Duty hikes, supermarket price wars, and greed are fuelling the trade in illicit alcohol and tobacco. Peter Cripps is the first journalist to join HMRC as a new crackdown hots up
A police station, inner-city London. A multi-agency taskforce is preparing to swoop on London's black market traders.
The raids will take us across the capital. Our quarry is a slice of the £4bn in contraband tobacco and alcohol that flood our streets each year.
Our remit doesn't stop at cigs and booze. So caught up is duty fraud in the criminal underworld that the officers expect to find drugs, illegal immigrants and tax evaders, too.
So we're well prepared: there are 20 officials from the police, Customs, the Borders Agency and the Department for Work and Pensions in our team.
Half an hour on, our convoy stops at a rundown estate a stone's throw from QPR's ground. At the foot of a tatty block of flats is an off-licence. 'Two bottles of wine for £5' reads a sign in the window, 'special offer for White City'.
The special offer isn't only for White City. Across Britain people are making a killing. HMRC puts the cost of contraband tobacco to the Treasury as high as £3.2bn a year.
Alcohol accounts for £1bn in lost revenue. Wholesaler Bestway claims it's had 40% of its alcohol sales wiped out by duty fraud in the past two years. But HMRC is stepping up its efforts to stamp out this illicit trade.
The agency has set up 12 regional taskforces, and The Grocer is the first publication to gain access to the latest phase of the fight. But is this, as FWD has claimed, just "tinkering around the edges", or can such operations have an effect on the entire criminal chain?
"These raids and blitz operations are a weekly occurrence the 12 regional teams are fully trained and starting to have a real impact," says Stuart Crookshank, HMRC assistant director, specialist investigations and mastermind of today's operation.
Earlier efforts to stem the tide of non-duty-paid spirits have already paid dividends. In 2005 duty stamps were introduced to denote spirits legally saleable in the UK, supposedly making it easier to root out contraband. An absence of duty stamps makes identifying non-duty-paid beer and wine an even taller order. But Crookshank suggests these drinks are less of a problem than tobacco as they offer less of a return.
Fraudsters employ cunning ploys. The simplest is smuggling contraband and selling it on the black market. 'Accompanying documents' to prove goods can be legally brought into the country are widely believed to be reused illegally by importers. A new electronic system was brought in last month to track the flow of drink and tobacco coming into the country and to prevent the illegal re-use of accompanying documents.
But not all illegal alcohol in this country is produced abroad. British drinks companies pay duty on their lines unless they are for export. However, a steady stream of 'under bond' alcohol, says HMRC, never makes it abroad and is sold illegally here. Even traders with duty-paid drink on their hands have their tricks, claiming back tax on alcohol they falsely claim is destined for export, they say.
The impetus for beating the fraudsters runs deeper than the economic. Counterfeit alcohol can be poisonous; drinkers risk blindness or death. Fake cigarettes have been found to contain excrement and cleaning chemicals.
Back at White City, bargain wine 'Del Gaudio Suave' has led the team to scour the off-licence. "In North London and across the south east we're seeing a lot of cheap Italian wine," says HMRC team leader Matt Parr. "They say they buy eight bottles for £8 and sell it for two or even three bottles for a fiver, which is suspicious straight away."
Closer inspection of more familiar brands Smirnoff, Grant's, Glen's casts doubt on their legitimacy, too. Some bottles are unstamped while others bear crude and obvious counterfeits. Other stamps are exposed as fakes using UV torches.
More than an hour after we entered the 500 sq ft premises, and following a search of the shopkeeper's Mercedes out the front, the team leaves with 111 litres of illegal spirits and 88.5 litres of wine. The shop owner says he was ignorant he had done anything wrong, claiming to have bought the contraband from a man in a white van.
The next stop is a west London market. Officers are arresting a suspected drug dealer and rounding up workers to check their eligibility to work in the UK as we arrive. But our destination is a greasy spoon HMRC visited in the past.
Last time officers found a haul of contraband cigarettes hidden in oven hoods in the kitchen. This time frozen packets of cigarettes and rolling tobacco are unearthed from a freezer. Yet more are found in a crisps box. The total haul is several cartons of cigarettes and a dozen boxes of rolling tobacco. Not one has a UK duty stamp.
Another team doing the rounds in London has hauled 129 litres of non-duty-paid spirits and 74 litres of wine from an off-licence.
But what of the people caught selling these illegal goods? The off-licence owner, who claimed ignorance of any wrongdoing, lost several hundreds of pounds in stock and more than an hour of trading time, and was not prosecuted.
No arrests are made at the cafe, either, HMRC deciding the man present, who speaks little English, is not behind the illegal tobacco on the premises. There are bigger fish to fry.
And it is a perceived failure to bring the big fish to account that has sparked criticism of HMRC. FWD CEO James Bielby has warned wholesalers face even stiffer competition from alcohol and tobacco that has avoided the taxman as the multiples ramp up their beer promotions for the World Cup.
"They need to make big seizures at wholesale level and concentrate on the bigger deals. We have passed on hundreds of pieces of information about wholesalers selling at prices too good to be true, and we hope they act on them. We will keep putting pressure on HMRC because this is such a massive problem for our industry."
Crookshank says they are chasing the big fish, too. Granted; no arrests have been made today, but those we have visited have been told that next time they face prosecution.
Today's seizures have also provided valuable intelligence on the products that are getting through that net.
"They know they are on our radar," says Crookshank. "We have to get a balance between our local blitz operations and going upstream to where the bigger money and organised crime are."
And what of the White City wine? It will go into pigswill.
A police station, inner-city London. A multi-agency taskforce is preparing to swoop on London's black market traders.
The raids will take us across the capital. Our quarry is a slice of the £4bn in contraband tobacco and alcohol that flood our streets each year.
Our remit doesn't stop at cigs and booze. So caught up is duty fraud in the criminal underworld that the officers expect to find drugs, illegal immigrants and tax evaders, too.
So we're well prepared: there are 20 officials from the police, Customs, the Borders Agency and the Department for Work and Pensions in our team.
Half an hour on, our convoy stops at a rundown estate a stone's throw from QPR's ground. At the foot of a tatty block of flats is an off-licence. 'Two bottles of wine for £5' reads a sign in the window, 'special offer for White City'.
The special offer isn't only for White City. Across Britain people are making a killing. HMRC puts the cost of contraband tobacco to the Treasury as high as £3.2bn a year.
Alcohol accounts for £1bn in lost revenue. Wholesaler Bestway claims it's had 40% of its alcohol sales wiped out by duty fraud in the past two years. But HMRC is stepping up its efforts to stamp out this illicit trade.
The agency has set up 12 regional taskforces, and The Grocer is the first publication to gain access to the latest phase of the fight. But is this, as FWD has claimed, just "tinkering around the edges", or can such operations have an effect on the entire criminal chain?
"These raids and blitz operations are a weekly occurrence the 12 regional teams are fully trained and starting to have a real impact," says Stuart Crookshank, HMRC assistant director, specialist investigations and mastermind of today's operation.
Earlier efforts to stem the tide of non-duty-paid spirits have already paid dividends. In 2005 duty stamps were introduced to denote spirits legally saleable in the UK, supposedly making it easier to root out contraband. An absence of duty stamps makes identifying non-duty-paid beer and wine an even taller order. But Crookshank suggests these drinks are less of a problem than tobacco as they offer less of a return.
Fraudsters employ cunning ploys. The simplest is smuggling contraband and selling it on the black market. 'Accompanying documents' to prove goods can be legally brought into the country are widely believed to be reused illegally by importers. A new electronic system was brought in last month to track the flow of drink and tobacco coming into the country and to prevent the illegal re-use of accompanying documents.
But not all illegal alcohol in this country is produced abroad. British drinks companies pay duty on their lines unless they are for export. However, a steady stream of 'under bond' alcohol, says HMRC, never makes it abroad and is sold illegally here. Even traders with duty-paid drink on their hands have their tricks, claiming back tax on alcohol they falsely claim is destined for export, they say.
The impetus for beating the fraudsters runs deeper than the economic. Counterfeit alcohol can be poisonous; drinkers risk blindness or death. Fake cigarettes have been found to contain excrement and cleaning chemicals.
Back at White City, bargain wine 'Del Gaudio Suave' has led the team to scour the off-licence. "In North London and across the south east we're seeing a lot of cheap Italian wine," says HMRC team leader Matt Parr. "They say they buy eight bottles for £8 and sell it for two or even three bottles for a fiver, which is suspicious straight away."
Closer inspection of more familiar brands Smirnoff, Grant's, Glen's casts doubt on their legitimacy, too. Some bottles are unstamped while others bear crude and obvious counterfeits. Other stamps are exposed as fakes using UV torches.
More than an hour after we entered the 500 sq ft premises, and following a search of the shopkeeper's Mercedes out the front, the team leaves with 111 litres of illegal spirits and 88.5 litres of wine. The shop owner says he was ignorant he had done anything wrong, claiming to have bought the contraband from a man in a white van.
The next stop is a west London market. Officers are arresting a suspected drug dealer and rounding up workers to check their eligibility to work in the UK as we arrive. But our destination is a greasy spoon HMRC visited in the past.
Last time officers found a haul of contraband cigarettes hidden in oven hoods in the kitchen. This time frozen packets of cigarettes and rolling tobacco are unearthed from a freezer. Yet more are found in a crisps box. The total haul is several cartons of cigarettes and a dozen boxes of rolling tobacco. Not one has a UK duty stamp.
Another team doing the rounds in London has hauled 129 litres of non-duty-paid spirits and 74 litres of wine from an off-licence.
But what of the people caught selling these illegal goods? The off-licence owner, who claimed ignorance of any wrongdoing, lost several hundreds of pounds in stock and more than an hour of trading time, and was not prosecuted.
No arrests are made at the cafe, either, HMRC deciding the man present, who speaks little English, is not behind the illegal tobacco on the premises. There are bigger fish to fry.
And it is a perceived failure to bring the big fish to account that has sparked criticism of HMRC. FWD CEO James Bielby has warned wholesalers face even stiffer competition from alcohol and tobacco that has avoided the taxman as the multiples ramp up their beer promotions for the World Cup.
"They need to make big seizures at wholesale level and concentrate on the bigger deals. We have passed on hundreds of pieces of information about wholesalers selling at prices too good to be true, and we hope they act on them. We will keep putting pressure on HMRC because this is such a massive problem for our industry."
Crookshank says they are chasing the big fish, too. Granted; no arrests have been made today, but those we have visited have been told that next time they face prosecution.
Today's seizures have also provided valuable intelligence on the products that are getting through that net.
"They know they are on our radar," says Crookshank. "We have to get a balance between our local blitz operations and going upstream to where the bigger money and organised crime are."
And what of the White City wine? It will go into pigswill.
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