A little whine
A couple of weeks ago, I was at the Wine & Spirit Education Trust (where I’m studying for a Diploma in Wine and Spirits) listening to Sally Easton MW lecturing on the global business of alcoholic beverages. This is the sort of thing tax lawyers do on their day off (after they’ve finished ironing the pages of their tax handbooks and re-proofed their anoraks). Nothing like a nice few statistics to set you up for the day.
During the lecture Sally asked the question, ‘Which European country has the highest per capita alcohol consumption?’ As my fellow diploma students are all in the wine trade I rarely find myself in possession of superior knowledge to theirs on any wine-related issue. Not so today. With the rest of the group seemingly stumped, I confidently stuck up my hand and answered ‘Luxembourg’.
‘Correct’ Sally said, seeming a little crestfallen. ‘Does anyone know why?’ A man at the back who worked for an off-licence chain thought it might be that the landlocked Luxembourgers were simply a nation of p***-heads. Although I don’t know anyone from Luxembourg and so can’t say for certain if he was right, I was of a different opinion. ‘Cross-border shopping?’ I asked.
‘Right again’ Sally said, somewhat begrudgingly. ‘But’ I went on (there was no stopping me now) ‘the figures are not consumption per head, they’re purchases, so it could be misleading’. Was that her point? I’m still not sure but, for what it’s worth, the figures for 2008, according to the World Health Organisation, were around 15 litres per person for Luxembourg. The UK was in thirteenth place with around 9 litres.
All this got me to thinking (once Sally had recovered her composure and moved on) that the UK tax authorities are absolutely obsessed with excise duty. Is it their long history as duty men? Or are they just getting desperate to fill the hole in the nation’s finances? They’ve even started trying to tax cooking wine as if it were Château Petrus.
Repertoire Culinaire Ltd v HMRC  concerned an appeal against the seizure of cooking wine, port and cognac. HMRC refused to restore the goods (which had been purchased in France) on the basis they were subject to excise duty and the relief for alcohol used in flavourings did not apply. This was despite the fact that they admitted that because ‘the wine, port and cognac had salt and pepper added to them, the goods were ‘undrinkable’ and intended for culinary purposes’.
The UK First-tier Tribunal, after hearing evidence from the delightfully named Monsieur Albert Allo of the French Ministry of the Economy, decided it needed help and referred the matter to the European Court of Justice in Luxembourg. We’d all better listen very carefully, as they’ll give judgement only once.
By the way, the excise duty on a bottle of still wine in the UK is £1.50, in Luxembourg it’s nil. Douze points pour le Luxembourg.
*** UPDATE – March 2016 ***
The European Court gave its judgement in the Repertoire Culinaire reference in December 2010. The Court decided that, for the purposes of excise duty, cooking wine and cooking port are ethyl alcohol, but, along with cooking cognac, they can be exempted from duty under article 27(1)(f) of Directive 92/83. Where such products are exempted from duty in the Member State of manufacture (in this case, France) that exemption must be respected by other Member States in the absence of concrete, objective and verifiable reasons not to do so. You can read my analysis of the Court’s decision here (75kb).
So nuls points pour HMRC, you might think but read on.
The matter then came back before the FtT for a decision in the light of the European Court’s ruling. The hearing was at the beginning of June 2012 but the decision was not released until the end of April 2013. Quite a wait.
The FtT held that the reasons given by HMRC for refusal to restore the seized goods were flawed in that they did not refer to the possibility that duty paid could be refunded on proof of appropriate use of the goods in the manufacture of foodstuffs. That appeal was allowed and a further review directed under section 16(4) Finance Act 1994.
Although the appeal was allowed, Repertoire Culinaire’s victory was a pyrrhic one. The original appeal to the FtT had been against HMRC’s refusal to restore the seized cooking wine. To allow the question of the liability to excise duty to be considered Repertoire Culinaire had, with HMRC’s consent, made a new out-of-time appeal to the FtT against the assessment to excise duty (rather than against the seizure of the goods).
Despite the steer from the European Court in paragraph 56 of its ruling, what seems to have emerged from the FtT is a straightforward decision that excise duty was payable and the question of exemption only arose after that. The FtT, in effect, ducked the substantive issues raised in the reference leaving Repertoire Culinaire no further forward than when it began in 2002. A case of forensic snakes and ladders…
The FtT’s decision rejecting the new appeal was then the subject of an appeal to the Upper Tribunal. And, guess what, Repertoire Culinaire won on the grounds that it was entitled to exemption under EU law. The UK legislation which did not give effect to that entitlement had to be read as subject to that right.
It appears from the decision of the Upper Tribunal (at paragraph 63) that HMRC are proposing to amend the relevant legislation (in section 4 FA 1995) to remove the offending parts. Let’s wait and see what emerges from the legislative sausage machine and when.
In the meantime, bien fait mes braves.
Tax lawyer specialising in business tax, SDLT and VAT