Tax arrears and your alcohol licence – what should you do?
Arrears do not automatically cost you the licence. But tax, duty and accounting matters form part of the good-conduct requirement, and large, long-standing or blameworthy arrears can become a serious problem if the business does not put them right.
Why can tax debt affect the alcohol licence?
Under section 1-7b of the Alcohol Act, the licence holder and anyone with significant influence over the business must be of good conduct, including in relation to tax, duty and accounting legislation. The Directorate of Health's commentary on the Alcohol Act explains how the municipality is to assess such matters. This is not only about tax fraud or deliberately undeclared turnover – the municipality can also take account of taxes or duties that are owed and overdue. But arrears do not in themselves mean the good-conduct requirement has been breached.
The municipality has to look at why the arrears arose
On tax and duty matters the municipality has to make a specific assessment. Among other things it has to consider whether the payment difficulties are temporary, relatively small, or a sign of more serious and persistent problems. There is a large difference between a restaurant with a temporary cash problem that is actively putting it right, and a business that lets VAT and tax liabilities pile up over time, fails to report turnover or keeps incorrect accounts. The latter will naturally weigh far more heavily. If the business generally cannot pay tax and VAT, see also Cannot pay tax and VAT – payment plan or bankruptcy?.
How much weight can the municipality give it, and how far back?
There is no set amount in kroner at which the licence automatically goes. The municipality has to look at what kind of breach it is, how serious it is, how long it has lasted, whether it is continuing, whether the people involved can be blamed, and how the business has tried to put the situation right. The older a breach is, the more serious it normally has to be to carry much weight. Under the Alcohol Act, matters older than ten years cannot be taken into account. The Directorate of Health recommends at the same time that most weight is normally given to more recent matters, particularly from roughly the last five years. This should not be confused with the Serving Act, where the conduct period itself is five years.
Whose conduct is assessed?
It is not only the company that is assessed. The Alcohol Act covers the licence holder, anyone owning a substantial part of the business, anyone receiving a substantial part of the return, anyone with significant influence through a management position or otherwise, and anyone who indirectly controls the business in practice. There is no fixed 25% rule. Ownership of around a third can be indicative, but smaller holdings can also be enough where the ownership structure or other circumstances give the person significant influence. Nor is an ordinary board member automatically covered simply by sitting on the board – what matters is actual influence. The designated manager and deputy for the alcohol licence have their own conduct requirement. That covers the alcohol legislation and other legislation connected to its purpose. Tax, duty and accounting legislation does not form part of that particular requirement in the same way.
How does the municipality find out about the arrears?
The municipality does not have to wait for the next licence application. The police and the tax and duty authorities have duties under the Alcohol Act to provide and report information in matters that may affect the licence. Information about overdue tax, unpaid VAT, missing reporting and serious accounting failures can therefore reach the municipality.
What should the business do when arrears arise?
The most important thing is to get control of both the reporting and the payment position. A practical order is to bring the accounts up to date, check that VAT returns, a-meldinger and other reporting have been filed correctly, check that Skatteetaten's claims actually rest on the right figures, get an overview of everything overdue, pay it if the business can, consider a payment plan if paying in full is not possible, and draw up a realistic cash flow budget. Skatteetaten has its own arrangement for payment plans for tax and duty liabilities where the conditions are met. A payment plan does not automatically save the licence – it does not bind the municipality's conduct assessment. But a plan that has been granted and kept to, up-to-date accounts and documentation that the problem is temporary can all be relevant when the municipality considers the cause of the arrears and how they were handled.
Do you have to tell the municipality about every arrear?
There is no general requirement for a licence holder to notify the municipality of its own accord every time a tax or VAT bill is late. Where the municipality has already been in touch or sent advance notice, though, answer quickly and thoroughly. For larger or long-standing arrears where the licence really could be affected, communication with the licensing authority should be considered specifically, with your accountant and if necessary a lawyer.
What happens if the municipality considers revoking the licence?
Revocation is an individual administrative decision. Before the municipality decides, the licence holder must as a general rule receive advance notice and a reasonable time to comment. The business can put forward up-to-date accounts, documentation of what caused the arrears, receipts for payments, a payment plan, a cash flow budget and evidence that the reporting is now correct. The municipality has to make sure the case is sufficiently well informed before it decides.
Can you appeal if the licence is revoked?
Yes. The appeal deadline is three weeks, and the appeal goes to the municipality first. If the municipality does not change its decision, the case goes on to the county governor (Statsforvalteren). The county governor can review the lawfulness, the procedure, the facts and whether the municipality took irrelevant considerations into account. It cannot freely replace the municipality's alcohol-policy discretion with its own. Serving alcohol cannot necessarily continue while you appeal. The business can ask for the decision to be suspended under section 42 of the Public Administration Act. If that is granted, the decision is put on hold while the appeal is considered. In an urgent case where the business risks having to stop serving, consider a lawyer quickly.
This is not the same as the points system
Conduct problems have to be kept separate from the ordinary points system for breaches of the alcohol rules. If a licence holder accumulates twelve points within two years, the standard response is revocation for one week. Whether the good-conduct requirement is still met is a different kind of assessment. Remember the serving licence too. Restaurants and bars normally need both a serving licence and an alcohol licence. The Serving Act has its own conduct requirement covering tax, duty and accounting legislation, and there matters older than five years cannot be taken into account. If the venue loses its serving licence, it cannot as a general rule carry on exercising the alcohol licence as before.
Read more
This is general guidance, not advice on your specific case. Deadlines, rates and amounts change – always check the current rules, or get in touch with us.
Is it urgent?
We can work out what actually has to be done, what documentation exists and how quickly it can be sorted. You can also reach us in the evenings and at weekends.
GET IN TOUCH