Alcoholic Ingredients Relief (Excise Notice 41)
Find out about Alcoholic Ingredients Relief, which is the repayment of excise duty charged on spirits, beer, wine, other fermented products and cider.
Introduction
Alcoholic Ingredients Relief provides for the repayment of excise duty charged on spirits, beer, wine, other fermented products (previously called made-wine) and cider when used in the production or manufacture of products, such as:
- beverages with an alcoholic strength not exceeding 1.2% alcohol by volume (ABV)
- chocolates for human consumption containing no more than 8.5 litres of alcohol per 100kg of chocolate
- other foods for human consumption (not including beverages) containing no more than 5 litres of alcohol per 100kg of the final product
- vinegar
For the purposes of this notice, the term ‘alcohol’ includes spirits, beer, wine, other fermented products and cider.
Beer is a malt beverage and includes ale, porter, stout and any liquor which is made or sold with a description of beer (or as a substitute for beer). It has a strength of more than 0.5% ABV and includes mixtures of beer with non-alcoholic drinks.
Cider or perry is made from fermenting apple or pear juice, without adding any alcoholic liquor, or any liquor or substance which gives colour or flavour (unless HMRC Commissioners allow them as being necessary for the production). It has a strength of more than 1.2% ABV but less than 8.5% ABV (at a temperature of 20°C).
In addition, the pre-fermentation mixture should satisfy the pre-fermentation requirement and the cider should satisfy the final product juice requirement.
Other fermented products include any liquor with a strength of more than 1.2% ABV, which is made by either:
- the alcoholic fermentation of any substance
- mixing any liquor or substance (not including wine, beer, cider or spirits)
Spirits include spirits of any description (other than methylated spirits) which have a strength of more than 1.2% ABV. This includes all liquors mixed with spirits, and all mixtures, compounds or preparations made with spirits.
Wine includes any liquor with a strength of more than 1.2% ABV, which is made from the alcoholic fermentation of fresh grapes or the must (juice) of fresh grapes, whether or not the liquor is fortified with spirits or flavour.
Your responsibilities
As a claimant of the relief we expect that you’ll be a revenue trader, that is, involved in any way with goods or services liable to excise duty, whether or not the duty has been paid. Notice 206 Excise goods: Revenue traders’ records explains in more detail.
As a claimant of the relief you must:
- exercise control over the production or manufacture of eligible articles, if you’re a producer or manufacturer
- keep complete and accurate accounts and records of the purchase and use of alcohol
- permit our officer to enter and inspect your premises and the production or manufacturing processes of any product in which alcohol is used
- upon request supply our officer with information and documents relating to the products supplied
- submit claims covering a 3 month period in which the eligible article was created within 3 years of the ending of that 3 month period
- comply with the requirements of this notice
If you fail to comply with the law, penalties may be imposed.
The applicable law
The main laws governing the use of spirits, beer, wine, made-wine, cider and perry in the production or manufacture of eligible articles can be found in the following:
- Customs and Excise Management Act 1979
- Finance (No. 2) Act 2023
- Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (SI 1992/3135)
- Revenue Traders (Accounts and Records) Regulations 1992 (SI 1992/3150)
Nothing in this notice overrides the requirements of the law.
Eligibility
Eligible articles
In this notice we use the term ‘eligible articles’, this means:
- beverages with an alcoholic strength not exceeding 1.2% ABV
- chocolates for human consumption containing no more than 8.5 litres of alcohol per 100kg of chocolate
- other foods for human consumption (excluding beverages) containing no more than 5 litres of alcohol per 100kg of the final product
- vinegar
Determining if products are eligible articles
Where your final product is a liquid (other than vinegar), for example, a soft drink, the alcoholic strength of the liquid must not exceed 1.2% ABV.
Where your final product is a solid or semi-solid article such as a frozen meal, the proportion of alcohol contained in the product must be compared against the net weight of the product, which is the weight excluding any:
- packaging
- inedible accessories supplied (fork, spoon, dish, and so on, but not inedible parts of the article itself, for example, the bones in a chicken)
- products not normally associated with the eligible article for example, free gift
Products that consist of separate parts
If the product consists of separate parts, not all of which contain alcoholic ingredients, (for example, a convenience food item consisting of a wine-based sauce with a separately packaged portion of rice), these may be taken together when assessing eligibility, provided you supply them as one product.
Products produced by cooking
Where a product is produced by cooking, the alcoholic ingredients will normally boil off during the cooking process leaving little or no alcohol in the final product. However, there will be occasions where the proportion of alcohol in the recipe exceeds the eligibility criteria and there’s doubt as to if the cooking process has reduced the level of alcohol to within the limit. In those cases it’s your responsibility to have the product analysed in support of your claim.
Eligibility to claim the relief
You may claim relief from duty if you:
- produce or manufacture eligible articles using duty paid alcohol, or provide alcohol which is subsequently used to produce eligible articles
- comply with the requirements set out in this notice
As an alternative to claiming relief from duty, you may be eligible to produce or manufacture your products using duty unpaid alcohol. For information on this facility, read ‘Manufacture of eligible articles using duty unpaid alcohol’ in this notice.
You’re not eligible to claim the relief if:
- you produce syrups exceeding 1.2% ABV for use in vending or other point of sale dispensing machines of low alcohol or soft drinks
- you produce beverages exceeding 1.2% ABV produced or intended to be consumed in frozen form or you produce products exceeding 1.2% ABV intended to be consumed as a substitute for a beverage
- you’re unable to comply with the requirements set out in this notice
Conditions for treatment as an eligible article
To be treated as an eligible article, any products for which a claim for Alcoholic Ingredients Relief is made must be produced or manufactured under carefully controlled conditions and be regularly monitored to make sure they comply with the definition.
Conditions to support treatment as an eligible article include:
- detailed records must be kept of all production and manufacturing processes including the quantities and strengths of alcohol used and measurements of the alcohol percentage in the final product — if products are produced under controlled conditions where alcohol is added by a calibrated machine, a representative sample must be checked for compliance with the conditions and results recorded
- if the process is not automated then proof of compliance with the definition will be needed for every eligible article or batch of eligible articles produced — this will include measurement of alcohol in the final product
- you must be able to prove that the alcohol for which the claim is made is the same alcohol that has been included in the eligible article — this will include evidence that sufficient security and other checks are in place to make sure alcohol for which a claim has been made cannot have been diverted for other use
If these conditions (or other reasonable conditions that we need to make sure compliance with the objectives of the scheme) cannot be demonstrated to our satisfaction, then a repayment of duty on the alcohol incorporated in the eligible article will not be made.
Claims from non-manufacturers
The person or company producing or manufacturing the eligible article would normally make the claim. However, there are circumstances where others in the alcohol supply chain may make a claim.
You may be able to make a claim if you can:
- prove that you’ve provided alcohol used to produce or manufacture an eligible article
- comply with all the relevant conditions within this notice
This is subject to the terms given in ‘Proof that no other claims have been made for alcohol made into an eligible article’.
Claiming on behalf of another person or company
Relief may only be claimed by the person or company:
- producing or manufacturing the eligible article
- paying duty on alcohol that’s eventually incorporated into an eligible article
Proof of duty payment
To successfully make a claim you must be able to prove to our satisfaction that UK excise duty has been paid on the alcohol that has been incorporated into an eligible article.
Evidence of UK excise duty payment
As the duty payer, you must submit either the original duty payment document or a copy of it.
Examples of what we mean as ‘duty payment document’ could be any of the following:
- a copy of your purchase invoice or invoices for the alcohol used in the eligible articles on your claim
- a validated copy 2 or electronic confirmation of form W5, form W6, form W50, form W5D or form W6D
- form HM2, form HM4 or form TRC2
- form EX46 or form EX606
- a print out of the customs import declaration
- a duty deferment statement
Other evidence may be accepted subject to our approval. Where you’ve submitted evidence that is not one of the above, explain this clearly in writing along with your claim.
Proof that no other claims have been made for alcohol made into an eligible article
We must make sure that claims are not duplicated. In certain circumstances we may need proof that no other claims have been made against the alcohol used in the eligible article.
Producer or manufacturer of an eligible article
Unless we specifically need you to do so, you’ll not have to demonstrate that claims have not been made by anyone else in the alcohol supply chain.
Non-producers or non-manufacturers of an eligible article
Although you’ve not produced or manufactured the eligible article you may be able to make a claim for duty which has been paid on alcohol that’s subsequently incorporated into an eligible article. The producer or manufacturer will normally make the claim, with any payment of duty to you being a commercial decision between you and the producer or manufacturer.
However, if you want to make a claim in your own right then you must be able to identify every person who has owned or held the alcohol used in the creation of an eligible article. You must be able to provide satisfactory evidence that no other person in the supply chain has previously made a claim for that alcohol under this scheme.
Other conditions for non-producers or non-manufacturers
You must be able to:
- meet the conditions given in ‘Evidence of UK excise duty payment’ and ‘Non-producers or non-manufacturers of an eligible article’
- get evidence from the producer or manufacturer of the article that provides sufficient information to assure us that the article conforms to the definition of an eligible article (read ‘Eligible articles’ in the notice)
The evidence needs to include recipes, measurements of alcoholic strength, production processes, and so on. This list is not exhaustive but the same level of evidence that a producer or manufacturer of the eligible article needs to produce must be given by the applicant. If the information is not deemed to be sufficient, we’ll ask for more evidence to be given before considering a repayment.
Making a claim
Authorisation or licensing requirements
There’s no requirement to apply for authorisation or give notice of your intention to claim duty. Also, if you use spirits purely for the manufacture of eligible articles, you do not require a compounder’s licence.
Claiming relief for all alcohol used in the manufacturing process if only part of that alcohol remains in the eligible article
Although eligibility is based on the proportion of alcohol remaining in the finished article, you can reclaim the duty on the total amount of alcohol you use in manufacturing the eligible article.
Claiming relief on imported alcohol
Provided the UK duty has been paid and the alcohol is used as an ingredient in an eligible article you can claim relief on imported alcohol.
Where the Commissioners are satisfied that a product has been correctly exempted from excise duty in an EU member state, that product may enter the UK without the need for payment of excise duty. In these circumstances, the goods must travel with all necessary documentation to prove that the exemption has been granted, including where appropriate, official stamps or signatures and an explanation for the exemption from the relevant authorities. This applies only to Northern Ireland.
If it cannot be established nor proven that an exemption has been correctly granted, the goods will be liable to excise duty in the normal way, but a subsequent claim for a refund of duty may be made if it conforms to the conditions set out in this notice.
Making a claim
You can claim for Alcoholic Ingredients Relief using form EX597 or by contacting Imports and exports: general enquiries.
You need to make a separate claim for each set of premises at which you produce or manufacture eligible articles.
Each claim form can only be used to cover a 3 month period. If you’re claiming for a period of more than 3 months, you will need to complete additional claim forms.
If you want to claim for a period of less than 3 months due to exceptional reasons, you should provide the National Excise AIR Centre (NEAC) with supporting evidence as to why you think this should be allowed.
Claims must:
- be submitted within 3 years of the end of the 3 month production period in which the alcohol was incorporated into an eligible article — if you submit a claim late, it should be accompanied by supporting evidence, such as a declaration from a company representative, explaining why the claim was not submitted on time (each case will be considered on its own merit)
- include all alcohol used in the production of eligible articles during that period
- be signed by the proprietor, partner, company secretary or director of the company if they are made by a company
In special cases, we’ll allow you to authorise an employee at supervisory level or above to sign on your behalf. You must keep NEAC informed of any changes to the authorised signatory of the form.
If you do not comply with these conditions, the NEAC is not obliged to authorise the repayment.
Send your claims to:
HM Revenue and Customs
Excise Processing Team
BX9 1GL
Additional information needed
When submitting a claim for AIR, you must include a worksheet or spreadsheet to show how you’ve calculated your claim amount.
Identify each product used by name in a way that can be matched to your other evidence (for example, by brand name).
An example of the type of sheet we would expect to see is produced below. Failure to submit a worksheet will result in your claim being returned to you.
| Alcohol category (spirits, wine, beer, cider or other fermented products) | ABV % | x | Litres used | x | Duty rate | = | Amount paid (£) |
|---|---|---|---|---|---|---|---|
| Beer | 5.5 % | x | 12 | x | Duty rate paid | = | 13.86 |
| Wine | 10% | x | 15 | x | Duty rate paid | = | 42.75 |
| Spirits | 40% | x | 24 | x | Duty rate paid | = | 303.74 |
| Beer (B) | 3.4% | x | 37 | x | Duty rate paid | = | 11.66 |
| Spirits (B) | — | x | — | x | Duty rate paid | = | — |
| Total | various | x | 88 | x | various | = | 372.01 |
Make sure the duty rate used in your calculation is the one that was in place at the time the alcohol was purchased, as rates may have changed following a budget.
The way in which Alcohol Duty is charged has changed. This is the duty due on alcohol products under section 47 of the Finance (No. 2) Act 2023. Alcohol Duty will be chargeable on litres of pure alcohol across all alcohol products. Additionally, there is a temporary easement for calculating wine between 11.5% and 14.5% ABV, where the duty calculation will be based on an assumed strength of 12.5% ABV.
For more information on calculating Alcohol Duty from 1 August 2023, check the Alcohol Duty guidance collection page.
Losses of duty paid product
If you can explain why the losses occurred, you can still include the relevant excise duty as part of your claim.
As soon as any loss has been detected, you should note in your records the circumstances and reasons for the loss occurring.
Any losses for which you cannot give a satisfactory explanation will be excluded from your claim.
Payment of claims
We can process your claim once we receive your completed claim form with all the required supporting documentation and evidence. We aim to process and pay complete claims within 30 working days.
You’ll receive your payment by bank transfer (Bacs). Exceptionally we could pay by payable order. We’ll always pay any amount greater than £50,000 by Bacs.
Manufacture of eligible articles using duty unpaid alcohol
General
If you’re a producer or manufacturer of:
- eligible articles and have an anticipated duty liability of £5,000 or more per annum
- semi-finished products, such as flavours and essences, for use in the production of eligible articles
We may approve you to produce or manufacture eligible articles under duty suspension (that is, in a trade facility warehouse using duty unpaid alcohol). A trade facility warehouse, is a place of security, approved by HMRC for the storage of goods without payment of duty.
This means that your approval will be strictly limited to the production of eligible products. You’ll not be able to carry out any other operation under duty suspension Notice 196 Excise goods: Authorisation of warehousekeepers, approval of premises and registration of owners explains in detail how to apply and what criteria are required for warehouse approval.
Spirits used to make semi-finished products
If you intend to use spirits in your manufacturing process to make semi-finished products which will not be used at your premises to produce eligible articles, you’ll need a compounder’s licence. To apply for a licence, complete and sign Alcohol duties: application for an Excise Trade licence (L5) for a licence to carry on an excise trade and forward it along with your application for a warehouse approval to:
HM Revenue and Customs
Excise Processing Team
BX9 1GL
There’s no charge for the licence, and it lasts indefinitely. However, we can cancel your licence if you fail to comply with any of our requirements or if you stop trading.
A licence is not needed if you use only beer, wine, other fermented products (previously known as made-wine) or cider in your manufacturing processes.
Approval to use duty unpaid alcohol
We may visit you to look at the way you intend to control the receipt and use of alcohol and check that your business records are adequate for our purposes.
Once we are satisfied, we’ll send you an approval letter in duplicate, asking you to sign it and return one copy. The approval letter will set out the conditions that you must meet.
Conditions of using duty unpaid alcohol
The conditions we set may vary according to individual circumstances. However, the following conditions are common to all approvals. You must:
- exercise effective management control over your accounting and production systems
- permit us to enter your premises at any reasonable time
- provide any facilities or help we need to carry out our checks
- retain all records for at least six years
Further requirements
If you deliver semi-finished products to a manufacturer or producer in an excise or trade facility warehouse your despatch note or other document accompanying the products should show:
- your name and address as the despatching warehouse
- the name and address of the receiving warehouse
- the bulk quantity and either the alcoholic strength or the quantity of alcohol (in litres) contained in each type of product supplied
The receiving manufacturer or producer should acknowledge receipt of the products by endorsing the despatch note or other document and returning a copy to you. If any product is missing or damaged the manufacturer or producer should record details on the despatch note, or other similar things. Both you and the manufacturer or producer must keep copies of this documentation as part of your records.
Providing financial security
You’re not required to provide security as a normal condition of approval. However, if we find that your compliance with our requirements is poor we may need you to provide a financial guarantee. Under these circumstances we’ll tell you what you must do.
Spirit-based flavourings and essences
Payment of duty on imports of spirit-based flavourings and essences
Duty is not payable on any spirits contained in flavourings imported into the UK or used in the production of flavourings, if those flavourings fall within CN Code 3302 and are for use in the:
- preparation of food for human consumption
- preparation of any beverage of an alcoholic strength not exceeding 1.2% ABV
This provision also applies to essences.
Spirits based flavourings and essences not classified under Code 3302 will be liable to duty (but may be eligible for AIR).
Spirit-based flavourings and essences manufactured for distribution within the UK
There’s no duty liability for spirit-based flavourings and essences manufactured and distributed within the UK if they fall under the classification in CN Code 3302 and comply with the conditions given in this section.
There is a duty liability for all other spirit-based flavourings and essences, other than while those products are subject to duty suspense provisions. The liability of products containing flavourings and essences will be determined by the final product.
Warehouse approval to receive or supply spirit-based flavourings and essences duty unpaid
Spirit-based flavourings and essences classified under CN Code 3302 are exempt from duty if they comply with the conditions given in this section (even if they are spirit-based with a strength of over 1.2% ABV). There is no need for an excise or trade facility warehouse approval to receive or supply these products without paying the duty.
However, warehouse approval is needed if you want to receive or supply any spirits-based flavourings and essences in duty suspension that are not classified under CN Code 3302.
The duty liability will be determined by the nature of the end product.
Duty on essences which are used to manufacture or produce alcoholic drinks
If you manufacture or produce any alcoholic drink which has a strength exceeding 1.2% ABV, then that drink will be liable to duty. The duty liability will be determined by the nature of the end product.
Records and accounts
Records and accounts requirements
As a revenue trader, we require you to keep records of all activities involving the use of alcohol in the production or manufacture of eligible articles. This includes information on:
- the quantity and type of alcohol received
- stockholdings
- use in production
- the quantity and type of eligible articles manufactured or produced
- sales of eligible articles
Notice 206 Excise goods: Revenue traders’ records explains in detail what records you need to keep if you’re a revenue trader, that is a trader involved in any way with goods or services liable to excise duty.
Generally, your normal business records will contain or can be modified to contain the information we need. However, they must be:
- accurate and kept up to date
- completed in ink or other permanently legible material
- readily accessible to us
- kept at your premises for at least 6 years from the date of the last entry (we are aware that this may cause you storage problems, involve you in undue expense or cause you other difficulties — if so, you can ask our helpline on Telephone: 0300 200 3700 for permission to keep some of your records for a shorter period)
- available for inspection at all reasonable times
You must not, without the agreement of our helpline, Imports and exports: general enquiries:
- remove any information from your records
- obliterate or delete any entry
At the end of each production period, you must add up and record the total quantity of each type of alcohol (that is, spirits, wine, and so on) used during the period and the excise duty paid on it. Wine and made-wine must be totalled and recorded by duty banding (the strength ranges for alcohol products set out in the Finance (No. 2) Act 2023, Schedule 7).
Remember, if you’re claiming relief on products containing made-wine, which may have been diluted after the duty was paid, you must be able to identify the amount of duty paid on that product.
Other records
As a revenue trader we require you to maintain and produce for examination your records of your business activities. This includes all records and documents relating to:
- stock
- handling
- purchases
- sales
- imports
- exports
- any losses in production of dutiable products
In addition to these records, we may examine:
- profit and loss and trading statements
- management accounts and reports
- balance sheets and trading forecasts
- internal and external auditors reports
- any record maintained for a business purpose
As a claimant, we may also ask you to produce specific records or documents that relate to your particular claim, whether or not you consider yourself to be a revenue trader.
We’re aware that a great deal of information to which we have access is of a confidential nature. We take great care to make sure that respect for confidentiality is maintained.
Visit to inspect records
We’ll visit you from time to time to verify your claims. When we visit, we need you to:
- admit us to your premises
- produce your records and goods for inspection
- provide facilities for examining the goods and taking account of them
- allow us to take samples
- observe health and safety requirements
For non-manufacturers we’ll need admission to examine your accounting and other records that you must keep in support of your claim.
Avoiding penalties
You can avoid a financial penalty by:
- checking that you’ve given complete and accurate information in your claim for relief
- applying for a licence to carry on an Excise Trade at the correct time
You have the right to appeal if we impose a penalty.
If you’re unaware you’ve made a mistake in your claim, or have not applied for a licence, tell us as soon as possible. We’ll be able to reduce the penalty in many cases to zero.
Review and appeal procedures
Disagreements with decisions made
When we make a decision that you can appeal against, we’ll tell you and offer you a review. We’ll explain the decision and tell you what you need to do if you disagree.
For example with:
- the amount of an assessment the issue of a civil penalty
- a decision specifically connected to the relevant duty or claim
You’ll usually have three options. Within 30 days you can:
- send new information or arguments to the officer you’ve been dealing with
- have your case reviewed by a different officer
- have your case heard by an independent tribunal
A review will be handled by a different officer from the one who made the decision. If you prefer to have an independent tribunal hear your case, you must write directly to the Tribunals Service.
Time limits to ask for a review
If you want us to review a decision, you must write to the person who issued the decision letter, within 30 days of the date of that letter. We’ll complete our review within 45 days, unless we agree another time with you.
You cannot ask the tribunal to hear your case until 45 days (or the time we agreed with you) has expired, or we’ve told you the outcome.
If you’re not satisfied with the review’s conclusion, you have 30 days within which to ask the tribunal to hear your case.
If we cannot complete our review within 45 days, or any time we agreed with you, we’ll ask you if you’re willing to agree to an extension so that we can complete the review. If you do not agree to an extension, the review is treated as concluding that the decision being reviewed is upheld.
We’ll write and tell you this: you then have 30 days from the date of that letter to ask the tribunal to hear your case.
Requesting a review
Your request should set out clearly the full details of your case, the reasons why you disagree with us and provide any supporting documentation. You should also state what result you expect from our review.
Appeal to independent tribunal
If you do not want a review, you may appeal to the independent tribunal. You need to send your appeal to the Tribunals Service within 30 days of the date on the decision letter.
More information
You can get more information about reviews and appeals in fact sheet HMRC1: HM Revenue and Customs decisions — what to do if you disagree.
You can also find more information about how to appeal to the tax tribunal on the Tribunals Service website.
Your rights and obligations
Read the HMRC Charter to find out what you can expect from HMRC and what we expect from you.
Help us improve this notice
If you have any feedback about about this notice, write to:
HM Revenue and Customs
Alcohol Team
4th Floor
Trinity Bridge House
2 Dearmans Place
Salford
M3 5BS
You’ll need to include the full title of this notice. Do not include any personal or financial information like your VAT number.
If you need general help with this notice or have another question, contact Imports and exports: general enquiries.
Putting things right
If you’re unhappy with HMRC’s service, contact the person or office you’ve been dealing with and they’ll try to put things right.
If you’re still unhappy, find out how to complain to HMRC.