An in bond whisky is a cask or bottle stored in a government-approved bonded warehouse where excise duty and VAT have not yet been paid. The whisky remains under duty suspension until it is removed from bond for sale on the open market, at which point the taxes must be settled. This system allows producers, traders, and investors to store whisky for long periods without immediately incurring the cost of alcohol duty and VAT.
The Definition of In Bond
In the UK, “in bond” refers to goods held in a secure warehouse that is authorised and monitored by HM Revenue & Customs (HMRC). For whisky, this means the spirit can mature or be stored without tax liability until it leaves the warehouse. The duty is calculated based on the volume and alcohol strength at the time of removal from bond.
The bonded system applies to both bottled and cask whisky. In practice, the term “in bond” is most often used in relation to cask ownership and the whisky investment market.
Why Whisky Is Stored In Bond
Cost Management – Alcohol duty and VAT can represent a significant expense. Keeping whisky in bond delays these costs until the whisky is ready to be sold or bottled.
Maturation – Most Scotch matures for years or even decades. Bonded storage allows the whisky to age without the owner paying tax upfront.
Trade Flexibility – In bond whisky can be traded between bonded warehouses without triggering duty, making it easier for cask owners and merchants to sell stock internationally.
A Brief History
The bonded warehouse system was established in the UK in the 19th century to encourage trade and allow merchants to store goods without paying tax immediately. For the whisky industry, it has been essential for enabling long-term maturation and international commerce. It remains one of the key advantages of producing whisky in Scotland and other regulated markets.
In Bond vs. Duty Paid
In Bond – Taxes have not been paid. The whisky must remain in a bonded warehouse under HMRC control until removed for sale or personal use.
Duty Paid – Taxes have been settled, and the whisky can be stored or consumed anywhere without bonded restrictions.
Impact on Pricing
In bond whisky is usually cheaper to buy than duty paid whisky because it does not include alcohol duty or VAT. However, these costs will have to be paid when the whisky leaves bond. For casks, the final tax bill can be substantial, depending on the spirit’s strength and volume at the time of bottling.
Frequently Asked Questions
Can I drink whisky that is in bond?
Not until duty and VAT have been paid and it has been removed from the bonded warehouse.
Can I move in bond whisky between warehouses?
Yes, as long as both are HMRC-approved bonded facilities, it can be transferred without paying duty.
Is in bond whisky only for investment?
No. While many investors keep whisky in bond, distilleries and blenders also store their stock this way for production purposes.
Conclusion
An in bond whisky is stored under tax suspension in a bonded warehouse, allowing it to mature and be traded without immediate duty or VAT costs. This system supports the long-term ageing that Scotch whisky is known for and provides flexibility for producers, traders, and investors alike.