stores and off licences does not pay duty, which simply cannot reflect the reality.

"The figures take no account of recent work from KPMG, which concludes that HMRC’s methodology is too weak to give a robust estimate – industry estimates suggest that three to four per cent would be much nearer the mark.

"Inaccurate estimates, and any move by HMRC towards ineffective tax stamps, should not deflect us from the real challenge, which is closer working, throughout the supply chain, to tackle fraudsters."

The HMRC report, Measuring the Tax Gaps 2012, also shows that the mid-point estimate for the value of illicit spirits sales in the UK in 2010/2011 is £230m. The proportion of sales that were illicit grew from 2% in 2008/2009, but were significantly lower than the 9% figure in 2006/2007.

Duty paid stamps on spirits were introduced in 2006.