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HMRC internal manual

VAT Supplies in Warehouse and Fiscal Warehousing

Treatment of services associated with goods held within warehouses: Special provisions for spirit manufacturers

The treatment of services supplied within distilleries and other spirit manufacturing premises generally conform to those detailed in VWRHS3045, but there are also some additional concessions specific to these manufacturers which have been agreed with the trade. These affect:

  • processes that change the nature of a product - see below;
  • accounting - see below; and
  • joint and several liability - see paragraph VWRHS2100.

Processes that change the nature of a product

The list in VWRHS3040 includes blending or marrying of different whiskies as a process that creates new product. Specifically with reference to malt whisky this means:

  • the blending of different distillations from different distilleries; and
  • the blending of different distillations, or different casks of the same distillation, from the same distillery.

What will not create new product is bottling from a single cask. The same rules apply to grain whiskies. The final distillation/rectification of gin and the final filtration of vodka, is also deemed to create new product. The definition of “cask” can be extended to include other vessels or containers in which the whisky is blended.


When a third party warehousekeeper removes goods to home use on behalf of someone else, he only accounts for the excise duty and any VAT due on the last supply of the goods. He does this on the usual forms W5 or W5D (see VWRHS2060). He does not account for any previously zero-rated services which fall to be taxed as a result of the removal.

The owner of the product removed from the regime must account for all relieved services supplied to him that fall to be taxed. The owner calculates a notional value of the services applied to the goods that are to be released into the domestic market, and accounts for tax accordingly. For example, if the company puts 40 per cent of their goods into the home market and exports or supplies the other 60 per cent to the EC, then only 40 per cent of the VAT due on the services should be accounted for. The resulting figure is entered on another W5 or W5D in the value for VAT box, the tax due is entered in the relevant box, and the form is submitted in the normal way.

The percentage split between

  • goods released into the home market and
  • those exported or sent to another EC Member State

in one financial year is applied to all services received in the next financial year.

An average throughput time which creates the notional due date can also be used (see VWRHS3050). This is the average time that product remains within duty suspension following the final process to create new product, or following purchase of new product in warehouse, whichever is later. The owner of the removed product schedules all notional due dates in each calendar month and accounts and pays tax due by the 15th of the following month.

These arrangements may only be used by businesses which are unable to track goods sufficiently well within their stock system, and cannot easily identify E-services relating to the specific consignments. Any ratios and/or average throughput times must be agreed by local control staff before they are used.