The United Kingdom could be on the cusp of a craft distilling revolution, similar to the one that has swept through America, as growing evidence suggests that the main obstacle to distilling has effectively been removed.
You’ve no doubt heard that it is illegal to make whisky on small stills under a certain size.
WELL IT’S NOT.
For decades there has been a widely held view that distilling was not allowed on stills smaller than 18 hectolitres (1 hectolitre ==100 litres, ed.). It has been repeated so often that people have assumed it to be correct and it has largely gone unchallenged. As recently as two weeks ago the Scotch Whisky Association’s chief executive Gavin Hewitt said that malt spirit could not legally be distilled on a still smaller than 18 hectolitres.
But new information shows that this interpretation is WRONG. The rules governing the minimum still size are not set in stone, and they neither prevent distilling on small stills now – but technically they never did. Moreover, not only can the rules be challenged, but on one more than one occasion in recent weeks they have been – and small distillers in both England and Wales have been granted licences to make whisky spirit on stills much smaller than 1800 litres capacity.
The laws governing distilling are highly complex but the sections pertaining to a minimum still size were first enshrined in The 1823 Excise Act and are included in the Alcoholic Liquor Duties Act (ALDA) 1979. They were drafted in relation to customs and excise duty and are designed to ensure that the correct tax is paid.
Customs and excise commissioners have historically adopted a policy of refusing licences to any distiller wishing to distill spirit where the largest still used is less than 18 hectolitres (or originally, 400 gallons) or where an equivalent throughput could not be achieved in an eight hour shift using a patent or continuous still. But in a customs and revenue internal guidance document known as X-1 and published on the HMRC website as SPIR 3090 the following words appear: “We may consider licence applications in respect of stills below 18 hectolitres where there are satisfactory controls in place to protect the revenue and the required control resources are not disproportionate to the amount of revenue involved.” According to specialist independent excise dusts consultant Alan Powell, who played a part in writing the guidelines when he worked in the customs and excise policy division, these words open the door for would-be distillers. “I believe the law (consolidated from many years ago) provided the commissioners with discretion to refuse to issue a licence in respect of premises where the largest still was less than 18 hl (originally 400 gallons) because of the possible risk that such a still might be moved from what would (then) have been the entered premises in remote areas for illicit use,” he says. “In current times, this risk is negligible and certainly not credible where the distillery is located in a restricted urban area.”
Incredibly, then, the standard view that you can’t distill on small stills is wrong. Commissioners historically refused licences to people wanting to distill on small stills and went unchallenged because before 1995 the only right to appeal was through a long and expensive judicial review process. That has now been scrapped.
“Basically, until the law was changed in 1995, the only way a challenge could be made against a decision by HMCE was by judicial review, which is expensive,” says Powell. “In relation to under-sized stills, I guess nobody even thought a challenge was possible at all. Nobody likes to question Customs. “
“If the commissioners’ decision is to refuse an application for a licence now, that decision can be appealed to the tax tribunal, which anybody can do and at no cost (or lower cost than judicial review if professional assistance is sought.) Bear in mind, HMCE/HMRC has to act reasonably in reaching a decision and the tribunal can review HMRC’s decision. Those legal principles are not optional. The commissioners are constrained to follow them or else are acting unlawfully.”
So much for the theory. But now it seems in practice customs and excise has shifted its position, too. The newly-established London Distillery Company, with Powell’s help, successfully applied for a licence to start distilling in Battersea later this year, and in Wales organic farmer John Savage-Onstwedder started distilling this week after being granted a licence. “The still I was applying for was only 350 litres, so well below their minimum requirement,” he says. “Nonetheless, I thought I would phone my local guy and when I mentioned their own regulations he said: ‘those regulations were introduced when we were still roaming the Scottish hills with muskets trying to sniff out the illegal stills! Put in your application and see what happens’. I did and lo and behold I was granted a licence.”
While the new approach makes the potential for a wave of new craft distillers, Alan Powell warns that there are still considerable barriers to overcome. “Bear in mind that not only is the licence required, but one must also obtain an approval for the distillery (this relates to conditions, site plan etc) AND, importantly probably have to have an excise warehouse (bond) in association with the distillery,” he said. “The law is not straightforward.”
What the law states Alan Powell quotes a decision made by Dr Nuala Brice in the case TDG (UK) Ltd and the Commissioners of Customs and Excise. From consideration of legal authorities, Dr Brice noted that the following principles may be derived.
* A person to whom discretion is given must consider each application and decide it in the light of circumstances at that time.
* A person may develop a policy as to the approach that he will adopt in the generality of cases but the policy must not preclude the decision-maker from departing from it, or from taking into account the circumstances of each case
* The attitude of the decision-maker must be such that he is prepared to make an exception in a deserving case.
* An inflexible and invariable policy is unlawful.
In particular, Dr Brice directed that the commissioners must observe the principles of reasonableness enunciated in the decision, by the following: “WE DIRECT that the commissioners should take steps to ensure that officers conducting statutory reviews under the provisions of section 15 of the 1994 Act are clear about: the relevant legislation under which the particular decision is taken; their correct function under section 15 which is to reach their own decision; the need to take into account all the circumstances of each case; and the need to be aware that they are not precluded from departing from a policy and that THEY SHOULD BE PREPARED TO MAKE AN EXCEPTION IN A DESERVING CASE” (The writer’s emphasis) The simple test is the man on the Clapham omnibus test.