Showcasing the British spirit Alan Powell Grogginess without fear –hose out those casks!

Excise law is often arcane and opaque and sometimes apparently, well, odd. The Alcoholic Liquor Duties Act 1979 (ALDA) is the primary law concerning alcohol duty that will be overhauled by a new Alcohol Act, currently at Finance Bill stage.

A curiosity of ALDA is at section 34 which states:

Prohibition of grogging

(1) No person shall

(a) subject any cask to any process for the purpose of extracting any spirits absorbed in the wood thereof; or

(b) have on his premises any cask which is being subjected to any such process or any spirits extracted from the wood of any cask

(2) A contravention of this section shall attract a penalty under section 9 of the Finance Act 1994 (civil penalties)

(3) All spirits extracted contrary to this section and every cask which is being subjected to any such process or which, being upon premises upon which spirits so extracted are found, has been subjected to any such process shall be liable to forfeiture.

Given that the section of law is headed “prohibition of grogging”, it is curious there is no interpretation of the term “grogging” in law, which is almost a colloquialism to express the purposeful extraction of spirits absorbed in the wood of a cask. Anyway, you can’t do it legally! No ifs or buts (or butts, even!)

Yet there will inevitably be grogging which is not done “on purpose” and where the extraction of spirits is fortuitous (ie happenchance, not

“fortunate”) such as cask rinsing or where beer or cider may be matured in an empty spirits cask. There was a famous case of a Fullers’ strong beer made very strong indeed by fortuitous grogging during maturation in an ex whisky cask and HMRC (in my view) getting the law wrong to say it was spirits production which it was not (in my view it was fortification of a fermented liquor, being a fortified made-wine since the law does not permit fortification of beer and still be classified as beer, but that’s another story) Curiously, "cask rinsing" may be applied for in the application forms from HMRC for excise warehouse approval but - with cross referencethis is modified by the standard approved processes in warehouse of paragraph 7 1 of HMRC's Notice 196 which states, inter alia: "cask rinsing, subject to the warehousing of the contaminated cleaning agent." This is unclear but implies that the cleaning agent (let’s call it “water”) will be “contaminated” ie it will contain extracted spirits and must be warehoused ie held in duty suspension in the excise warehouse OK, what then? And is that not in breach of absolute prohibition of grogging expressly in ALDA s34?

In America, Bourbon casks are being subject to cask rinsing to extract the absorbed spirits which is “re-used” by blending with full strength whiskey (such as Jim Beam’s Devil’s Cut) but would be totally unlawful in Blighty

Grogging will be legalised

Maybe to regularise the practical situation, after repeal of ALDA, grogging will be treated as production of spirits as currently set out Schedule 6 paragraph 2 in the Finance Bill 2023

The British Distillers Alliance (BDA) is a non-profit making body which provides a professional service for independent and craft businesses in the spirits production industry and supply chain The BDA represents distillers, rectifiers and compounders and those in related sectors New members always welcome.

Production of spirits will not be subject to the current distillers' licence and warehousing approvals, but will be incorporated in the simplified alcohol production ("drinks factory") regulations to be made under what is currently clause 88 of the Finance Bill 2023 This will or ought to mean though that excise warehousekeepers occupying maturation warehouses that grog will need to be approved as producers of alcohol Presumably, after being approved this would simply be a record of the spirits extracted and then “re-warehoused” in the accounts? There may be some consideration about the W1 monthly stock return since the spirits will have been generated “from nowhere”, so to speak In April, I requested clarification from HMRC’s team working on the new law but have not had a response to date Anyway, what is lost as the angels’ share during maturation might be hosed out to take some back from the freeloaders!

Alan Powell is a specialist excise duties consultant, formerly a Policy official within HMCE’s HQ teams. He is excise duties advisor to the Chartered Institute of Taxation, honorary advisor to the UK Warehousing Association and founded the British Distillers Alliance as a conduit for consultation with, and representation to, Government bodies and to assist and advise on technical matters

For further information: www.britishdistillersalliance.com

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