4 Things You Should Know if you Buy or Sell Scotch Whisky Casks in the UK

Scotland is renowned for its whisky production. Scotch Whisky can only be made in Scotland – in order for a spirit to be called Scotch Whisky, it must mature in oak casks in Scotland for at least 3 years. The sale of Scotch Whisky casks is thriving. In 2024, exports of Scotch Whisky were reportedly worth over £5 billion. Buying and selling whisky casks is not just about an interest in Scotch Whisky, it is also shaped by specific legislation. Below are key points you should know before stepping into the market.

There are no specific rules under UK law that regulate the sale and transfer of ownership of Scotch Whisky casks. The seller and buyer are free to agree in the sales contract when title of a Scotch Whisky cask passes from seller to buyer. Most businesses choose to connect the transfer of title to either delivery or payment of the price.

No further documentation is necessary to transfer title of movable goods like Scotch Whisky casks. In particular, it is not necessary to issue a warehouse receipt, consignment note or delivery order. These documents do not have any legal effect on the ownership of goods. Receipts, however, can be useful as evidence. For example, they can prove delivery has taken place.

Scotch Whisky needs to be held at a warehouse for two reasons:

Maturation

Maturing in an excise warehouse is required for whisky to qualify as Scotch Whisky. Under UK law, a spirit may be called Scotch Whisky when it is distilled and matured only in Scotland (amongst other requirements). It must have been matured in oak casks for at least three years – and it must have been matured only in an excise warehouse or other permitted place.

Excise Duty

In the UK, excise duty is charged on alcoholic products that are produced in or imported into the UK. As long as a Scotch Whisky cask is held in an excise or tax warehouse, excise duty is not payable. Duty becomes payable when the whisky is released for consumption. This happens when the Scotch Whisky cask leaves the warehouse – for example in order for the Scotch Whisky be bottled.

The rules on who must register with HMRC in relation to Scotch Whisky casks have recently changed. The Warehousekeepers and Owners of Warehoused Goods Regulations (commonly known as WOWGR regulations) provide the legal framework under which Scotch Whisky can be stored and matured in excise warehouses across Scotland under duty suspension. It also sets out who has to register with the HMRC – and who does not have to.

Revenue traders

Previously, “revenue traders” had to be registered with the HMRC as the owners of whisky casks. A revenue trader could be, for example, a person carrying on a business that involves buying, selling, or exporting Scotch Whisky casks. The requirement for revenue traders to register with the HMRC has now been removed from the WOWGR regulations. Now, buyers and sellers of Scotch Whisky casks, whether acting as an individual or in the course of trade, will not need to register with the HMRC.

Duty representatives

Previously, Scotch Whisky cask owners that were domiciled overseas had to appoint a duty representative, who would act as their agent and would register with the HMRC. Only revenue traders that were domiciled in the UK could act as duty representatives. This requirement has been removed from the WOWGR regulations. This means that overseas owners are able to store Scotch Whisky in an excise warehouse in their own name, instead of the cask being held by a third party or broker. This could provide protection to the buyers of Scotch Whisky casks in the event their ownership of the cask is disputed.

In a nutshell, only warehousekeepers now have the duty to register under the WOWGR regulations. This eases the administrative burden on buyers and sellers of Scotch Whisky casks.

As always when it comes to the supply of goods, it is important to read the small print of the supply agreement that you will enter into with the buyer or seller of a Scotch Whisky cask. In addition to general considerations, like payment obligations or limitations of liability, it is important to ensure that your terms are robust when it comes to the particulars of the whisky industry. Are you familiar with the terms Angels’ Share, OLA and RLA? The Angels’ Share is the volume of spirit within a Scotch Whisky cask which is lost to evaporation during the ageing process. This is an unavoidable natural evaporation process whereby approximately 2% of the contents of each Scotch Whisky cask will evaporate through the wooden cask each year of the maturation period. The supply agreement should adequately deal with this to avoid disappointment or any arising liabilities that could have been avoided.

When you are planning to buy or sell Scotch Whisky casks, and to enter into supply agreements in this regard, you should get professional advice on this. We can conduct a red-flag review of any terms you have been asked to sign and inform you of any risks involved in entering into that agreement. We can also help you with drafting a supply agreement that is tailored to your business and reflects the characteristics of the whisky industry. You might also provide services, like bottling services in this regard, that you want to be covered by your standard terms and conditions. And why not try out our Small Print Service? The ‘Small Print’ Service is a monthly subscription contract support package for SMEs which allows for certainty over legal fees and easy access to prompt, pragmatic advice that helps identify the small print that you might miss.

If you would like to learn more about how we can help you with agreements about buying or selling Scotch Whisky, please get in touch with a member of our IPDC team.