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This publication is available at https://www.gov.uk/government/publications/excise-notice-39-spirits-production-in-the-uk/excise-notice-39-spirits-production-in-the-uk
This notice cancels and replaces Notice 39 (June 2017).
This notice explains the:
- licensing of distillers, rectifiers and compounders
- procedure of approving distiller’s plant and production process
- warehousing of spirits
1.2 Recent changes
Paragraph 14.1 Overview updated to clarify when a licence isn’t needed by spirits rectifiers and compounders.
1.3 The relevant law
You’ll find the main legal provisions relating to the production of spirits and spirits rectifiers and compounders in the:
- Alcoholic Liquor Duties Act 1979
- Spirits Regulations 1991
- Spirits (Amendment) Regulations 2013
The following legislation is also relevant to spirits producers and spirits rectifiers and compounders:
- the Customs and Excise Management Act 1979
- the Revenue Traders (Accounts and Records) Regulations 1992
The following product specific legislation may also apply where relevant:
- the Scotch Whisky Regulations 2009
- technical files for Scotch whisky, Irish whiskey, Irish cream, Irish poteen and Somerset cider brandy
Sometimes the law says that detailed rules on a particular matter may be set out in a notice published by HM Revenue and Customs (HMRC). Parts of paragraphs 3.3, 3.5, 3.6, 7.1 and 9.1 have legal force. A highlighted box shows text with legal effect.
You may be penalised if you fail to comply with the law.
1.4 Other relevant notices
Other notices referred to in this notice are:
- Excise Notice 196: excise goods - registration and approval of warehousekeepers, warehouse premises, owners of goods and registered consignors
- Excise Notice 197: receipt into and removal from an excise warehouse of excise goods
- Excise Notice 207: Excise Duty drawback
- Excise Notice 2002: Alcohol Wholesaler Registration Scheme
- Excise Notice DS5: UK Duty Stamps Scheme
1.5 Methods of spirits production covered by this notice
The same general requirements and conditions will apply at all spirits production premises, whether spirits production comes:
- from fermented cereals
- from fermented molasses
- by ‘cracking’ ethylene gas
- by any other process
1.6 Aspects of spirits production covered by this notice
This notice mainly focuses on the end-to-end process of spirits production, from the application process to production and warehousing, and payment of duty. You can find additional sections towards the end of the notice on other spirits-related issues.
Use the table to find the paragraph you’re interested in.
|Stage of the process||Subject||Paragraph|
|Application||The application process||2|
|Once all the approvals are granted||Changes to details, production and accounts of spirits||3, 4, 5, 6, 7, 8 and 9|
|Paying Excise Duty||11|
|Certificate of age and origin||13|
|Rectifiers and compounders||14|
|Alcohol Wholesalers Registration Scheme and due diligence||15 and 16|
You must exercise control over all aspects of your spirits production including:
- the physical security of your premises, plant or vessels
- the security of spirits produced
- accurately accounting for the spirits produced
- rendering returns on time
- examining losses and identifying their cause
- investigating any irregularity at your premises
- implementing and monitoring reasonable and effective measures to prevent any loss of dutiable spirits
You should make sure your procedures and records for production and stock control take these aspects into account.
2. The application process - licences and approvals
2.1 New distillers
As a new distiller, there can be a lot to consider before production begins. The table below provides an overview of the steps you need to take before you can start production. Detailed guidance follows on what you need to do, how and when to do it. Please note, this describes the route of a successful application.
|Preparation||Prepare a business plan, see paragraph 2.3||Identify production and warehouse premises: if not yet purchased, you’ll need evidence that you’re planning their purchase|
|1. Apply for or obtain a distiller’s licence (DLA1), paragraph 2.5
||You may need to apply for a letter of indication of likely approval to satisfy bank lending requirements, for example, paragraph 2.4|
|2. Apply for or obtain an approval of plant and process, paragraph 2.6||You may need to apply for a letter of indication of likely approval to satisfy bank lending requirements, for example, paragraph 2.4|
|Application (at least 45 days before production begins||3. Gain approval for a warehouse to hold spirits (EX69) and gain authorisation as a warehousekeeper (EX61), paragraph 10||See Excise Notice 196 for information on the requirements to provide a financial guarantee for the warehousing of produced spirits, and registration as owner of goods in a third party warehouse, depending on your circumstances|
|Where appropriate, register for the Alcohol Wholesaler Registration Scheme, (Excise Notice 2002)||If you plan to sell alcohol to other businesses|
|Where appropriate, apply for verification under the Spirit Drink Verification scheme, paragraph 12||If you’ll be producing Scotch whisky, Irish whiskey, cream or poteen or Somerset cider brandy|
When all licences and approvals have been received by the applicant, production can begin.
2.2 Guide to the process
The following is a detailed guide to the process of starting as a distiller. Any potential producers of Scotch whisky, Irish whiskey, Irish cream, Irish poteen or Somerset cider brandy should take note of paragraph 2.8 which explains how to become a verified producer of a UK spirit drink with a protected GI.
Before applying to HMRC
Prepare a business plan. This can help assure us of your suitability for approval, particularly if you are a new distiller without previous or existing licences. In some instances, a business plan is a requirement of the application. For more information on when a business plan is necessary, and what it should include, see paragraph 2.3.
Identify production and warehouse premises. If you don’t own these, you’ll need to provide evidence to show you are planning to purchase them with any application you make.
Note that any variations between initial proposals and final plans could lead to a delay or rejection of your application.
At least 45 days before you start to produce spirits
Alongside your DLA1 form, provide us with the required information to seek approval of plant and process, see paragraph 2.6.
We can issue a letter of indication to help you in securing finance to complete your plans where we’re satisfied from the details in your application that you are likely to succeed. For more information, see paragraph 2.4.
We’ll only issue the final distiller’s licence when we’re satisfied that all necessary requirements are in place, including premises security.
- EX61 to apply for authorisation as a warehousekeeper, see paragraph 10.2
- EX69 to apply for approval to operate an excise warehouse, see paragraph 10.2
To apply for any financial guarantees required for a warehouse, see paragraph 10.2.
If you wish to store spirits in a third-party warehouse:
- apply for registration as an owner of warehoused goods using form EX60 Excise warehousing: application to be an owner of duty-suspended goods held in excise warehouses
- see also Excise Notice 196: excise goods - registration and approval of warehousekeepers, warehouse premises, owners of goods and registered consignors for information
Please note that 45 working days is the standard time taken to process applications. The actual time taken to process applications depends on the circumstances of each individual applicant. For example, if you’ve not provided all the required information or the application refers to premises that require building work, the time taken to process and approve the application may be longer than 45 days.
Once you’ve received your:
- distiller’s licence
- approval of plant and process
- proper warehouse and warehousekeeper approvals
you’re ready to begin to produce spirits.
After production begins
Excise Duty becomes chargeable when spirits have been produced and will not normally be payable until the spirits are taken out of the warehouse. For information on payment procedures, see Excise Notice 197. Please note we may ask you to pay duty on any losses which are not due to natural wastage or for which there isn’t an acceptable explanation.
You must complete form W21 Alcohol duties: Quarterly Distillery Return - declaration of materials used and spirits produced return quarterly for each class of spirit you produce, see paragraph 6.3.
2.3 The business plan
For the manufacture of spirits using a still with a capacity of less than 18 hectolitres (see paragraph 2.10) we’ll always require a business plan to assure us that the production is commercial in nature.
In other cases, a business plan can also help assure us of your suitability for approval, particularly if you are a new distiller without previous or existing licences.
There’s no checklist of what we would expect to see within a business plan as each case will be different. However, we’re expecting to see satisfactory evidence which shows that it’s likely to be a viable business. Information on costings, suppliers, customer base, market research and profit forecasts will all build the picture we’re looking for of a well-considered and potentially successful business. We’ll ask for more information where plans lack enough detail for us to make a decision.
For help and advice see Write a business plan.
2.4 Distiller’s licence - letter of indication
Where a business is looking to secure necessary finance (for example, to purchase premises), financial institutions have in some cases, asked the applicant for an indication that a distiller’s licence will be granted by HMRC.
Providing we’re content with your plans, we can, on request, issue a letter confirming we’re likely to approve your application based on the information you’ve provided. Before issuing a letter, we expect to see comprehensive business plans and detailed information of the proposed plant and process, see paragraph 2.6.
We’ll not issue a letter of indication if we’re not satisfied that you’ve demonstrated a genuine business purpose or if we’ve concerns about other aspects of your plan, for example, the security of alcohol once produced. We’ll not issue the final licence if there are changes, or deviations from the original plans.
Once you’ve completed the building or other preparation work that was not ready at the time of application, you should contact us to arrange for final approval.
We’ll close your application if we’ve not heard from you in a reasonable time from issuing the letter of indication, and you’ll need to start the process again if you wish to proceed. It’s your responsibility to contact us.
2.5 Applying for a distiller’s licence
Please send your completed form DLA1 to:
HM Revenue and Customs
Excise Processing Teams
You must make the application in the name of the person manufacturing the spirits. If you, as a manufacturer, are not also the owner of the premises you can obtain a licence in joint names.
If you intend to produce spirits at more than one set of premises, you must complete a separate application and get a licence for each.
We’ll not issue a distiller’s licence to produce spirits for your own use.
The production of spirits by a person who isn’t licensed is an offence for which there are financial penalties. You can avoid a penalty by applying for a licence at the correct time. If you’ve not applied for a licence, you must notify us as soon as possible. We may be able to reduce the penalty. You can find information on penalties.
2.6 Approval of plant and process
At the same time as you apply for a distiller’s licence, you must apply for approval of the plant and process you intend to use.
Please attach the following information, on a separate sheet, with your application:
- address of proposed distillery
- plan of premises
- full description of the manufacturing process, including size of still
- the number and description of the vessels used in the manufacturing process, their capacity and use of all plant
- your intended source of raw materials and the range of products you intend to produce
- where the product will be stored, including security arrangements (see paragraph 5 for more detail on security)
If you’ve asked for a letter of indication (see paragraph 2.4) we still require you to apply for approval of plant and process in as much detail as possible. We’ll refuse your application if you’re not able to provide enough detail.
Our approval of the plant and processes at each distillery may include conditions which we consider are necessary to protect the revenue. These conditions will be set out in our letter of approval and we’ll review them from time to time. We may add to them or vary them if we need to.
2.7 Stills smaller than 18 hectolitres
We may refuse to issue a licence where the largest still to be used has a capacity below 18 hectolitres. However, we’ll consider applications for a distiller’s licence providing you use the still for the commercial production of spirits. You must submit a business plan to support your application for commercial production, see paragraph 2.3.
2.8 Producing spirits with protected GI
If you intend to produce a UK spirit drink with a protected GI, you must apply for verification under HMRC’s Spirit Drinks Verification Scheme in addition to the process described above for obtaining a distiller’s licence and approval of plant and process. See Spirit drinks with a protected Geographical Indication.
The current spirit drinks with protected GI status in the UK are Scotch whisky, Irish whiskey, cream and poteen, and Somerset cider brandy.
You can find the technical files for each within the technical guidance for each product.
2.9 How HMRC will process your application
We’ll check your application to see if it has been completed correctly and in full. If it’s incomplete, or is in any way unclear, we’ll ask you to supply the missing detail or clarify certain information. Until we’re satisfied with the changes, we won’t be able to process your application.
We will then perform checks to satisfy ourselves that the information you’ve given is full and accurate and that you are suitable for approval. These will involve checks of our records to find out whether you’ve been compliant with your tax obligations and, in the case of a corporate body, are likely to include checks with Companies House. We may include checks with other government departments and agencies, and with credit reference agencies. We’ll also check the criminal records of applicants for any relevant convictions.
We may also decide that we want to visit your premises to look at your trading activities. We’ll ask you for details about (but not limited to) your suppliers, customers, business plans, accounting and stock control systems, premises and financial viability. For information on what to expect, see Compliance checks: Excise visits - CC/FS16.
We may refuse your approval if we discover that the information you’ve given to us is untrue or incomplete in any important aspect, and you could be prosecuted or liable to penalties.
If HMRC’s checks don’t provide sufficient assurance that you are suitable, we may ask you for more information. Your application will not be processed further until we’ve received and verified this information.
2.10 The fit and proper test
We’ll only grant approval to applicants who can demonstrate that they are fit and proper to carry on a controlled activity. This means HMRC must be satisfied the business is genuine and that all persons with an important role or interest in it are law abiding, responsible, and don’t pose any significant threat in terms of potential revenue non-compliance or fraud.
HMRC will assess all applicants (not just the legal entity of the business but all partners, directors and other key persons) against a number of ‘fit and proper’ criteria to establish:
- there’s no evidence of illicit trading indicating the business is a serious threat to the revenue, or that key persons involved in the business have been previously involved in significant revenue non-compliance, or fraud, either within excise or other regimes - some examples of evidence we would consider are:
- assessments for duty-unpaid stock or for other under-declarations of tax that suggest there’s a significant risk associated with the business trading in duty-unpaid alcohol
- seizures of duty-unpaid products
- penalties for wrongdoing or other civil penalties which suggest a business doesn’t have a responsible outlook on its tax obligations
- trading with unapproved persons
- previous occasions where approvals have been revoked or refused for spirits production or other regimes (including liquor licensing)
- previous confiscation orders and recovery proceedings under the Proceeds of Crime Act 2002
- key persons have been disqualified as a director under company law
- there are no connections between the businesses, or key persons involved in the business, with other known non-compliant or fraudulent businesses
- key persons involved in the business have no criminal convictions which are relevant for example, offences involving any dishonesty or links to organised criminal activity - we will normally disregard convictions that are spent provided there are no wider indications that the person in question continues to pose a serious threat to the revenue (an ‘unspent’ conviction is one that has not expired under the terms of the Rehabilitation of Offenders Act 1974)
- the application is accurate and complete and there has been no attempt to deceive HMRC
- there have not been persistent or negligent failures to comply with any HMRC record-keeping requirements, for example poor record keeping in spite of warnings or absence of key business records
- the applicant, or key persons in the business, have not previously attempted to avoid being approved and traded unapproved
- the business has provided sufficient evidence of its commercial viability and credibility - HMRC won’t approve applicants where they find that they can’t substantiate that there’s a genuine plan to legitimately trade from the proposed date of approval
- there are no outstanding, unmanaged debts to HMRC or a history of duty or VAT not being paid on time
- the business has in place satisfactory due diligence procedures covering its dealings with customers and suppliers to protect it from trading in illicit supply-chains, see paragraph 16 for more information about due diligence
The list above isn’t exhaustive. HMRC may refuse to approve you for reasons other than those listed, if they have justifiable concerns about your suitability to be approved.
3. Changes to your address, records and accounts
3.1 Amending or changing details of a distiller’s licence or plant and process
You must tell the Excise Processing Teams (see address in paragraph 2.5) if you change your business address. We’ll then issue you with an updated licence. You must also tell us if:
- there are any significant changes to the information on the licence, for example, changes to the legal entity or directors of the company)
- you wish to make significant changes to your approved plant and process (for example, you want to produce a new category of spirits or install a new still)
- you cease trading
You don’t need to tell us about minor changes such as repairs to pipes - note these in your business records instead.
3.2 Revoking a licence, withdrawal of plant and process approval
We may revoke your distiller’s licence if you cease to manufacture spirits.
We may withdraw, vary or add conditions to approval of plant and process with reasonable cause.
3.3 Keeping records and accounts
For information on record keeping, please see Excise Notice 206: revenue traders’ records.
The following requirement has the force of law and is made under regulation 6 of the Revenue Traders (Account and Records) Regulations 1992.
You must keep records of all your spirit production. This includes information on processes and operations such as:
- distillations, including the start and finish of each distillation period and any process or stage of the process in the manufacture of spirits
- deliveries to warehouse
Your normal business records should be enough, but we may ask you to modify them if needed.
3.4 Format of records and accounts
There’s no prescribed format and records may be electronic or written - but they must be:
- accurate and kept up-to-date
- readily accessible to us
- kept for at least 6 years from the date of the last entry - if this causes you storage problems, involves you in undue expense or causes you other difficulties, contact HMRC
Your records must be available for inspection at all reasonable times.
3.5 Other records to keep
The following requirement has the force of law and is made under regulation 6 of the Revenue Traders (Accounts and Records) Regulations 1992.
You must keep all records and documents relating to:
- yeast slurry
In addition, we may also wish to look at:
- profit and loss and trading statements
- management accounts and reports
- balance sheets
- internal and external auditors’ reports
- any record maintained for a business purpose
We’re aware that much of the information we have access to is confidential and we’ll take great care to respect your confidentiality.
3.6 Recording breakdowns or accidents
The following requirement has the force of law and is made under regulation 6 of the Revenue Traders (Account and Records) Regulations 1992.
Any incidents which affect operations, for example, a breakdown of plant, must be recorded accurately in your business records.
4. Duty stamps
Producers and bottlers of spirits destined for the UK market should be aware of the requirements for the duty stamping of retail containers. Please see Excise Notice DS5 for information on this.
5. Security and construction of premises and plant
5.1 Security responsibilities
You are responsible for the security of the spirit until the duty is paid.
We’ll check to make sure your security systems protect the revenue. You must pay duty on any losses you can’t explain.
5.2 Ensuring adequate security
The list gives some ideas of what we would normally expect.
|Area||Security must include||Regularly demonstrated by|
|Distillery site||Perimeter and building security which deters casual entry and identifies signs of forced entry||Security reviews|
|Still room and distiller’s warehouse||Regular checks of vessels and plant and have restricted access||Management checks to ensure any lapses in security are put right|
|Vessels and plant||Measures to secure all vessel openings are locked or sealed and that signs of tampering or pilferage don’t go unnoticed||Security reviews and management checks|
|Technology of a high standard which controls access to all areas and vessels on the site|
5.3 Requirements for individual items of plant
We expect all plant to be:
- readily identifiable
- with the exception of working stills, capable of being opened as required for our inspection
and that all:
- wash backs
- feints receivers
- spirit receivers
are gauged and calibrated, with calibration tables readily available.
5.4 Marking plant and vessels
There’s no requirement to mark particular items, however we expect the use of plant and vessels to be identifiable in your business records.
5.5 Making alterations, repairs or carrying out maintenance
You don’t need to inform us if you carry out maintenance or repairs or make minor alterations.
You’ll only need to inform us directly if you wish to make significant changes to your approved processes or schedule of plant (see paragraph 3.1).
6. Manufacturing operations
6.1 Distillation periods
These are accounting periods for the manufacture of spirits. You must carry out all manufacturing in these periods. A period is usually between a week and a month. If you need a longer period you should contact our Helpline. You must specify the start and finish dates of each period in your records. If you manufacture more than one class of spirits (see paragraph 6.2) you must specify separate periods for each class of spirit. These periods may run simultaneously.
Every distillation period should be clearly identifiable in your business records.
Until you’ve taken separate accounts, you mustn’t mix spirits produced in different periods.
6.2 The ‘classes of spirits’
On form W21 Alcohol duties: Quarterly Distillery Return - declaration of materials used and spirits produced there are 8 categories listed:
- malt spirits
- grain spirits
- neutral spirits of agricultural origin
- neutral spirits of non-agricultural origin
- spirits produced from beer
- spirits produced from wine or made-wine
- spirits produced from cider or perry
6.3 Submitting a production return
You must complete a quarterly return, form W21 Quarterly Distillery Return - declaration of materials used and spirits produced at the end of March, June, September and December. You’ll need to complete a separate return for each class of spirits you produce. The form W21 details how to complete the return itself.
We give each distillery a unique 5-digit identifying number. We’ll notify you of your number and you should use this on your quarterly return.
If you manufacture more than one class of spirits we’ll view this as more than one distillery. We’ll allocate a unique number for each class of spirits which you produce, for example you’ll receive one number for malt spirits and another for grain spirits if you produce both. You must complete your quarterly return (with the correct identifying number) and submit it to the address on the form within 14 days of the end of the calendar quarter.
6.4 Submitting a production return when no spirits have been produced
Even if you’ve not produced spirits in the quarter concerned you must still make a return.
6.5 Signing the return
Returns must be signed by:
- you (as the proprietor)
- a partner or director
- the company secretary
If this isn’t possible, you can allow someone to sign the return on your behalf. This must be in writing:
- in a letter of authorisation to the individual concerned
- contained in their job description
- contained in your management control manual
- in some other form contained within your business records
6.6 Accuracy of returns
You can avoid a penalty by checking that you’ve given complete and accurate information in your return. You may be liable to a penalty if your return is inaccurate and, as a result, you don’t pay enough duty or if you don’t notify us that a duty assessment we’ve sent you is too low. If you’re aware you’ve made a mistake on your return, you must notify us as soon as possible. We may be able to reduce the penalty.
If you deliberately make a false return, you may face prosecution for the offence and incur a heavy penalty.
For information on penalties, see Penalties: an overview for agents and advisers.
6.7 Restrictions on the manufacturing processes
When you manufacture spirits you must:
- use only those processes for which you’ve received approval
- comply with any conditions we specify including, if applicable, those relating to Inward Processing (IP) on imported cereals
If you wish to change an existing process, or use a new process you must contact the Excise Processing Teams - see paragraph 2.5 for details. You must have our written approval before introducing any changes to your processes.
6.8 Taking production samples
You may take duty-unpaid samples of wort, wash, feints and spirits for the purposes of:
- quality control
- strength testing
- scientific research
- other production-related analysis
However, you must:
- note the samples taken in your business records
- keep the quantity to the minimum necessary for the purpose
- label the samples as ‘sample’
- label samples of spirits, ‘duty-unpaid sample - not for sale’
- destroy samples no longer required
- keep records of their use and disposal
6.9 Duty-suspended receipt of wash and feedback for use in spirits manufacture
You may receive and store in duty suspense, wash and feedback from the premises of a:
- registered cider maker
- licensed wine producer
- registered brewer
providing your premises are covered by an excise warehouse approval (granted under section 92 of the Customs and Excise Management Act 1992 (CEMA)).
6.10 Producing spirits for experimental purposes
There’s no exemption from the requirements covering spirits production for anyone seeking to manufacture spirits for experimental purposes (for example, to use in the making of a flavoured gin before deciding whether to sell the product).
All spirits producers must have a distiller’s licence, approval of plant and process, warehousekeeper authorisation and warehouse approval as per the information earlier in this notice.
As a choice, producers may wish to consider using duty-paid plain spirit and adding flavourings separately. In order to do this, a rectifier’s or compounder’s licence will be necessary, depending on the method of manufacture used (please see paragraph 14 for more information about rectifying and compounding).
7. Measuring wort, wash, gravity and alcoholic strength
7.1 Requirements in respect of wort, wash and gravity
The following requirement has force of law and is made under regulation 6 of the Revenue Traders (Accounts and Records) Regulations 1992.
You must keep an accurate record of the quantity and gravity of wort and wash collected.
The quantity and gravity of wort and wash should be measured using recognised industry methods.
7.2 Measuring the quantity of wort, wash and gravity
You should use any industry-recognised equipment, in accordance with the manufacturer’s protocol.
7.3 Instruments for measuring alcoholic strength: criteria and use
Instruments must comply with regulation 18 of the Spirits Regulations 1991 (as amended).
Automatic densimeters must measure density according to regulation 18 of the Spirits Regulations 1991.
The 2 main criteria are:
- the density must be directly measured as ‘density in air’ not ‘density in vacuum’ and then converted to ‘density in air’
- at the time the measurement is taken, the temperature of the liquid must be 20°C - the measurement can’t be taken at a different temperature and converted to the equivalent density at 20°C
The automatic densimeter must carry out density measurements with accuracy and precision. All of the approved densimeters have been 5-decimal place machines, and when used according to the operator’s instructions, have proved to be accurate and precise enough for our purposes.
Some machines can convert the density of a liquid to the alcoholic strength from an internal look-up table. If you select this option, the machine must use the Official Laboratory Alcohol Tables to convert the density in air value to an alcoholic strength. For a copy of the table write to the Alcohol Policy Team at the address in the ‘Comments or suggestions’ section at the end of this notice.
7.4 Methods to use to measure the strength of spirits
You may use any method set in the Spirits Regulations 1991 (as amended).
8. Low wines, feints and fusel oil
8.1 Disposal and destruction of feints
Normally you’ll carry feints forward from one manufacturing period to another. If you’ve feints which you no longer wish to use in the manufacture of spirits, these should be isolated and an account taken of them, and then they should be warehoused or destroyed. Your records must show what you’ve done with the feints.
8.2 Re-distillation of low wines, feints and spirits
You may re-distil low wines, feints and spirits at any time.
Record the details of operations to re-distil low wines, feints and spirits in your business records.
8.3 Removal of fusel oil
You may remove any fusel oil which has:
- separated from the feints in the feints receiver
- collected in oil traps
You must measure the quantity and strength of the fusel oil before you dispose of it and record the details in your records. We don’t charge duty on fusel oil which is below 8.7% alcohol by volume, but you must be sure that no spirits or feints are mixed with the oil. If you find it contains more than 8.7% alcohol by volume, it must be ‘washed’ so that the alcohol content is reduced to 8.7% or below before it’s removed from the distillery.
If the strength of any fusel oil is greater than 8.7% alcohol by volume, the whole product is liable to Excise Duty at the spirits rate.
If you keep fusel oil recovered from the distillation of materials entered to IP in the community, it may be chargeable with Customs Duty.
Fusel oil used as a heating fuel isn’t subject to Excise Duty. Please see Excise Notice 179: motor and heating fuels - general information and accounting for Excise Duty and VAT.
9. Accounting for spirits and warehouse vat
9.1 Accounting for the spirits produced
The following requirement has the force of law and is made under regulation 6 of the Revenue Traders (Accounts and Records) Regulations 1992.
You must keep a record of the spirits you’ve produced. The record must include the:
- date and time
- spirits receiver or other vessel
- dip or gauge reading
- temperature and hydrometer readings
- quantity of spirits, adjusted to a temperature of 20°C, with details of bulk volume, strength, and litres of alcohol produced
9.2 Warehouse vat
You must immediately warehouse spirits you’ve produced once you’ve taken account of them (paragraph 10). If your spirit receiver is additionally approved as a warehouse vat, we’ll consider the spirits to have been warehoused as soon as the account has been taken and declared in your records.
Where your spirits receiver isn’t approved as a warehouse vat, the spirits collected must be removed immediately after the taking of the account. In both instances, the receiver must be empty before you put in any newly produced spirits.
You may request approval for your spirits receiver to be a warehouse vat as part of the application for approval of plant and process (paragraph 2.6).
9.3 Accounting for remnants in the spirits receiver
Where a remnant remains you should take account of it in the normal way and enter the details in your records.
You must immediately warehouse all spirits once you’ve established the quantity produced (known as ‘taking account’).
Distillers may store spirits produced in their own distillery, known as a ‘distiller’s warehouse’ (paragraph 10.3).
10.2 Applying for authorisation as an excise warehousekeeper and for a distiller’s warehouse
To store spirits you’ve produced in duty suspense you must:
- be authorised as an excise warehousekeeper - using form EX61
- have approval for a distiller’s warehouse - using form EX69
Submit your application for both together with the:
- distiller’s licence application form DLA1
- application for approval of plant and process
to the Excise Processing Teams (address in paragraph 2.5) at least 45 working days before you wish to begin production.
10.3 Distiller’s warehouse
The type of warehouse a distiller may provide for storing spirits produced at their own distillery is known as a ‘distiller’s warehouse’. Approval of a distiller’s warehouse is under section 15 of the Alcoholic Liquor Duties Act 1979; for details on how to apply to operate a distiller’s warehouse see paragraph 10.2.
The operations that may be carried out in a distiller’s warehouse are very limited and don’t extend to the same range that may be carried out in a general storage and distribution warehouse (see Excise Notice 196 for further details). However, they include the bottling of spirits produced at the distillery of manufacture.
Spirits belonging to a third-party may not be stored or processed in a distiller’s warehouse. They must be stored or processed in an excise warehouse approved under section 92 of the Customs and Excise Management Act 1979 (CEMA) - see Excise Notice 196 for further information.
You may not receive, hold or move duty-suspended excise goods outside the terms of your warehouse approval.
10.4 Distiller’s warehouse: providing a financial guarantee
Subject to minimum throughput levels, new authorised warehousekeepers operating a distiller’s warehouse must provide a financial guarantee (known as a ‘premises guarantee’).
Guarantees are also required for most other types of warehouse.
The level of guarantee required for a distiller’s warehouse is calculated by reference to the potential average month-end duty liability on the spirits produced by the distillery that are stored in the distiller’s warehouse (meaning the throughput).
Please refer to the table in paragraph 4.5 of Excise Notice 196 to establish the level of guarantee required. For example, a distiller’s warehouse with a proposed or current month-end stockholding of £3 million would require a guarantee of £250,000. One with a month-end stockholding of £100,000 doesn’t have to provide a guarantee.
Reductions apply to the level of guarantee for good compliance. The guarantee required is reduced by 50% after 2 years of good compliance. After a further 2 years of good compliance, it’s reduced to zero (paragraph 4.5 of Excise Notice 196 refers).
A new business will have its initial guarantee based on anticipated levels of production and stockholding. HMRC will review the guarantee level on a regular basis to ensure it reflects actual production and stockholding.
To apply for a financial guarantee, you must contact HMRC’s Financial Securities Centre (FSC). Please see paragraph 4.5 of Excise Notice 196 for further details.
10.5 Specific requirements to follow when storing spirits in a third-party warehouse
It’s possible to remove spirits from a distiller’s warehouse to a third-party warehouse (for example, to an independent maturation warehouse).
If you wish to store spirits in a third-party warehouse, you’ll need to register as an owner of warehoused goods under regulation 5(1) of the Warehousekeepers and Owners of Warehoused Goods Regulations 1992. See Excise Notice 197 for further information on moving excise goods.
10.6 Moving alcohol in duty suspension
If you intend to move alcohol in duty suspension, you must register for the Excise Movement Control System. You can find full information on this in Excise Notice 197.
11.1 Point at which Excise Duty is chargeable on spirits, and how to pay it
Excise Duty becomes chargeable following distillation or manufacture of spirits in any other way. It’s not normally payable until the spirits are taken out of warehouse storage (for information on duty payment procedures and worked examples of the Excise Duty calculation for spirits, please see Excise Notice 197.
We may ask you to pay duty on any losses, which occur at your distillery or while transferring spirits to a warehouse, which are not due to natural wastage or for which you don’t have an acceptable explanation.
11.2 The duty charge
It’s normally based on the litres of alcohol contained in the spirits and any feints produced less the litres of alcohol in any feints brought forward from the previous period. This is known as the actual charge.
11.3 Less spirits produced than expected
You should investigate the reasons why this has happened. Your business records should show the steps you’ve taken to look into the matter and your findings. If, having completed your investigations, you’ve found no satisfactory explanation for the loss, then you should provide a written explanation of what has happened to the Written Enquiry Team at the address found here. We may assess for duty on the loss.
11.4 The rate of duty on spirits
Part 12, Volume 1, of the integrated Tariff of the United Kingdom shows the rate of duty on spirits.
Please see Excise Notice 197 for examples of the duty calculation on spirits.
12. UK spirit drinks with a GI
Certain UK spirit drinks, for example, Scotch whisky, are protected under EU legislation as a product of GI, see Regulation (EC) number 110/2008.
The authorities in the relevant member state of manufacture must verify that any spirit drink with a protected GI complies with specific conditions set out in the product’s technical file. Under regulation (EC) number 110/2008, the costs of verification must be paid by the manufacturers being verified.
We are the designated verifying authority for UK spirit drinks with a protected GI. If you produce a UK GI spirit drink, you must apply to us for verification of your processes. Please see Spirit Drinks Verification Scheme: technical guidance. For general queries email: firstname.lastname@example.org.
13. Certificates of age and origin
Certificates of age and origin attest to the authenticity of UK produced spirits. HMRC issues these to support exporters and producers of UK manufactured spirits and facilitate entry of their product into overseas markets.
The majority of issued certificates are in respect of Scotch whisky exports. The certificates are an essential part of the industry’s efforts to protect Scotch whisky in overseas markets from counterfeiting.
13.1 Applying for certificates of age and origin
HMRC issues certificates of age and origin to UK applicants who are able to provide a satisfactory audit trail of the origin of the product. This is restricted to distillers and brand owners and manufacturers and holders of goods in duty-suspense.
We may also issue certificates of age and origin to overseas applicants for spirits previously consigned which are being sent on to a further overseas destination (for example, from UK to France to Taiwan), providing the applicant provides a certificate of non-manipulation and also holds satisfactory documentary evidence of the spirits’ origin.
13.2 Certificates of age and origin
The following certificates are currently in use:
- C&E 94 (USA)
- C&E 94D (Japan)
- C&E 94H (Singapore)
- C&E 94J (Taiwan)
- C&E 94L (Philippines)
- C&E 96 (General use) - is for general use and isn’t product or destination specific
- C&E 96A (Canada) - is for Scotch whisky and is destination specific
13.3 Charge for certificates of age and origin: how to apply
There’s a charge for certificates.
For details of the current costs when you wish to order certificates email: email@example.com.
14. Spirits rectifiers and compounders
|Definition||You’re a rectifier if you re-distil spirits (with or without flavouring ingredients)||You’re a compounder if you combine or mix plain spirits or previously compounded spirits with any other substance, except water, so as to distinctly alter the character or flavour of the plain spirits or compounded spirits, producing a new compounded spirit|
|When do I need a licence?||You must hold a rectifier’s licence if you are a rectifier or compounder and keep a still to carry out either process||You must hold a compounder’s licence if:
you don’t have a rectifier’s licence and you manufacture (by compounding)
alcoholic liquors other than mixed drinks solely for consumption on the premises and ‘coolers’ which are made-wines as defined by the Alcoholic Liquor Duties Act 1979, ingredients (for example, essences, bitters) for incorporation in alcoholic liquors (either in their manufacture or as a mixer)
|When don’t I need a licence||Not applicable. You’ll always need a licence to rectify (including for own use)||If you’re compounding in a still and have a rectifier’s licence, or if you compound spirits solely in order to make:
foodstuffs produced solely for consumption on the premises
food products, such as liqueur chocolates or the liquid fillings that are put into them
flavouring essences of the type used solely in confectionery or other food, mineral waters or medicines
if you’re compounding spirits for your own use
|What warehouse facility do I need?||For duty-suspended spirits, approved trade facility warehouse||For duty-suspended spirits, approved trade facility warehouse|
|For duty-paid spirits, none||For duty-paid spirits, none|
14.2 Apply for a rectifier’s or compounder’s licence
You apply for a rectifier’s or compounder’s licence by completing form L5, Alcohol duties: application for a licence to carry on an Excise Trade. Send the completed form L5 to:
Excise Processing Teams
There’s no charge for the licence.
For more information, you can contact HMRC.
14.3 Further requirements as a rectifier or compounder
Unless you are operating in an excise warehouse (when you must meet the requirements set out in Excise Notice 196 and Excise Notice 197), you’ll also have to ‘make entry’ of the premises and plant that you intend to use before you start operations.
To make entry of plant and premises, you must complete the proper form and return it to us:
14.4 Penalties for rectifying or compounding without a licence
You may be liable to a penalty if you give us inaccurate information, whether in your licence application or otherwise. If you’ve not applied for a licence when you should have done, you must let us know without delay. You’ve the right to appeal if we impose a penalty. For more about appealing, see Disagree with a tax decision.
15. Alcohol Wholesaler Registration Scheme (AWRS)
From April 2017, a business buying alcohol must check the alcohol wholesaler approval of the supplier. You may also be required to register for the AWRS if you sell duty-paid alcohol to another business.
You should read Excise Notice 2002: Alcohol Wholesaler Registration Scheme to see if you’ll need to apply for approval.
16. The due diligence condition
16.1 Definition of due diligence
Due diligence is the proper reasonable care a company exercises when entering into business relations or contracts with other companies, and how it responds in a deliberate, reflexive manner to trading risks identified.
For details on due diligence, please see Excise Notice 2002.
17. Review and appeal procedures
17.1 Disagreements with decisions made
When we make a decision that you can appeal against, we’ll tell you and offer you a review. We’ll explain the decision and tell you what you need to do if you disagree with, for example:
- the amount of an assessment
- the issue of a civil penalty
- a decision specifically connected to the relevant duty
You’ll usually have 3 options. Within 30 days you can:
- send new information or arguments to the officer you’ve been dealing with
- have your case reviewed by a different officer
- have your case heard by an independent tribunal
A different officer from the one who made the decision will handle the review. If you prefer to have an independent tribunal hear your case, you must write directly to the Tribunals Service.
17.2 Time limit for a review
If you want us to review a decision, you must write to the person who issued the decision letter within 30 days of the date of that letter. We’ll complete our review within 45 days, unless we agree another time with you. You can’t ask the tribunal to hear your case until 45 days (or the time we agreed with you) has expired, or we’ve told you the outcome of the review.
If you’re not satisfied with the review’s conclusion, you have 30 days within which to ask the tribunal to hear your case.
If we can’t complete our review within 45 days, or any time we agreed with you, we’ll ask you whether you’re willing to agree to an extension so that we can complete the review. If you don’t agree to an extension, the review is treated as concluding that the decision being reviewed is upheld.
We’ll write and tell you this: you then have 30 days from the date of that letter to ask the tribunal to hear your case.
17.3 Information to include in a request for review
Your request should set out clearly the full details of your case, the reasons why you disagree with us and provide any supporting documentation. You should also state what result you expect from our review.
17.4 Appeal to independent tribunal
If you don’t want a review, you may appeal to an independent tribunal. You need to send your appeal to the Tribunals Service within 30 days of the date on the decision letter.
17.5 More Information
You can find information about reviews and appeals in factsheet HMRC1, HMRC Decisions – What to do if you disagree. You can get this factsheet on our website or by contacting the Helpline.
You can also find more information about how to appeal on the Tribunals Service website or by Telephone: 0300 123 1024.
|Alcohol||Ethyl alcohol or ethanol|
|ALDA||The Alcoholic Liquor Duties Act 1979|
|AWRS||Alcohol Wholesaler Registration Scheme|
|CAP||The Common Agricultural Policy of the European Union|
|Diastase||An enzyme, developed by the malting process, which converts starch to sugars during mashing.|
|Distiller||A person holding a licence to manufacture spirits|
|Distiller’s warehouse||An excise warehouse approved by us under section 15 of ALDA, for the storage of the spirits produced at a distillery. A limited range of operations can be carried out in a distiller’s warehouse, for example, racking|
|Distillery||Premises where spirits are manufactured, whether by distillation of a fermented liquor or by any other process|
|EU||Member states of the European Union|
|Excise warehouse||A place of security approved by the Commissioners of HMRC under CEMA section 93. Conditions may be included in any exercise warehouse approval. For further information see Excise Notice 196|
|Feints||Spirits conveyed into a feints receiver|
|Free circulation||Goods are in free circulation when the import formalities have been complied with and any Customs Duty due has been paid and not wholly or partly refunded|
|Gravity||The ratio of the weight of a volume of liquid to the weight of an equal volume of distilled water, both volumes being measured at 20°C:
‘Original gravity’ is the gravity of wort before it’s fermented
‘Final gravity’ is the gravity of wash when taken to be distilled
|Gauging||The process by which a vessel is calibrated|
|Inward Processing Relief (IPR)||Relief from Customs Duty on the importation of goods from non-EU countries for process and re-export outside the EU|
|Low wines||Weak spirits obtained from the distillation of wash|
|Process||Operation carried out in order to manufacture spirits, including operations on spirits after their manufacture|
|Safe||A secure box with transparent panels designed to enclose the tail or outlet pipe of the worm or condenser. It provides an opportunity to:
watch the flow of spirits or feints
test for quality and strength
route them to the spirit receiver or feints receiver as appropriate
|Scotch whisky||Whisky which has been distilled and matured in Scotland|
|Still||The apparatus, or any part of an apparatus, in which spirits are produced|
|Tax warehouse||Premises approved for the production, processing, holding, receipt or dispatch of excise goods under duty-suspension arrangements. A tax warehouse is defined in EU Directive 2008/118, and a producer of spirits’ production premises will be a tax warehouse under the EU definition - additional approval is not needed.
The fact that premises are a tax warehouse under this definition doesn’t alter the range of activity that can be carried out under a distillery approval
|Technical file for Scotch whiskey||A document setting out the technical specifications of Scotch whisky with which producers must comply|
|Trade facility warehouse||A warehouse approved for a specific purpose that’s required to be completed within an approved warehouse to maintain the duty-suspension chain. This may include the maturation of spirits, and as such, a distiller’s warehouse is by definition a type of trade facility warehouse|
|Warehouse VAT||A vat approved to hold spirits in duty-suspension|
|Wash||Wort in which fermentation has begun. After fermentation, the wash will form the raw material for the distillation process|
|Wash back||A vessel in which wort is collected and fermented into wash|
|Wash charger||A vessel in which wash is collected from the wash backs for removal to the still|
|Whisky or whiskey||A spirit drink produced by the distillation of a mash of cereals which has been:
saccharified by the diastase of the malt contained in it, with or without other natural enzymes
fermented by the action of yeast
distilled at an alcoholic strength less than 94.8% by volume, so that the distillate has an aroma and flavour derived from the raw materials used and matured for at least 3 years in wooden casks not exceeding 700 litres capacity
|Wort||Infusion, solution or mixture intended for fermentation as part of the process of manufacturing spirits|
Your rights and obligations
Read Your Charter to find out what you can expect from HMRC and what we expect from you.
Your comments or suggestions
If you have any comments or suggestions to make about this notice, please write to:
HM Revenue and Customs
3rd Floor West
3 Stanley Street
For your general enquiries, please phone us on 0300 200 3700.
Putting things right
If you’re unhappy with our service, please contact the person or office you’ve been dealing with. They’ll try to put things right. If you’re still unhappy, they’ll tell you how to complain.
If you want to know more about making a complaint, please read Complain to HM Revenue and Customs.
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