Excise duty is charged on three things — alcohol, tobacco and fuel — plus a short list of related products, and it works quite differently from VAT. It attaches to the goods rather than to a transaction, it becomes payable when the goods leave a controlled regime for UK consumption, and it is collected from whoever holds them at that moment. That structure is why a business can owe duty on stock it never sold.
Duty points and suspension
The central concept is the duty point: the moment duty becomes due. Goods can be produced, stored and moved between approved warehouses under duty suspension without duty being paid, and the liability crystallises when they are released for consumption — leaving the warehouse for the UK market, being imported without suspension arrangements, or being found outside the regime without evidence that duty was paid.
Everything in excise administration follows from that. Approved warehousekeepers and registered consignors operate under authorisations with conditions attached. Movements are tracked electronically, and a movement that does not close properly — no receipt from the destination warehouse — becomes an irregularity with the duty falling on the guarantor. Guarantees back the movements precisely because the duty at risk on a single lorry-load of spirits is substantial.
Who ends up paying
Excise liability travels with the goods, and that surprises businesses whose only involvement was logistical. The person holding goods at an irregular duty point can be assessed, whether or not they knew the duty was unpaid — which is why the due diligence obligation in alcohol and tobacco supply chains is a legal requirement rather than good practice.
Alcohol wholesalers must be approved under the Alcohol Wholesaler Registration Scheme, and buyers must check that their supplier is on the register. Trading with an unapproved wholesaler is itself an offence, and it removes any argument that the buyer took reasonable care. The same logic runs through the tobacco track and trace system, where every pack is identified and its movement recorded.
The practical consequence for an ordinary business — a hospitality group, a retailer, a haulier — is that supplier verification is not optional. Cheap stock from an unfamiliar supplier is cheap for a reason, and the assessment lands on the holder.
The reliefs that make the difference
Excise is a system of reliefs as much as charges, and the ones worth knowing are specific to each product:
- Small producer relief in alcohol, which reduces duty for producers below defined production volumes and applies across product categories under the strength-based structure introduced in the alcohol duty reform;
- Draught relief, reducing duty on qualifying products packaged for on-trade dispense — a material difference for brewers and the pubs they supply;
- Drawback, which reclaims duty on goods that have borne it and are then exported or destroyed, subject to notification requirements that must be met before the event;
- Rebated fuel — red diesel — restricted to a narrow list of permitted uses after the 2022 reforms, with substantial penalties for use in unauthorised vehicles or machinery;
- Denatured alcohol and industrial use authorisations, where alcohol is used in manufacturing rather than consumed.
Alcohol duty is now calculated by reference to the strength of the product across all categories, which changed the arithmetic for producers and importers and made accurate ABV data a compliance input rather than a label detail.
Where businesses come unstuck
Three failures recur. Stock losses in a warehouse that cannot be explained are treated as released for consumption, so duty is assessed on shrinkage — which makes stock control an excise control rather than an operational nicety. Movements that do not close, where a receipt is never recorded, generate assessments against the consignor's guarantee months later. And classification, particularly for products near a category boundary, where a modest difference in strength or presentation moves the rate materially.
Penalties in this area are heavier than elsewhere in tax, and they sit alongside the loss of approvals. Revocation of a warehouse approval or removal from the wholesaler register ends the business far more quickly than any assessment.
Getting the controls right
For a business holding or moving duty-suspended goods: reconcile physical stock to the duty account on a fixed cycle and investigate every difference; monitor open movements and chase receipts; verify every supplier's approval before the first order and periodically afterwards, keeping the evidence; and review the duty point analysis whenever a new supply route or storage arrangement is introduced, because that is where accidental duty points are created.
For businesses further down the chain, the obligation is narrower but real: know who you are buying from, keep the paperwork, and treat an unusually good price as a question rather than an opportunity.
Acumon advises on excise controls, duty accounting and the surrounding indirect tax position through indirect tax compliance and international VAT work, alongside the customs sequence in our guide to importing goods. If you hold duty-suspended stock and your losses have never been reconciled to the duty account, that is where an assessment would start.