1st June 2022

HMRC Policy change: removal of restrictions on a) storage time for Trade Facility Warehouses and b) removal of qualifying criteria for General Storage and Distribution warehouse approvals

Due to BDA lobbying of HMRC, and commencement of litigation on behalf of a member as a lead case, HMRC has removed the storage time restriction for Trade Facility (TF) policy warehouses for distillers’ own product held in an excise warehouse (e.g., spirits produced "from scratch" in a distiller's warehouse, or gin from ethyl alcohol "bought in”, etc).  

HMRC has also removed the stockholding/throughput criteria from the General Storage and Distribution (GSD) warehouse policy.  GSD approval will be considered on an individual business case and economic need basis.

These changes are formally promulgated by amendments to paragraphs 4.1 and 4.2 of Notice 196, with effect from 1 June 2022.
The restrictive “dwell time” policy has been a cause for concern and tribulation for such warehousekeepers for years due to its arbitrary and unnecessary abbreviation of duty suspension.
Third party warehoused goods in a TF warehouse will have a 90 day maximum period from the end of the last permitted operation in the TF warehouse (e.g., bottling, packing, etc).  The BDA has written to HMRC with its members’ views that this time period may not be sufficient in some circumstances.  Moreover, the 90 day "extension" may be further extended for reasonable cause or need — it is a matter of HMRC's discretion which must always be exercised reasonably.   In any event,  third party packers may consider applying to commute the type of approval they hold from TF to GSD, thus being "free" of any dwell time restriction for their customers’ goods.



26 April, 2022

HMRC review and consultation into the Warehousekeepers and Owners of Warehoused Goods Regulations 1999 (WOWGR)

At the meeting of the Joint Alcohol and Tobacco Consultative Group (JATCG) of 21 March 2022, HMRC announced a Review of WOWGR.  This was unexpected and has wide-reaching implications for the spirits industry and for beer in duty suspension.

HMRC’s presentation

HMRC stated that previous reviews of WOWGR were undertaken in 2002 and 2013.

HMRC recognizes that the law is inconsistent and caused problems, which may briefly be summarized as follows:

  • Only spirits, beer and tobacco products included in the scheme;

  • Oils (fuel) ownership excluded from the scheme;

  • Wine and made-wine (including flavoured ciders) excluded from the scheme.

  • Duty points created  for errors/breaches of WOWGR (which are in breach of retained EU law — "Polihim") and cause immense difficulty to resolve;

  • Problems with identification of ownership for the warehousekeeper.


HMRC say the review will help it adopt an effective policy and ensure any future changes to WOWGR are approached clearly and consistently, so are developing a policy review document detailing the:

  • Policy Summary

  • Data on the number of WOWGR approvals and revocations

  • Rationale behind the possible changes of the WOWGR policy

  • Potential options — setting out the advantages, disadvantages, impacts and issues to address.


HMRC hold no fixed or preferred view of change.  Potential changes will be shared with stakeholders to assess the need/desire for any change.   HMRC’s indicated options appear to be:

  • Do nothing;

  • Complete revocation of WOWGR registration of owners;

  • Remove investment in product owned in warehouse (mainly spirits) as a “revenue trade”;

  • Remove cask/bulk spirits from the ownership scheme;

  • Alternative may be removal of scheme and instead to register transporters


HMRC's timeline, noted below, is tight and had commenced by the JATCG meeting:


Initial review of the current policy: Feb – March 22

  • Data gathering on WOWGR and feedback analysis 

  • Development of options to pursue  

  • High level risks and wider impacts of each option. 


Discovery: April – June 22

  • Wider HMG sessions on proposals

  • Further engagement with the trade on the options 

  • Delivery timelines 

  • Option finalised 


Delivery: July 22 onwards

  • Project coordination


BDA submission — summary

The rationale for Warehousekeepers and Owners of Warehoused Goods Regulations 1999  (WOWGR) is set out in the explanatory notes to the regulations, stating:

The provisions in respect of owners of goods held in excise warehouses (and their duty representatives) enable the Commissioners to identify those persons who hold duty suspended excise goods in warehousing facilities provided by third parties.  (Emphasis added).

In fact, and as a matter of public record, the frauds that led to registration of owners were incited and orchestrated covertly by (as was) HMCE’s National Investigation Service (NIS).  HMCE knew all the owners of goods and the transporters in order to arrest and prosecute them.


When HMRC stopped the fraud they were operating in 1998, all the fraud ceased immediately.  Moreover, the implementation of WOWGR did not, nor could, achieve more than HMCE had already done by simply stopping the fraud 18 months previously.  For that reason alone, the scheme, which has no basis in EU law, fails utterly to meet any measure of the principle of proportionality, that requires the UK to do no more than necessary to achieve the legitimate objective.

As HMRC recognizes, the law is inconsistent because oils (fuel) ownership is excluded from the scheme, as are wine and made-wine.   It should be noted that cider is not excluded from WOWGR, but the duty on “plain cider” is very low and the UK alcohol market share miniscule.   However,  since most commercial cider is flavoured cider and therefore taxed as made-wine, flavoured cider is excluded from the scheme.   Only beer and spirits are left as alcohol products within the scheme.  The tax gap for spirits is practically nil, therefore only one alcohol product — beer —  might justify being considered for retention.

Duty points are created for errors leading to non-compliance with WOWGR (which are in breach of retained EU law — “Polihim") and as a consequence of the scheme, there are growing problems with identification of ownership of cask spirits for the warehousekeeper.

Evaluation of options

The registration and authorization of excise warehousekeepers filled a gap (lacuna) in UK law to enable HMCE to formally authorize persons as warehousekeepers.  Hitherto, only the warehouse premises were subject to approval by HMCE which was, in turn, deficient with regard to EU law (as retained in UK law).  It is therefore necessary to maintain such registration.

In terms of registration of owners of goods in warehouse and duty representatives, the WOWGR scheme is riddled with inconsistencies, anomalies and breaches of retained EU law.  Accordingly, HMRC does not realistically have an option to do nothing.  The BDA’s position is as follows:

  • WOWGR has caused unintended problems for ownership of casks of spirits maturing in warehousekeepers’ approved premises.  Therefore, there is a case for removal of cask spirits from the scheme, which would remove from the register a great many owners of goods in warehouse.

  • There is also a case with for removing the interpretation of investment in spirits in warehouse as a “revenue trade”.  This would also remove large numbers of registered owners of goods in warehouse and could be in unison with removal of cask spirits from the scheme.

  • However, any “piecemeal” removal of such parts of the WOWGR scheme would leave little purpose in the regime remaining on the statute book, because there would be far more exclusions from WOWGR than products and activities remaining within its ratio.  



It is urged that HMRC takes necessary steps to either:

  • amend the Warehousekeepers and Owners Of Warehoused Goods Regulations 1999 to repeal the parts requiring registration of owners and duty representatives; or

  • revoke the regulations entirely and replace with a short statutory instrument that continues to regulate the authorization of excise warehousekeepers.


The Alcohol Wholesale Registration Scheme (AWRS), which includes wine, made-wine, RTDs, flavoured cider, already comprehensively addresses any existing risk of alcohol duty fraud and due diligence is, in any case, part of the anti-fraud infrastructure for both duty suspension and duty-paid supply chains under AWRS.

October 31 2021

Budget: Autumn Statement 

The Autumn Budget statement freezes all alcohol duties and states no legislative changes are intended for the next year.


HM Treasury’s Alcohol Duty Review follows the government’s calls for evidence from the industry last November.  The government’s proposals are now out for consultation:




Confusion has arisen because the Chancellor's speech was not wholly clear or correct and the consultation document does not adequately communicate the main proposed changes.  However, leaving aside reduced rates for large pack (casks of beer, cider, made-wine), everything is summarized at Table 4.B at page 31 of the consultation document


It is proposed by the government that in February 2023 there will be five alcohol strength bands to establish a rate for duty on products within each band.  In four of these bands, the duty rate (an amount per litre of pure alcohol) is the same for all products within each respective band.  The band for strengths 3.5 - 8.4% abv has exactly the same rate as that for wine, made-wine and spirits with a slightly reduced rate for beer and a very much reduced rate for ‘plain’ cider.  Note that fruit cider is still to be treated as made-wine.


The proposed “1st band” is from 0 to 1.2% abv and is set at nil duty, but the definitions of all alcohol subject to taxation under section 1 of the Alcoholic Liquor Duties Act 1979, requires the products to exceed 1.2% before they “become” a taxable alcoholic product.  Until they exceed 1.2% abv, they do not exist as an alcoholic product subject to ALDA and therefore are not subject to alcohol tax.  


The BDA feels there should be only four bands and has written to HM Treasury with this suggestion.


Spirits duty rates


Spirits at “normal” strength (and which have to be a certain strength, e.g., whisky at 40% abv) will bear the highest of the five bands.   However, the reduced rates will be attractive for RTDs made from spirits and also for stronger “shots” type drinks at, say, 15 - 22% abv.  Many of these, (which at one time were subject to post-duty point dilution) are currently made as fortified made-wines from a neutralized ferment/spirits base, then flavoured.  Since ethyl alcohol is cheaper than ferment/alcohol as a basic cost, producers are very likely to quickly switch to spirits as the base alcohol.


There is no justification given by the government for not including spirits producers as “craft” producers, thereby allowing them to benefit from a reduced rate at full strength.   The reduced rates will apply to “craft” producers of spirits-based drinks below 8.5% abv.  Therefore, an RTD made from spirits by a small producer would be eligible for the reduced rate, but this misses the point that the artisan sector is no less deserving of a reduced rate for spirits of any strength.  Moreover, the main spirits brands at full strength will have the most cachet, not as a derivative RTD.  


Administration and reform


In terms of administration, several sensible proposals have been made in the Condoc to simplify and rationalize licenses and approvals for all alcohol regimes: this is an on-going project within HMRC.  Of particular interest is paragraph 5.14, which says: 


“The requirement for rectifiers and compounders working with duty paid spirits to be licensed or approved will be removed under new system.”  


This is long-overdue, not only because it is utterly pointless, but also should be removed for those operating on spirits in duty suspension (warehouse) as well.  The law permits rectifying and compounding as a specific operation in warehouse, but does not require a licence to be held for that trade/operation.  Therefore, a simple revocation of section 18 of the Alcoholic Liquor Duties Act (which requires a rectifier or compounder to be licensed by HMRC) would suffice.

Budget October 2021 

Recycling bottles and containers - call for repeal of HMRC’s spirits duty stamps law 


The British Distillers Alliance (BDA) has been inundated with requests from members for clarification of the law concerning re-filling of duty-stamped empty bottles.  The law does not make clear where a stamp should be re-applied, and appears silent about stamped bottles that are re-filled at on-trade premises.  There are potentially huge penalties for breach of the regulations including a fixed penalty of £250 per bottle even though the duty has been paid on the spirits (and the penalty is 30 times the duty on the spirits in the stamped bottle that has already been duty paid).  The BDA has written several times to HMRC Policy officials over the past 12 months to discuss and seek clarification but has not had replies.  Meanwhile, the industry is in panic they may get things wrong.

The law has not moved with the times and, at the least, requires amendment and clarification.  That said, the simplest solution would be for the duty stamps scheme to be repealed entirely.  There never was any spirits duty fraud of any statistical significance at the time the duty stamps scheme was mooted and the empirical data clearly bear this out.  It appears HMCE (as was) erred in interpreting revenue receipts at the turn of the century but nevertheless in 2006  legislated for a scheme that the industry did not believe was necessary and, indeed, remains unnecessary and heavily burdensome.

23 February 2021

UK – EU excise movement procedures from 1 January 2021

Since 1 January 2021, the excise movement procedures for intra-EU movements between GB and EU Member States ceased.  The procedures for what are (now) imports and exports of excise goods between the UK (GB) and EU (now Rest of World) already exist but many businesses have been wrong-footed.  


The UK  “switched off” the EU-wide Excise Movement and Control System – EMCS – at the end of 2020 (and gave notice this would happen).  The UK has retained a domestic version of EMCS for duty-suspended movement of excise goods wholly within the UK.  This takes movements as far as the port for exports (under EMCS).


There is an option for exporters to use customs transit/procedures which does not involve EMCS but HMRC’s Notice 197 section 13 (Exports of excise goods) commences (and majors) on the “EMCS” route.  A brief summary of how goods should “move” under the “EMCS” route is set out below.  


The GB tax warehousekeeper of dispatch must use the UK-only version of the Excise Movement Control system (EMCS) to initiate a movement (eAD) from a UK tax warehouse to UK port under cover of a UK movement guarantee.  A declaration must be lodged for the export to the EU and an import declaration to be made (e.g. French or Dutch customs), with a customs procedure code for release of the goods to free circulation (customs-cleared), but subsequently under the control of the EU EMCS (excise duty suspension) from the port, to a tax warehouse within the EU.  The movement from the UK is discharged when a Report of Export (IE 818) is received via EMCS from HMRC.


When the goods are customs-cleared in the EU, any further excise duty-suspended movement must be initiated on the EU EMCS by a Registered Consignor (Defined in Directive 2008/118/EC Article 4(10)) in the “recipient” Member State.  Further, “another” moment guarantee must be in place to cover "the risks inherent in the movement" under the EU EMCS.  The goods then move under cover of an eAD (with an ARC number) to a tax warehouse in the EU.  


For movements involving Northern Ireland, see Notice 197 section 17.


The ”reverse” applies to all excise imports into the UK (GB) in effect.  See Notice 197 section 7.


The UK has retained its own version of the EMCS, as explained above, but it has no relationship or interface with the EU EMCS.  



January 2021 will bring an end to the main opportunities for alcohol excise duty fraud and must mean changes to HMRC’s anti-fraud Due Diligence Condition


January 2021 brings in fundamental changes to the movement and control of excise goods from the EU to the UK.  What were “acquisitions” from the EU will be “rest of world” imports, subject to full border controls.  This will mean that the current opportunity for systematic alcohol fraud under the weakness of the EMCS (“inward diversion” fraud) is closed entirely.   Further, the requirement for alcohol excise businesses to carry out the mandatory Due Diligence procedures (including those under the AWRS) as set out in public notices, must urgently be reviewed by HMRC to reflect the entirely different supply chains for excise goods moved between the EU and the UK.


Features of alcohol excise duty fraud


Alcohol duty fraud has been primarily in inward diversion of large volumes of popular (and relatively inexpensive) British-produced brands of lager.  Its most severe effects were felt by the wholesale sector and the impact was exacerbated by HMRC’s inability to counter the problem.


There has additionally been a lesser problem with popular third country wine brands, but, as highlighted repeatedly by HMRC’s Fraud Investigation Service, the main issue was beer.  Indeed, this was the conclusion of the 2012 All Party Parliamentary Beer Group’s report on the matter, which took evidence from HMRC, Border Force, other regulatory bodies, industry trade-body representatives and businesses.   


HMRC’S description of the fraud was summarized in last year’s Court of Appeal case “Seabrook Warehousing Ltd ” 2019 EWCA Civ 1357 by Henderson LJ at [37]:

a)  A movement of goods is arranged, moving goods to the UK under duty suspension for consignment to an account within a receiving excise warehouse in the UK.


b)  The movement is entered onto EMCS, and is known as “the cover load”.

c)  The cover load will leave for the UK. If it reaches the UK, and passes through the frontier without being checked by UK Border Force, it will “park up” and not go direct to the warehouse.


d)  At this point, a number of identical “mirror loads” will be created, with the same Administrative Reference Code (“ARC”) as the cover load. These mirror loads will then be transported into the UK, until one of them is intercepted or until the journey time stated on the original EMCS expires.


e)  If a mirror load is detected, it will use the details of the cover load to legitimise itself and will make its way to the UK warehouse. The ARC will then be discharged, and the cover load which has been “parked up” will probably be, in the jargon, “slaughtered” (i.e. broken up and distributed).


f)  If none of the mirror loads is intercepted, they can then all be “slaughtered” and enter the UK home market without payment of any excise duty or VAT.


From 2021, supply chains and revenue risk will be very different for movements between the UK and the EU and most importantly, the main risk of alcohol excise inward diversion fraud will simply be extinguished. This is because when the UK exits the EU following the end of the transition period, EMCS will be switched off for intra-EU trade, which means the weakness of EMCS for inward diversion of fraudsters using multiple mirror loads under cover of a single ARC will not be possible.  Import declarations will have to be made and excise goods will always be subject to control checks, which is not currently permitted under Single Market rules.  The risk of fraud will therefore be reduced by these measures.  That is not to say that fraud may not mutate, but “container fraud”, akin to tobacco duty fraud (i.e. plain old fashioned smuggling) seems unlikely.

This will also mean that the current Due Diligence Condition set out in HMRC’s public notices must be revised substantially or removed entirely.  The current policy really deals with intra-EU movements and inward diversion fraud as described in the Seabrook Warehousing case, i.e. risks in EMCS alcohol supply chains between the UK and the EU.  The supply chains will not be subject to EMCS from January 2021 and as a consequence HMRC’s entire policy will need re-consideration, particularly in respect of the heavy burdens it has imposed upon the legitimate alcohol sector.

28 November 2020

HM Government Alcohol Duty Review Call for Evidence 2020 -  BDA response


The British Distillers Alliance has responded to the government’s Alcohol Duty Review (ADR) Call for Evidence.  Copies of the response are available upon request.


There are two elements to the ADR: rates and structure (HM Treasury) and management of the revenue (HMRC).  In terms of the former, the main issues are fairer tax for spirits (tax by unit for all alcohol) and reduced rates for smaller producers.  In the case of management of the revenue, this runs in tandem with HMRC’s modernization and simplification programme, for which the BDA has also made submissions, reiterated in the ADR response.


At a Joint Alcohol and Tobacco Consultative group meeting on  meeting on 24 November, HMRC addressed the status of the ADR, with the following points:


  • Stakeholder engagement (other than HMG) comprises industry, economists and the public health sector;

  • HM Treasury will engage with minister before Christmas and “shape proposals”

  • There will be consultation on proposals including a “technical” consultation

  • These consultations will be announced next year — possibly at a “Budget event”, taking matters thereafter into 2022.

  • Constraints will be (as always) systems capacity and legislative space.


The BDA will participate in further interim discussion.

8 October 2020

BDA welcomes HMRC Policy change to remove requirement for excise warehouse premises guarantees

HMRC has just announced an extremely welcome policy change removing the requirement for a premises guarantee to be in place as a condition of excise warehouse approval.  Until this month, a premises guarantee has been a requirement for excise warehouse approval, albeit it has been possible for “trade facility” policy excise warehousekeepers to have a “nil” level of security where there is no more than  £100k duty stockholding at month end.


By circular of 28 September 2020 to members of the Joint Alcohol and Tobacco Consultative Group (JATCG), HMRC stated:

“Excise premises guarantees will also be changing from 1 January 2021. This will allow most GB and NI businesses to operate an excise premises without a guarantee. This will be subject to risk and compliance checks by HMRC​. This policy change will apply to both storage and production premises.  

HMRC is currently reviewing all existing premise guarantees to identify those that can be cancelled.  HMRC will notify businesses who do not satisfy the risk and compliance checks, as these guarantees will be retained.  It is expected we will complete this work by 1st January 2021.”

At the virtual JATCG meeting of 7 October 2020, HMRC confirmed that excise warehouse premises guarantees would be applied “by exception” ie the requirement for a guarantee would be exceptional, not the norm.  HMRC’s position is that a guarantee could be required for cases of non-compliance by a warehousekeeper (or applicant for warehouse approval) or other revenue risk. 

Whilst the policy change is welcomed, the BDA nevertheless believes that HMRC misses the purpose (or rather, lack of purpose) of a premises guarantee.  HMRC has manifold appropriate sanctions to improve compliance of a warehousekeeper incrementally or with immediate severity.  The premises guarantee is not really part of such compliance measures and never covers the full extent of revenue in duty-suspension.  Instead, a premises guarantee is really an archaic, blunt “long stop” in the unlikely event that a warehousekeeper did not pay assessments to duty on pilferages or unexplained stock deficiencies.  

To put this into context, HMRC has never routinely require licensed wine producers or cider-makers or registered brewers to provide a premises guarantee for excise duty suspension.  It is discriminatory, therefore, for a premises guarantees to be imposed upon excise warehousekeepers who may “hold” such alcohol products (as well as spirits).   Alan Powell and the BDA have lobbied hard for years for removal of warehouse premises guarantees imposed as a matter of routine by HMRC since they are not necessary or effective for compliance purposes and are discriminatory vis a vis “production” tax warehouses. 

2 October 2020

UK Alcohol Duty Review starts - call for evidence

HM Treasury has advised the BDA that the Call for Evidence by the UK government into alcohol, duty rates and structures has commenced. The link to the web site is here: https://www.gov.uk/government/publications/alcohol-duty-review-call-for-evidence

The government committed at Budget 2020 to undertake a review of the alcohol duty system. This area of policy was previously harmonised by EU law.  The UK is  now able to set its own law in this area.

The aim of the Alcohol Duty Review is said to improve the current system to make it simpler, more economically rational and less administratively burdensome on businesses and HMRC. This call for evidence seeks views from respondents on how well the current system works (both for the individual duties and as a system as a whole), and also looks at whether:

  • the method of alcohol taxation should be standardised

  • the duty categories should be changed or unified

  • products should be consistently distinguished by their strength

  • distinctions should be made based on the place of retail

  • small producer reliefs should be extended or standardised

  • duties could be uprated for inflation in a more consistent manner

  • a single process for approvals, declarations and payments should be introduced

  • more could be done to tackle avoidance and evasion of duty

The BDA has been ready to contribute to this call for evidence since the Budget announcement and will participate with submissions to HMT about both duty rates and the entire taxation structure.