Navigating the complex bureaucratic process of HMRC policy isn’t an enjoyable prospect for any would-be distiller but change is on the horizon and, with it, perhaps more distilling pubs could turn their hands to making spirits.
Alan Powell, who also sits as an industry expert on the high-level Joint Alcohol and Tobacco Consultative Group with HMRC, reveals: “Key meetings last November and in January will reduce bureaucracy and improve communications concerning applications for distiller’s licences for small businesses.”
“HMRC is recognising the need to be flexible and is picking up the idea of the ‘drink factory’, comprising one core authorisation of a business to conduct a range of alcohol production activities — the craft distillery boom has been the main impetus for such simplification.”
There are three different licensing laws depending on whether you want a simple process like rectifying neutral spirit or make spirits from scratch. Here’s what you need to know:
Rectification
If you want to produce small quantities with minimal fuss, you can buy a small still and make gin and other rectified spirits using duty-paid neutral spirits. Powell explains: “All you need to do is apply for a combined rectifiers/compounders licence (NB: HMRC has no powers to refuse such a licence) and “make entry” — ie, make a list of the rooms and kit you will use and send it off to HMRC.
“The mere making of the entry (form Ex 103) suffices and once you send the entry form registered delivery with evidence of signature from HMRC, the job’s done. HMRC does not need to approve anything and once the licence comes through, you are in business.”
Maturing spirits
If you want to store spirits in “duty suspension” for maturation purposes, this needs more work because you will also need to make a case to HMRC for the approval of a bonded warehouse.
“The key things are that you have paid all your taxes, have a credible business plan and can keep accurate accounts and records.
“You’ll also have to register and use the electronic Excise Movement and Control System (EMCS) so that your alcohol supplier can raise electronic movement documents and you can receipt them.
“HMRC has been hung up about business plans as they look to deter alcohol fraudsters but, unfortunately, they have been checking on new distillery applications without consideration of the business or need.”
Distilling from scratch
If you want to go the whole hog and distil from scratch, you will need a distiller’s licence: “You will need to apply to be approved by HMRC — that is: describe your distillery premises, plant and processes to be used, including the “distillery warehouse”, which is the vat you will collect your spirits in when produced.
“Next, the spirits have to be immediately transferred to a ‘full’ bond, which is where you will need to have room or place approved as an excise warehouse in association with the distillery.
“Don’t forget you will need to register to receive and use duty stamps — with few exceptions, almost all retail containers need them, even in your own pub.”