AIR4010 - Alcoholic Ingredients Relief: Technical guidance: Why do we need an alcoholic ingredients relief regime?

The largest users of alcohols, mainly spirits, are industrial manufacturers and pharmaceutical companies. However, the area we are concerned with in this guidance is the use of alcohol in the production or manufacture of soft drinks, chocolates, vinegar and other kinds of food.

Relief from duty on alcohols used in the production of eligible articles was first introduced in January 1979. The relief, however, was limited to the duties on beer, wine, made-wine, cider and perry. In January 1993, a similar relief was introduced for spirits.

The introduction of the relief for spirits was a direct result of the implementation of Article 27 of the Structures Directive (92/83/EEC).

The 1995 Finance Act finally unified the two systems, to bring them fully into line with Article 27 of the Structures Directive and simplified the claims procedures.

From 1 January 2021 the Directive only applies to Northern Ireland, but the AIR regime as set out in Finance Act 1995 remains in place for both NI and GB.

Under the unified system, alcohol is eligible for relief when:

used in the production or manufacture of:

• beverages of a strength not exceeding 1.2 per cent abv;
• chocolates containing no more than 8.5 litres of alcohol per 100 kilogram of chocolates;
• other foods for human consumption (excluding beverages) containing no more than 5 litres of alcohol per 100 kilogram of the final product; or

converted into vinegar.

For the purpose of this guidance and Notice 41, these products are known as “eligible articles”, a term not defined in legislation.

The 1995 Finance Act in 2015 was amended on 1 February 2016 to remove the existing minimum monetary claim amount, to amend the time limits for a claim and to remove the restriction that a claimant must be a wholesale manufacturer.