Because cask investment is an unregulated market, here is an outline of the relevant sections of the main laws that govern buying, selling and storing casks. Understanding the law helps consumers make the right choices when purchasing a cask.
These laws provide the legal framework specific to the sale and purchase of casks of whisky held in duty suspense.
WOWGR or The Warehousekeepers and Owners of Warehoused Goods Regulations 1999
WOWGR is an acronym for the Warehousekeepers and Owners of Warehoused Goods Regulations 1999, the law governing the regulations that must be followed by warehouses, warehousekeepers and owners of goods kept in UK warehouses.
The legislation is sometimes misinterpreted as a license that needs to be obtained. But WOWGR is actually a registry governing a variety of different entities:
“These Regulations provide for the approval and registration of (i) excise warehousekeepers, (ii) owners of goods held in excise warehouses and (iii) duty representatives of owners of goods held in excise warehouses”.
The registration and approval methods differs for each of the mentioned warehousekeepers, owners of goods held in excise warehouses and duty representatives. Regulations 3 and 5 are particularly relevant for buying buying casks of Scotch whisky. Read more about WOWGR here.
Regulation 3: Duty representatives
Duty representatives are defined in Regulation 3:
A duty representative is a UK-based business authorised to act as an agent for overseas businesses that want to buy, sell and store duty suspended goods in UK excise warehouses. Only overseas businesses, and no one else, can have a duty representative act on their behalf.
So neither UK-based businesses nor private individuals can have a duty representative act on their behalf.
Duty representatives must be approved and overseas businesses or revenue traders needing one should ask to see their certificate before hiring them. Read more advice for overseas buyers here.
Regulation 5: Warehousing
Regulation 5 requires:
“revenue traders who wish to hold goods (other than hydrocarbon oil) in an excise warehouse to be approved and registered by the Commissioners of Customs and Excise or to use the services of a duty representative”. (Bold emphasis added).
Also important is Part V – Warehousing – Section 9(3):
“Relevant goods shall not be sold whilst they are being kept in an excise warehouse unless the seller, or if the seller has a duty representative that representative, gives notice of the sale to the authorised warehousekeeper”.
The regulation clarifies that only revenue traders need to be approved and registered in order to hold goods in an excise warehouse. Therefore, private individuals do not need to be registered under WOWGR to own a cask in a warehouse.
It also reinforces Excise Notice 197 section 8 (see below), that the warehousekeeper must be notified of any sale of goods within the warehouse.
Therefore, when a buyer has not had contact with the warehouse where the sold cask is stored there is a possibility that ownership of the cask has not actually been transferred at the warehouse level, increasing the risk of fraud.
The penalties warehousekeepers face for not complying with WOWGR are severe, and they keep careful records of ownership. So if a warehouse doesn’t have the buyer on record as the owner of a cask, it likely means the buyer is not the legal owner.
Excise Notice 196
As detailed in the Notice itself, Excise Notice 196 “explains the UK’s requirements for the warehousing of excise goods held in duty-suspension within the UK”.
It is a legal document that explains everything – from what a warehouse can do with stock to what they must do when stock in their warehouse belonging to someone else is sold.
Three parts in Section 5 of the Notice, which covers “Registration of owners of excise goods in warehouse (including duty representatives)”, are the most relevant when buying casks of Scotch whisky:
Section 5.1 General
“All owners of duty-suspended excise goods must get approval and registration, unless: […] the owner of the excise goods is not a revenue trader”.
Therefore, section 5.1 clarifies that as long as the purchaser is not a revenue trader (see below for more information) they do not need to be registered or approved under WOWGR.
Private individuals, then, do not need to be registered with WOWGR to own a cask in their name at a warehouse, nor is WOWGR registration required to receive a delivery order.
Section 5.3 Duty representatives
“Duty representatives must have a business or other fixed establishment in the UK and may only represent non-UK based owners”.
If a cask purchaser requires a duty representative a copy of their certificate should be requested. And if the company offering duty representative services is not based in the UK, it is not legally permitted to be a duty representative.
The Notice repeats what is already stated in WOWGR: only foreign overseas businesses require a duty representative, and they can’t be used by anyone else.
Section 5.8 Changes of Ownership in a Warehouse
“The owner or duty representative of excise goods stored in an excise warehouse must inform the excise warehousekeeper in advance when any duty-suspended goods are sold in warehouse”.
It is a legal requirement for a seller to inform the warehouse of a sale. If the warehouse is not aware of the sale of a cask, then either the cask has not legally changed hands or the warehouse is in breach of the conditions governing its licences.
The latter is highly unlikely as the registration process for operating a warehouse is very stringent and owning a warehouse involves monthly audits.
Therefore, if the warehouse where a cask is sold is unaware of the sale it is likely the cask has not legally changed owners.
Section 13 Glossary
Here’s the Notice’s definition of a Revenue Trader:
“In the context of this notice, anyone carrying on a trade or business concerned with the buying, selling, importation, exportation, dealing in, or handling of excise goods, and the financing or facilitation of any such transactions or activities. Find a full definition in CEMA section 1”. (Emphasis added).
More on this below, but for the sake of clarity, and in the specific context of Notice 196, a company or trader is classed as a ‘revenue trader’ if it is regularly trading or doing business in casks, so private individuals are exempt from certain parts where it clearly states “unless not a revenue trader”.
Excise Notice 197
Excise Notice 197 covers how to “Receive goods into and remove goods from an excise warehouse”.
For private individuals purchasing a cask, Section 8 covering the “buying and selling duty-suspended goods in warehouse” is the most relevant.
Section 8.2: The seller’s responsibilities
“Before making any sale you, as the current owner of the goods, should: […] inform the warehousekeeper that the goods are to be sold and give details of the purchaser’s registration. If you fail to advise the warehousekeeper about a change of ownership of the goods, the goods are liable to forfeiture.”.
Section 8.3 The purchasers responsibilities
“Before making any purchase, you should: inform the warehousekeeper that the goods are to be purchased and give details of your registration to the warehousekeeper”.
The law makes clear the seller has a legal obligation to inform the warehousekeeper that goods are being sold and must not simply provide information regarding the purchaser but must also ensure the buyer is in contact with the warehouse about the sale.
This is why a delivery order is so useful, although not legally required. When selling casks, it is the industry-standard method to fulfill Excise Notice 197’s requirements connecting the seller, buyer and warehouse. If the purchaser of a cask does not receive a delivery order or has not had contact with the warehouse storing it, then either or both seller and purchaser might be in breach of the Notice, or the cask has not actually been sold to the buyer.
Excise Notice 206 – defining ‘revenue trader’
Excise Notice 206: revenue traders’ records, defines a revenue trader as “a trader involved in any way with goods or services liable to Excise Duty”.
Excise Notice 196 also defines a revenue trader: “in the context of this notice, anyone carrying on a trade or business concerned with the buying, selling, importation, exportation, dealing in, or handling of excise goods, and the financing or facilitation of any such transactions or activities. Find a full definition in CEMA section 1”. (Emphasis added)
WOWGR and Excise Notice 196 make clear that private individuals do not need to apply for approval and registration as Owners under WOWGR if they are not revenue traders.
Therefore, to purchase a cask as a private individual and store it in a duty suspended warehouse it’s important not to be regarded by the HMRC as a revenue trader. That means the number of casks bought or sold wouldn’t be construed as trading in casks and that they are not purchased through a business.
The History of Delivery Orders
Delivery orders were first passed into law with the Alcoholic Liquor Duties Act 1979 (ALDA)
Section 32
“(2)Spirits manufactured in the United Kingdom chargeable with duty which has not been paid which are in any warehouse other than a distiller’s warehouse shall not be transferred into the name of a purchaser until the purchaser produces to the officer in charge of the warehouse a written order for the delivery of the spirits signed by the person in whose name they are warehoused and countersigned by the occupier of the warehouse or a servant of his acting for him at the warehouse”.
This law was then repealed and replaced by the Finance Act 2006, which invalidated ALDA 1979, meaning that those ‘written orders’ are no longer required.
However, as discussed above, Excise Notice 196, 197 and WOWGR all show there is a legal need for the warehousekeeper to be notified by the seller and the buyer about any change of ownership.
While the legal need for a written note has been repealed, the warehousekeeper still needs to be informed and in contact with both the buyer and seller. And delivery orders, countersigned by both buyer and seller, are still the industry standard ensuring a safe and legal transfer of cask ownership.
Disclaimer
The information provided on Protect Your Cask is intended solely for educational and informational purposes and does not constitute legal, financial, or investment advice. We strongly encourage readers to conduct their own research and, where necessary, consult with professional advisors or legal counsel before making any investment decisions in the Scotch whisky cask market. The views and opinions expressed herein are not intended to serve as a guarantee or prediction of future events and should not be relied upon as such. Protect Your Cask disclaims any liability for decisions made based on the information provided on this website.