Duty fraud on beer and spirits has shot up by 46% to more than £1.2 billion, a report by HM Revenue & Customs has revealed.

The illicit spirits trade was worth as much as £440 million, or 11% of the market, in 2009-10, while duty fraud on beer was worth up to £800 million, or 14% of the market, it said. 

The report measured the gap between the tax Customs should have received and what it actually collected.

The estimates are significantly higher than the £850 million loss Customs calculated for the previous year, and do not include income lost to wine duty fraud, which is believed to be on the increase.

A Customs spokesman said the figures are the highest estimates of duty fraud, and noted that they pre-date new measures to combat duty fraud.

He said: “Fraud in beer is carried out by highly organised criminal gangs. HMRC implemented a strategy to tackle this fraud in April 2010 and we are already beginning to see positive impacts from that. In its first year, the strategy has almost doubled the impact we have had on alcohol fraud.”

The Federation of Wholesale Distributors called for duty stamps to be introduced on bottles and cans of beer as they have been on spirits. Chief executive James Bielby said: “We always recommend that retailers buy their alcohol products from known and trusted sources, and duty stamps on beer would be a clear signal that they are operating within the law when sourcing stock. Small businesses which put non-duty-paid stock on their shelves, even unintentionally, could find themselves facing closure.

“The [absence of] stamps would also indicate to HMRC’s inspectors that UK duty had not been paid on products, which would make it easier to track the illegal supply chain, and reassure the public that they are buying a legitimate product.”

But the British Beer & Pub Association was sceptical about the figures.

Communications manager Neil Williams said: “The HMRC’s analysis of the beer tax gap is based on a survey of how much consumers say they spend on beer and comparing this to duty receipts – this is unlikely to provide an accurate basis for measuring any trend. 

“In any event, the figures pre-date the new resources made available to tackle fraud, which should deliver results. 

“But we also need to remember a key driver of the tax gap – the eye-watering rates of beer duty in Britain.”

There was better news for the tobacco trade, which saw lost revenues drop from £1.4 billion to £1.1 billion in 2009-10, while rolling tobacco remained stable at £600 million – although Customs believes it still loses nearly half the revenue it should collect from rolling tobacco. 

Tobacco Manufacturers’ Association chief executive Christopher Ogden said: “This is still a very serious issue. These figures refer to 2009-10, and since then tobacco taxation has increased markedly, leading to the price of cigarettes rising by as much as £1 per 20. 

“High tobacco taxes are an acknowledged driver of illegal trade and there is widespread concern that the increases imposed over the past 18 months will lead to a rise in criminal activity.”