WOWGR reform: will removal of owner registration requirements open up the industry or leave a due diligence vacuum?

On 3 March 2025, a key piece of legislation in the Scotch whisky industry will be overhauled. The Warehousekeepers and Owners of Warehoused Goods Regulations 1999 (WOWGR) is set to be substantially amended; removing the registration requirement for owners of goods and duty representatives.

In our earlier article we looked at the proposals for reform to WOWGR and the potential impact of changes. In this article, we'll outline:

• the legislative changes that will be implemented from 3 March 2025;
• the practical implications of the changes; and
• the possible issues and potential impact on people operating in the industry.

 

Changes to WOWGR

WOWGR is the statutory basis under which Scotch whisky can be stored and matured in excise warehouses across in Scotland under duty suspension. Excise duty is only payable when the whisky leaves the warehouse for the last time (usually when being bottled and sold).

WOWGR outlines the registration requirements for three categories of people:

• warehousekeepers who operate the excise warehouse;
• registered owners of excise goods (also known as revenue traders); and
• duty representatives, who can act as the agent for overseas owners of excise goods.

Our earlier article (available here) outlined the registration requirements for each party and some of the potential issues.

From 3 March 2025, the regime is set to be substantially amended with a “legal red pen” drawn through vast amounts of the WOWGR text. The practical effect of the changes is to remove the requirement for owners of goods and duty representatives to register with HMRC (along with all ancillary provisions).

No substantive new provisions have been introduced, and all that will be left in WOWGR are the provisions relating to warehousekeepers. These provisions include the approval and registration of warehousekeepers; obligations in relation to holding dutiable goods; and the privileges afforded to authorised warehousekeepers. Notably, WOWGR has been amended to state that HMRC may require an authorised warehousekeeper (not a revenue trader) to provide security for excise duty that may become due.

The changes and new position are:

• Owners of Scotch whisky can store whisky in an excise warehouse under duty suspension without having to be registered with HMRC.
• Overseas owners of Scotch whisky don’t have to appoint a duty representative to act as their agent. Instead, overseas owners can store Scotch whisky in an excise duty in their own name.
• Under WOWGR, only warehousekeepers have to register with HMRC, so they can operate an excise warehouse.

The amendment to WOWGR will, in effect, return the position back to how it was before 1999 in respect of the ownership of excise goods.

We understand that the forms for registration with HMRC as an owner and duty representative are to be removed from the UK government website, and we expect HMRC will issue amended guidance to reflect these changes.

Potential impact of the reform

The reform to WOWGR appears to be substantial, overhauling the regime for the registration of owners and duty representatives. But how will these changes apply in practice in the industry?

Owners of casks

When you consider the position of buyers (owners) of casks of Scotch whisky, the overall impact of the reform to WOWGR is expected to be positive.

In theory, without a registration requirement under WOWGR (and the removal of the registration of duty representatives), all owners of Scotch whisky (including revenue traders and owners based overseas) will be able to store their goods in an excise warehouse in their own name (i.e. under their own account at a warehouse), rather than casks remaining in the name of a broker. This removes a layer of administration and, with it, provide additional protection to the buyer (i.e. in the event of a dispute about over ownership of casks).

With more individuals investing in casks in recent years, there’s potential for hundreds (if not thousands) of cask owners to seek to open accounts to store Scotch whisky at excise warehouses in their own name.

The position will also be clearer for private individuals owning casks – there has been some ambiguity over the threshold for registration as a "revenue trader" under WOWGR. Whilst ownership of 5 casks is frequently discussed in the industry as the critical mass of cask ownership to trigger the requirement for registration, that limit is not found in legislation or HMRC guidance. Removal of registration requirements for all owners of casks will therefore bring some welcome certainty to buyers (and avoid the administrative exercise of WOWGR registration).

However, the removal of the requirement for registration by owners will also mean that brokers – who may own casks of whisky for sale and / or store casks for buyers at warehouses under their account – will be able to operate without any "authorisation" (albeit that was not the intended purpose of WOWGR).

Warehousekeepers

The practical effect of the reform will, however, likely depend on the appetite of the individual warehousekeeper. Under WOWGR (as amended), the warehousekeeper may have to – under the amended regulation – provide security for the excise duty on the goods stored in the warehouse. And the warehousekeeper is also the party responsible for paying excise duty to HMRC where goods have been deposited in a warehouse in breach of the regulations. There’s also a question mark over whether the warehousekeeper will be responsible for paying excise duty to HMRC in the first instance. So warehousekeepers might be reluctant to open new accounts and accept goods from new (unvetted) customers.

In practice, WOWGR has performed an unofficial (and indirect) role in due diligence for warehousekeepers. To get a WOWGR certificate, a revenue trader (or duty representative) had to have satisfied HMRC that it was a “fit and proper person.” While registration under WOWGR alone wouldn’t be sufficient due diligence (and this wasn’t the role or purpose of the WOWGR regime), it did provide some comfort to warehousekeepers as to the standing of the revenue trader or duty representative.

WOWGR also performed an unofficial role in due diligence relating to the provenance of casks. There are no regulations that address the process for transferring ownership of Scotch whisky. In practice, verifying goods and persons in the industry has been performed in part (and indirectly) through HMRC's registration of owners, duty representatives and warehousekeepers under WOWGR. In the industry, a warehousekeeper accepting goods into an excise warehouse is widely regarded as confirmation of the stated provenance of a cask. But warehousekeepers might be reluctant to accept casks from new customers who they don’t know and who now haven’t been verified by HMRC as being a “fit and proper” person or company.

These issues are potentially exacerbated by the surge in cask investment in recent years and the absence of regulations in the market for trading Scotch whisky casks.

From what we've seen, the initial reaction in the industry to the reform to WOWGR has been conservative. Warehousekeepers will still have to carry out due diligence on all owners and satisfy themselves as to the casks being stored in their warehouse. It may be anticipated that some warehousekeepers will still be reluctant to accept goods from new (unvetted) customers. Aside from receiving rent for storing casks, there’s no upside for warehousekeepers in accepting casks from new customers. Before the reform, some warehouses were already reluctant to open new accounts at their warehouses to limit their exposure. Unless a new due diligence process is introduced (or financial security is provided by owners for excise duty), this practice may continue, and warehousekeepers won’t agree to open new accounts for customers despite the reform to WOWGR. This would prevent owners from storing Scotch whisky in their own names (despite the reform to WOWGR allowing this to happen), snd so the current position may continue.

On the other hand, de-regulation could offer an opportunity for existing and new warehousekeepers to take advantage of the likely increase in the numbers of cask owners (both in the UK and overseas) looking to open warehouse accounts. Indeed, many warehouses open new accounts for owners to store goods in their own name.

 

Comment

The upcoming reform to WOWGR is substantial and, on the face of it, offers a simpler system under which people based in the UK and overseas can store Scotch whisky under duty suspension in excise warehouses in their own name.

But the impact of the reform may be tempered in practice. And reform to WOWGR may have created a due diligence vacuum that a new regime will have to fill. For the whole system to operate as intended, we think a new due diligence regime needs to be created – addressing both the standing of the cask owners for payment of excise duty and the provenance of casks. We await with interest how the reform will develop in practice.

DLA Piper's dedicated Scotch whisky practice advises clients around the world in the distilled spirit sector and we’d be pleased to discuss any issues connected to this article.