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HMRC internal manual

Duty Free Spirits Guidance

Technical Guidance: Why do we need a Duty Free Spirits regime?

In the UK, only a small fraction of alcohol (ethanol) is used in the manufacture of beverages. The majority is used in industry, medicine and science as a raw material, solvent or reagent. Using duty paid alcohol for such purposes would be prohibitively expensive, so a system was needed which could relieve industry of the duty, but at the same time protect the revenue from illicit diversion.

The Denatured Alcohol regime was designed to meet these requirements by allowing for specific grades of alcohol to be received free of duty by approved users for approved purposes.

But, while denatured alcohol is are suitable for many industrial purposes, there are certain applications where it cannot be used, eg in medicine or where a process cannot tolerate the standard chemicals in Denatured Alcohol.. Therefore, another system allowing the receipt of pure alcohol free of duty was required. Hence the Duty Free Spirits regime.

Such uses include:

  • in manufacturing processes provided the final product does not contain alcohol (ie where the spirits act as a catalyst, or where they undergo chemical conversion or are removed eg by evaporation;
  • in the manufacture of ethyl esters and ethyl ether;
  • in the manufacture or preparation of recognised “conventional” or homeopathic medicinal products (including the administration to hospital patients under strict medical supervision);
  • for scientific laboratory purposes; and
  • for scientific or medical research.