Firms can now reclaim tax for alcohol in food

09-Mar-2016 - Last updated on 09-Mar-2016 at 22:33 GMT

Food manufacturers can now reclaim tax paid on alcohol

Food manufacturers are now able to claim back tax on alcohol after an amendment to the law came into force last month.

Anyone who uses duty paid alcohol as an ingredient in ‘the commercial production and sale of food and drink’ is eligible for Alcoholic Ingredients Relief, Her Majesty’s Revenue and Customs (HMRC) has stipulated. Previously, only wholesalers were eligible.

The law applies to food that contains no more than five litres of alcohol per 100kg of final product. In the case of chocolate, that figure is 8.5kg per 100kg, while qualifying beverages should not exceed 1.2% alcohol by volume. Vinegar is also eligible.

If the product consists of separate parts, not all of which contain alcoholic ingredients, these may be taken together when assessing eligibility, provided they are supplied as one product. A convenience food item consisting of a wine-based sauce with a separately packaged portion of rice is one such example.

Doubt over claims

For products made by cooking, and there is doubt as to whether the cooking process has reduced the level of alcohol to within the limit, HMRC has advised it is the manufacturer’s responsibility to have the product analysed in support of the claim.

Another condition is that 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 made under controlled conditions where alcohol is added by a calibrated machine, a sample must be checked for compliance with the conditions and results recorded.

Alcohol in the final product

If the process is not automated, then proof of compliance with the definition will be required for every eligible article or batch produced. This will include measurement of alcohol in the final product.

As an alternative to claiming relief from duty, producers may be able to make products using duty unpaid alcohol. Only firms that produce flavours and essences and have an anticipated duty liability of £5,000 or more a year are eligible.

Manufacturers should use form EX597 (Alcohol duties: claim for Alcoholic Ingredients Relief) to make a claim.