DP champagne transferred back to IB. VAT?

Is VAT applicable on DP wine transferred back into bond (IB)

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I am buying some old champagne. The bottles are already duty paid (DP) so both duty and VAT have been paid. If they are purchased from a DP warehouse and transferred to another DP warehouse, this is straightforward and VAT is applicable on the sale. However, if the wine is being transferred from a DP warehouse to an IB warehouse it is my understanding that VAT is not applicable on this particular transaction. If the wine is subsequently sold out of the bonded warehouse to DP again then obviously VAT is again applicable (duty is not as this is this a single charge that was originally paid the first time it was taken out of bond).

Can someone confirm that this understanding is correct, and ideally point me to the legislation that confirms this?

Replies (18)

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By paul.benny
18th May 2024 10:34

It would be highly unusual for an importer of excisable goods to account for the duty (and VAT) and then to export those goods again as the duty is not normally recoverable. And I'm not even sure why anyone would want or need to move goods back into bond.

That said, a DP to IB movement is analogous to export. To zero-rate an export, you need evidence that the goods have left the country. I think you would have an uphill struggle to convince HMRC that transfer to bond is a bona-fide export. And ultimately it is the seller who has the obligation to account for the VAT. As seller, I would not zero rate.

But you said your understanding is that "VAT is not applicable" - what is the basis for that understanding?

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Replying to paul.benny:
By Ruddles
18th May 2024 12:04

paul.benny wrote:
It would be highly unusual for an importer of excisable goods to account for the duty (and VAT) and then to export those goods again

So unusual that there are (or used to be) special reliefs for import and re-export.
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Replying to Ruddles:
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By paul.benny
18th May 2024 13:22

Are you thinking of IPR, which relates to customs duty - rather than excise duties?

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By David Ex
18th May 2024 10:40

timfoster wrote:

Can someone confirm that this understanding is correct, and ideally point me to the legislation that confirms this?

What are you offering in return?

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Replying to David Ex:
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By FactChecker
18th May 2024 13:59

Don't accept the "old champagne" (at least not without clarification).

Guess it depends on 'how old' but non-vintage champagne is generally only good (unopened) for about 4-5 years.
And vintage champagne may be OK for up to twice as long (but 'vintage' refers to it being made from grapes of a single year not to its age).

Vintner response to "Is it safe to drink 40 year old Champagne?"
* Simple answer is yes! The more complex answer is that it might not taste all that great. But having lost it's carbonation does not make it bad, it will taste just like cheap old wine.

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Replying to FactChecker:
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By David Ex
18th May 2024 14:26

FactChecker wrote:

Don't accept the "old champagne" (at least not without clarification).

Guess it depends on 'how old' but non-vintage champagne is generally only good (unopened) for about 4-5 years.
And vintage champagne may be OK for up to twice as long (but 'vintage' refers to it being made from grapes of a single year not to its age).

Vintner response to "Is it safe to drink 40 year old Champagne?"
* Simple answer is yes! The more complex answer is that it might not taste all that great. But having lost it's carbonation does not make it bad, it will taste just like cheap old wine.

I don’t move in such exalted circles!!

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By timfoster
18th May 2024 20:17

Let me clarify. The wine is vintage. some cases are 1983 some are considerably older. I'm not looking for advice on whether I should or should not buy the wine. I have bought and sold wines of varying vintage for many years, IB, en primeur and DP for delivery to my personal collection. These are the first batch that I intend to return to bond. They are not for export. In Bond in this context pertains to bonded storage such as Vinotheque in the West Midlands. The usual journey for wines is that they are stored IB when bottled and cased. This is after it has been brought into the UK but before it is released for consumption. To release the cases from bond, duty and VAT must be paid. This is nothing unusual and how the wine market has operated for many, many years. (search in bond wine if you want to get a thorough understanding of the principles involved).
In this case, duty and VAT were paid when the cases were initially release from bond. For these particular cases they were delivered to a private collection and correctly stored in exactly the same way. The only difference is that the owner could , if they wished, open and drink the wine as it is no longer held IB.
It is not usual for wines to be returned to bond once they have been DP, but it is not unheard of either.
Champagnes of this vintage are entirely drinkable and will remain so, provided they are stored correctly. They will not taste like supermarket champagnes or any champagnes as you would purchase from a retail setting, but having sampled champagnes and wines that are 50-120 years old, I can tell you, they are very drinkable.
My question is, from a taxation point of view, should VAT be charged on the sale by the merchant selling to me when the cases will be returned into bond without me seeing or touching them in process. They are, from my point of view, exactly the same as when they are en primeur, and sent from the vineyard in terms of legal process.

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Replying to timfoster:
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By Leywood
18th May 2024 23:50

Study tax if you want to get a thorough understanding of the principles involved. I can recommend a couple of courses.

Failing that, ask your tax advisor.

This site isn’t a free tax helpline for members of the public.

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Replying to Leywood:
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By timfoster
19th May 2024 09:29

Leywood wrote:

Study tax if you want to get a thorough understanding of the principles involved. I can recommend a couple of courses.

Failing that, ask your tax advisor.

This site isn’t a free tax helpline for members of the public.

Very unhelpful. Asking a question on a very specific aspect of taxation is treated, by most people with such knowledge, as an opportunity to help someone. I am not looking to become a tax expert, I am asking a question of those that hopefully have the expertise. If you don't want to share your knowledge, that's fine, there is no need for you to comment at all, but perhaps then public forums aren't really for you.

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Replying to timfoster:
By Ruddles
19th May 2024 09:43

“ AccountingWEB.co.uk is the largest independent online community for accounting and finance professionals in the UK”

Are you an accounting or finance professional? If not, I suggest that you reconsider commenting on whether this forum is appropriate for others.

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Replying to Ruddles:
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By Paul Crowley
19th May 2024 19:44

+1
@OP
best not to criticise the regulars if you want the regulars to be helpful
This is not twatter, or X, or whatever type of social medium.

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Replying to timfoster:
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By Leywood
19th May 2024 09:59

Clearly didn’t read the rules when you joined.

Nor spotted the fact that I just repeated part of one of your comments back at you.

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Replying to Leywood:
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By timfoster
19th May 2024 10:20

Leywood wrote:

Clearly didn’t read the rules when you joined.

Nor spotted the fact that I just repeated part of one of your comments back at you.

Erm... I did spot that you repeated part of my comment. Not sure what point you are trying to make though. No, I didn't read "the rules" of a public forum. The t&c though, linked from the registration page, makes no mention that the forum is exclusively for the use of any individual or group by qualification, experience, knowledge or any other critiera, so again, I'm not really sure what point you are trying to make.

Again, if you don't want to share any knowledge or information, fine. Totally your prerogative. Sanctimoniously lecturing people though is puerile and does you no favours. The phrase that comes to mind is "it's better to remain silent and let people think you're a fool, than open your mouth and remove all doubt".

Clearly there is nothing useful to be gained from this site and so I will leave you to your inward-looking navel gazing.

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Replying to timfoster:
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By FactChecker
19th May 2024 14:40

"Clearly there is nothing useful to be gained from this site"
... is a rather neat encapsulation of an egotist's perspective.

Tens of thousands of others gain something (mostly useful) from this site; but only one person, Tim, can pass judgement?

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By paul.benny
19th May 2024 10:06

@OP - my response (including the question asked of you) at the beginning of this thread stands. Argue with the less helpful respondents by all means but if that's all you do, those of us who have tried to assist will walk away.

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Replying to paul.benny:
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By David Ex
19th May 2024 11:17

paul.benny wrote:

@OP - my response (including the question asked of you) at the beginning of this thread stands. Argue with the less helpful respondents by all means but if that's all you do, those of us who have tried to assist will walk away.

I don’t know why you bother, Paul. He never did you the courtesy of acknowledging or thanking you for your response yesterday.

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Replying to David Ex:
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By paul.benny
19th May 2024 14:01

I've asked myself the same question. Even if we don't want to share our valuable skills and experience for free, we can at least avoid unedifying slanging matches.

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By Matrix
19th May 2024 14:13

Those bubbles are going to my head and not my area anyway but why don’t you turn this around: If the merchant charged you VAT on the basis of responses from a public forum would you find that acceptable?

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