Tribunal serves decision on cooking alcohols which leads to HMRC policy change

In Gourmet Classic Ltd v HMRC [2025] UKFTT 00256 (TC), the First-tier Tribunal (FTT) ruled that Gourmet Classic Ltd's (GCL) cooking wines (and other similar products with a strength of 4.8% abv), qualify as foodstuffs and are exempt from excise duty.

This blog is based on an article written by Michelle Sloane and Jasprit Singh that was published in Taxation Magazine on 11 September 2025. 

Setting the table: a recipe for dispute  

For many years, HMRC accepted that alcoholic products intended exclusively for culinary use – such as cooking wines and fortified stocks – could be classified as 'foodstuffs' for the purposes of the alcohol duty exemptions under the relevant Finance Acts and EU directives, namely, Article 27(1)(f) of Council Directive 92/83/EEC of 19 October 1992 on the harmonization of the structures of excise duties on alcohol and alcoholic beverages (the Directive), which was transposed into UK law under section 4(2)(c), Finance Act 1995 (FA 1995) (repealed and now found in section 75(3), Finance (No 2) Act 2023). Specifically, under HMRC's Excise Notice 41, manufacturers could rely on Alcoholic Ingredients Relief (AIR). Under AIR, excise duty would not apply to products that met the definition of 'eligible article'. The definition of eligible article was based on the wording in section 4(2)(c), FA 1995, and included 'other foods for human consumption (excluding beverages) containing no more than 5 litres of alcohol per 100kg of the final product'. As such, excise duty charged on cooking wine (as well as spirits, beer, cider, etc) could be reclaimed.

At the start of its business in 1998, GCL liaised with HMRC to get clarity and certainty on its excise duty position and reached an agreement with HMRC which allowed it to follow a simpler approach by not having to pay excise duty on its cooking alcohol products and thereby avoided the need to have to reclaim the duty at a later date, provided the products were clearly labelled, denatured where required, and supplied for use in food production.

However, in 2017, HMRC initiated a significant policy reassessment. It   took the view that cooking wines – despite being intended solely for use in food preparation – did not automatically qualify as 'foodstuffs' and insisted that there had to be clear evidence that they had been used as an ingredient in a prepared food. In practical terms, under this interpretation, AIR could only be claimed by the person using the cooking alcohol in their food product. This marked a significant departure from HMRC's previous practice and reflected a narrow interpretation of the exemption under Article 27(1)(f) of the Directive.

On the back of this reinterpretation, HMRC raised assessments against GCL between 2019 and 2022, in the amount of £9,236,153. The basis of the assessments was that GCL had not paid excise duty on cooking alcohols that, in HMRC’s view, were not eligible for AIR or, alternatively, remained dutiable unless and until proof could be provided that they had been used in food manufacturing. HMRC argued that cooking alcohols were not 'foodstuffs' and, if they were, the exemption did not apply at the point of production or distribution, but only after the final use had been verified.

This approach created a significant administrative burden and legal uncertainty for GCL and similar food sector businesses. If HMRC's position was accepted, cooking alcohol manufacturers would have to consider either absorbing the excise duty cost or implement a new,  complex system for verifying and evidencing customer end-use. This change in position also raised broader questions about the consistency and fairness of HMRC’s policy-making, particularly when compared with long-standing interpretations of both EU and domestic law. These issues and GCL's interpretation that it was rightfully exempt from excise duty, led to it appealing the assessments to the FTT.

The main course: FTT decision and the meaning of 'foodstuff'

In the appeal before the FTT, the legal issues centred on Article 27(1)(f) of the Directive, which provides a mandatory exemption from excise duty for products 'used directly or as a constituent of semi-finished products for the production of foodstuffs provided that the alcoholic content does not exceed 5 litres per 100kg' for products other than chocolate, and the UK's version of this in section 4(2)(c), FA 1995.

HMRC argued that the exemption from excise duty under the section 4(2)(c) did not apply. In its view, cooking alcohol was not a food and the word 'foodstuffs' in Article 27(1)(f), excluded products that are liquid, and only included solid or semi-solid foodstuffs. HMRC also argued that if the cooking alcohols met the conditions for the exemption, they would only become exempt when actually used in the cooking of food.

GCL argued that the cooking alcohol products were exempt from excise duty and met the conditions in section 4(2)(c). GCL argued its products, which were rendered unfit for drinking and classified under Combined Nomenclature (CN) code 2103, were 'foodstuffs' and were exempt at the point of manufacture. In GCL's view, the word 'foodstuffs', in Article 27(1)(f), excluded beverages, but not liquid foodstuffs.

The FTT allowed GCL's appeal and quashed the assessments. The FTT found that the cooking alcohol products were 'foodstuffs' and 'food for human consumption', and that they were therefore exempt from excise duty at the time of their manufacture.

In reaching its decision, the FTT considered that the Directive did not define 'foodstuffs', nor did it refer in this respect to the national law of the Member States. In the circumstances, the term 'foodstuffs' was to be interpreted in accordance with the usual meaning of the word in everyday language, taking into account the legislative context in which it occurs and the purposes of the rules of which it is part.

In its analysis of the meaning of 'foodstuffs', the FTT considered the object and purpose of the Directive. Notably, it commented that the overall purpose of the Directive was not to combat evasion or abuse, as was suggested by HMRC, but rather to achieve harmonisation by having common definitions for all products concerned, to achieve the free movement of goods and to neutralise the impact of excise duties on alcohol used as an intermediate product in other commercial or industrial products. The FTT also considered the text of the Directive as a whole and the evidence of the legislative history of the Directive and found no support for HMRC's interpretation. Further, HMRC's interpretation was not supported by the UK's own domestic legislation and the FTT pointed out that there is no reference to 'liquids' or 'solids' in the relevant provisions of the FA 1995 while, on the other hand, there is wording in section 4(8), FA 1995, which supported GCL because it stated that 'references in this section to chocolates or food do not include references to any beverages', suggesting that the relevant exclusion was in relation to beverages. Crucially, the FTT found that GCL's interpretation of 'foodstuffs' was supported by the Directive and rejected HMRC's argument that the word 'foodstuffs' in Article 27(1)(f), excluded products that are liquid and only included solid or semi-solid foodstuffs.

In allowing the appeal, the FTT also considered the case law of the Court of Justice of the European Union (CJEU) applying Article 27(1)(f) of the Directive, the relevant UK domestic case law, and Skatteverket v Gourmet Classic Ltd (Case C‑458/06), a decision of the Swedish Supreme Administrative Court, relevant to the appeal.

In Skatteverket, the issue was whether the alcohol contained in cooking wine was to be classified as ethyl alcohol, as referred to in Article 20 of the relevant Directive (92/83). The CJEU said that the answer to the question that had been referred to it was that 'the alcohol contained in cooking wine is, if it has an alcoholic strength exceeding 1.2% by volume, to be classified as ethyl alcohol …'. While this was not directly relevant in determining the issue in GCL's appeal, the FTT considered that the case and the Advocate General's (AG) opinion provided helpful analysis. The AG recorded that the alcoholic strength of the appellant’s cooking wine in issue in that case was 4.5 litres of pure alcohol per 100 kilograms of finished product, that is to say, within the range to qualify for the exemption under Article 27(1)(f) and that the position of the Swedish tax administration was that no excise duty was to be levied on the cooking wine because it fell within the exemption in the provision of the Swedish legislation transposing Article 27(1)(f). Additionally, it was clearly recorded in the judgment itself that the 'Skatterättsnämnden came to the conclusion that although cooking wine is, in principle, subject to excise duty, since it is a foodstuff it is exempt from such duty under Article 27(1)(f) of Directive 92/83'.

Turning to the domestic case law, the FTT considered the Répertoire Culinaire Ltd v Revenue & Customs line of cases and the related preliminary reference to the CJEU. While the cases dealt with matters that were not directly relevant to GCL, they provided helpful observations. The cases illustrated HMRC's previous approach was that it accepted that cooking wines with a strength of 5% abv or less fell within the exemption in Article 27(1)(f) of the Directive. The FTT observed that the line of cases also did not assist HMRC in its interpretation because it was unlikely that the cases sought to address the situation of cooking wines with a strength of 5% abv or less, which was relevant to GCL, as these cases concerned cooking alcohols with a strength greater than 5%. Further, according to the FTT, if it were possible to infer any opinion on the issues concerning GCL, it would be that cooking wines are 'foodstuffs' for the purposes of Article 27(1)(f). The FTT also dismissed HMRC's reliance on Revenue & Customs v Asiana Ltd [2014] UKUT 489 (TCC), on the basis that it dealt with cooking wine with an alcoholic content in excess of 5 litres per 100 kilograms, which was not relevant to GCL's appeal.

The FTT held that the cooking alcohol products in issue were foodstuffs because they are not beverages - they are unsuitable for consumption as beverages – and are not intended for such consumption. Further, they contain nutrients and are used as an ingredient in the preparation of final food items, which are consumed by humans for the purpose of obtaining the nutrients in the final food item, including the nutrients in the cooking alcohol products.

HMRC has chosen not to appeal the FTT's decision. 

Sweet dessert: HMRC's policy response

In the wake of the FTT's decision, HMRC published, on 30 June 2025, a new Brief and revised Excise Notice 41. The updated guidance now explicitly recognises that cooking alcohols, provided they do not exceed 5% abv, are 'food' and qualify for exemption at the point of manufacture and import.

Excise Notice 41, concerning AIR, makes it clear that cooking alcohols fall within the definition of 'eligible article' benefitting from relief from excise duty and states that:

'Cooking alcohols are treated as food and will therefore qualify as an eligible article if their strength does not exceed 5% ABV. These alcohols are produced for use in cooking and consist of an alcoholic product to which salt, or a combination of several seasonings has been added, rendering the product unsuitable for consumption as a beverage. These products generally contain at least 5 grams of salt per litre of product and are labelled for use in cooking.'

This provides clarity and reflects the concept of foodstuffs, in the context of excise duty, which is consistent with the Directive and its intended object and purpose. In addition to cooking alcohol manufacturers, this guidance may be relevant to other businesses in the food industry that need to consider the meaning of 'foodstuffs'.   

Comment

The case highlights the importance of scrutinising, and where appropriate, challenging HMRC's interpretation of the law, especially in circumstances where HMRC has changed its position without a sound legal basis. The FTT's decision highlights the flaws with HMRC's narrow interpretation of the word foodstuffs, which excluded liquid products, and the legal uncertainty its interpretation would create for businesses in applying the Directive. A key takeaway for taxpayers is to closely analyse the relevant legislation in classification cases, including the potential application of any reliefs or exemptions. 

The decision can be viewed here.