SHOWCASING THE BRITISH SPIRIT

HMRC licences for travelling and pop-up stills – down with this sort of thing!

I’m aware of “travelling stills” and “off-site” pop-up operations of “distillation” of gin and other spirits and am asked from time to time what law applies to the licensing of such activities and whether my interlocutor “Can do it as well”. After all, it’s good promotional activity for bars and events. Now, I believe I can tell you what the law says, but I can’t tell you what HMRC Policy at HQ will say or do, ‘cos I have asked. For them, each case is “treated on its merits”, which is like Father Jack being coached by Father Ted to respond to any question with “That would be an ecumenical matter”.

So, what is the underlying legal position? Well, what we are really talking about is not “distillation” (of a fermented liquor) but rectification (re-distillation) and compounding of spirits using a still. We have to discount any of this taking place under duty suspension (“bond”) which requires a huge amount of legal compliance and excesses from HMRC in terms of warehousing law. But the use of duty-paid spirits for rectification has no revenue risk whatsoever – HMRC have had their tax “early” - so what are the implications?

Legal Position

The Alcoholic Liquor Duties Act 1979 (ALDA) section 18 states, in summary, that: “no person shall rectify or compound spirits or keep a still for that purpose unless that person holds a rectifier’s licence”. In terms of excise licenses more broadly, section 101 of the Customs and Excise Management Act 1979 states, inter alia:

(1) An excise licence shall be in such form and contain such particulars as the Commissioners may direct and, subject to the provisions of any enactment relating to the licence or trade in question, may be granted by the proper officer on payment of any appropriate duty.

(2) An excise licence for the carrying on of a trade shall be granted in respect of one set of premises only, but a licence for the same trade may be granted to the same person in respect of each of two or more sets of premises.

A rectifier must be licensed but HMRC has no powers to refuse a licence in respect of an application to rectify spirits in respect of one or more “sets of premises”. OK, this might provide HMRC with the powers to allow a licensed rectifier to “extend” a licence to other “sets of premises” for “pop-up” type rectification of spirits. But there is more. The “making of entry” of those premises.

The Spirits Regulations 1991 state: Rectifiers and compounders: entry of premises and plant 7.—(1) No person shall make use, for rectifying or compounding spirits, of any premises or plant unless they have first made entry of that premises or plant.

The Customs and Excise Act 1979 (CEMA) s108 sets out the form and manner etc of the entry process and what particulars are required by the Commissioners (ie the EX103(A) form(s)).

There is no discretion in the law as to whether a person can rectify/compound spirits without holding a licence or the making of entry of premises or plant (of the licensed place). Nor may the Commissioners refuse to issue a licence or accept an entry made out correctly.

The requirements of the law are predicated absolutely upon a licence being required for an excise trade carried out identifiable and entered premises.

The problem is that a person who intends to give notice to HMRC to rectify/compound duty paid spirits (even in tiny quantities) cannot apply for a licence or submit an entry where the place for the activity will take place does not comprise “premises”. Notwithstanding HMRC “treating each case on its merits”, I can’t see any statutory discretion for such a “policy” and it runs contrary to what is said in section 14 of Notice 39: Spirits Production In the UK.

The legal requirements are consolidated “bits and pieces” probably across two centuries, from a time of rigid control by HM Customs and Excise (as was) such that no potential for illicit distillation could occur and, indeed, licences had to be paid for and renewed annually. In fact, until 1986, no person could own or use a still for any purpose without being licensed by HMCE. Those days are long past, but we left with archaic, and, frankly, pointless law and unclear and contradictory policy. If the spirits are duty-paid, that ought to be the end of it in terms of whether one is licensed to use a still or not or the premises “entered”; there is no risk at all to the revenue. So, going back to Fathers Ted and Jack: “Down with this sort of thing”.

Alan Powell