Finance (No. 2) Act 2023 (made full expensing permanent)
What this means for your business
- Applies to
- United Kingdom
- On this page
- 20 compliance obligations, 1 practical guide
What you must do
20 compliance obligations under this legislation — 2 can result in imprisonment.
Management duties 4
Apply for authorisation to use duty‑charged spirits for exempt purposes
Unlimited fineIf your business wants to use alcoholic spirits for making medical products, scientific work, or certain art/manufacture where denatured alcohol won’t work, you can ask the Commissioners to let you receive the spirits without paying alcohol duty. You must get the authorisation, follow any conditions they set, and keep records – otherwise you could be fined or prosecuted.
Buy wholesale alcohol only from approved wholesalers
If you purchase alcohol wholesale, you must only buy from a UK‑approved wholesaler, or from an Isle of Man‑approved wholesaler when dealing with Isle of Man suppliers. Before you place any wholesale order, check that the seller is on the approved list.
Calculate and claim duty discount for small producer alcohol
If your business makes a relatively small amount of alcoholic drinks, you can get a discount on the duty you pay. You must work out whether your production falls within a discount band, use the formula in the Act to calculate the discount, and apply that reduced rate when you submit your alcohol duty return. Keep the figures you used so you can show HMRC how the discount was worked out.
Do not mix alcoholic products unless an exemption applies
10 years imprisonmentYou must not combine two or more alcoholic drinks unless one of the four exemptions applies – an approved mixing process, the products are in the same tax class and strength, the excise duty has already been paid to cover the resulting mix, or the mix is for on‑premises consumption using a method set out in a notice. Before mixing, check that you meet at least one exemption to avoid breaking the law.
Notifications 1
Notify HMRC of electricity generator levy payments
Unlimited fineIf your company (or the lead company in a group) has to pay the electricity generator levy and you make a payment that relates to that levy, you must tell HMRC the amount of the payment before the payment is made. Failure to do so can lead to a criminal fine.
Other requirements 3
Affix required duty stamps to excisable goods
Unlimited fineIf your business manufactures, imports or sells goods that attract excise duty (such as alcohol, tobacco, fuel or mineral oils), you must put the correct duty stamp on every item and keep evidence of that stamping. Failing to do so can lead to criminal prosecution and unlimited fines.
Do not dilute alcoholic products after the duty point for sale
If your business handles alcoholic products that are subject to alcohol duty, you must not add water or any other substance to them after the point where duty is calculated if the product is going to be sold. Doing so would reduce the duty payable and is prohibited. Make sure any mixing is done before the duty point or that the duty is recalculated correctly.
Obtain approval before carrying out a controlled activity
7 years imprisonmentIf your business wants to carry out a 'controlled activity' you must first get approval from the Commissioners. You will only be approved if you are considered a fit and proper person, and you must follow any conditions they set, such as where the activity can be carried out. The approval can be limited in time and may be varied or revoked, so you need to keep it up to date.
Payments and fees 8
Calculate and pay domestic top‑up tax
If your company (or its UK group) earns profits and its effective tax rate is below 15%, you must work out any domestic top‑up tax due. Follow the steps set out in the Act to calculate the amount, convert it to sterling if needed, and pay it when your corporation tax is due.
Check if your business must pay multinational top‑up tax
If your company is part of a multinational group that meets the criteria in the Finance (No. 2) Act 2023, you may be liable to a special top‑up tax. You need to determine whether your business falls within the definition of a “chargeable person” and, if it does, calculate and pay the tax for the relevant accounting period.
Pay alcohol duty at the correct rate
If your business makes, imports or sells alcoholic drinks you must calculate the excise duty you owe using the rates set out in the Finance (No. 2) Act 2023. The amount you pay depends on the strength of the alcohol and the type of product (e.g., cider, beer, spirits). You need to report the duty to HMRC and pay it when the product is released for sale.
Pay alcohol duty if imported spirits are for human consumption
If you import spirits that are later found to be in goods intended for people to drink, you must pay the alcohol duty that would have applied. HM Revenue & Customs (the Commissioners) will tell you the amount due and you must settle it when notified.
Pay alcohol duty on produced or imported alcoholic products
If your business makes alcoholic drinks in the UK or brings them into the country, you must pay alcohol duty on those products unless an exemption applies. The duty is a tax calculated on the amount of alcohol, and you need to ensure it is paid to HMRC and recorded appropriately.
Pay any assessed alcohol duty shortfall
If HMRC (the Commissioners) find that you have applied a lower alcohol duty rate than you should have – for example, you claimed the small‑producer discount when you were not eligible – they can issue an assessment for the shortfall. You must pay the amount they notify you of. Keeping accurate duty calculations helps you avoid these assessments.
Pay domestic top‑up tax if your business is a chargeable person
If your company or partnership is a qualifying entity (or you are liable for tax on one) and you are UK‑resident, you must pay domestic top‑up tax for each accounting period. Where more than one party is liable for the same qualifying entity, each is jointly and severally responsible for the tax.
Pay electricity generator levy for group members
If your business is part of a group that runs a generating undertaking and the group is charged the electricity generator levy, the lead member must pay the whole amount and the other members are also jointly and severally liable. In practice this means your company must ensure the levy is paid, even if you are not the lead member.
Offences and prohibitions 3
Fail to comply with denatured‑alcohol licence or regulations
Unlimited fineIf your business manufactures, deals in or wholesales denatured alcohol without a proper excise licence, or breaches any of the regulations made under section 92, you commit a criminal offence. On conviction you face an unlimited fine under section 9 of the Finance Act 1994 and any alcohol, equipment or related items may be seized and forfeited.
Repackage draught alcohol without proper duty compliance
Unlimited fineIf you re‑package draught alcoholic products that qualify for duty relief but do so contrary to the rules in section 52(2) of the Finance (No 2) Act 2023, you commit an offence. HM Revenue & Customs can charge you the duty shortfall and add a penalty calculated on that amount. Any equipment, packaging or product used for the unauthorised repackaging can also be confiscated.
Use denatured alcohol for beverage or medicine
Fine up to £1,000It is an offence for any business (or individual) to prepare, sell, use or try to recover denatured alcohol for drinking, mixing with drinks or as a medicine, unless you have specific permission from the Commissioners. If you breach this, you can be prosecuted in the Magistrates' Court, face a fine up to £1,000 and any offending alcohol or equipment may be seized.
Registration and licensing 1
Register and file multinational top‑up tax returns
If your company is the filing member of a multinational group that becomes a qualifying multinational group, you must register the group with HMRC, send the required information and self‑assessment returns, and keep the supporting records. The registration must be made within six months of the end of the accounting period in which the group first qualifies.
Penalties for non-compliance
8 penalties under this legislation. 2 can result in imprisonment. 7 carry an unlimited fine.
Fail to comply with alcoholic products duties (s.82, 86, 87)
Unlimited fine and/or 10 years imprisonment
Wholesale of controlled alcoholic products without proper approval
Unlimited fine and/or 7 years imprisonment
Apply for authorisation to use duty‑charged spirits for exempt purposes
Unlimited fine
Notify HMRC of electricity generator levy payments
Unlimited fine
Affix required duty stamps to excisable goods
Unlimited fine
Fail to comply with denatured‑alcohol licence or regulations
Unlimited fine
Repackage draught alcohol without proper duty compliance
Unlimited fine
Use denatured alcohol for beverage or medicine
Fine up to £1,000
Practical guidance
Our guides explain how to comply with the requirements above.
Sections and provisions
420 classified provisions from this legislation.
Duties 19
- Schedule 7 Rates of alcohol duty
- Schedule 14 Administration of multinational top-up tax such partner
- s.47 Alcohol duty: charge
- s.59 Duty discount for small producer alcoholic products
- s.60 Assessments where incorrectly low rate of alcohol duty applied
- s.78 Authorised use for certain purposes
- s.79 Imported goods not for human consumption
- s.86 Mixing alcoholic products
- s.87 Post-duty point dilution of alcoholic products
- s.100 Approval to carry on controlled activity
- s.101 The register of approved wholesalers
- s.102 Regulations relating to approval, registration and controlled activities which
- s.103 Restriction on buying controlled alcoholic products wholesale
- s.112 Duty stamps
- s.122 Chargeable persons
- s.269 Chargeable persons
- s.270 Amount charged
- s.289 Liability of members of groups
- s.304 Requirement to provide information about payments must give notice
Offences and penalties 8
- s.53 Repackaging in contravention of section 52 (2)
- s.89 Penalties and forfeiture
- s.93 Penalties and forfeiture
- s.97 Prohibition of use of denatured alcohol etc as beverage or medicine
- s.104 Offences
- s.105 Penalties
- s.145 Exclusion of expenses for illegal payments, fines and penalties
- s.326 End of exempt period for HGV road user levy
Powers 25
- s.46 Categories of alcoholic products: regulations
- s.73 Research and experiments
- s.74 Spoilt alcoholic products
- s.80 Restrictions on use of certain articles
- s.83 Supplementary provision about approvals
- s.88 Alcoholic products regulations
- s.92 Regulations relating to denatured alcohol
- s.96 Inspection of premises etc
- s.99 Further provision relating to definitions
- s.109 Forfeiture: supplementary provision
- s.111 Drawback
- s.162 Election to reflect deductions for stock-based compensation
- s.165 Election to have excluded equity gains and losses included
- s.166 Election in relation to hedging currency risk in ownership interests
- s.181B Cross-border allocation of deferred tax assets and liabilities
- s.181A Cross-border allocation of current tax under cross-crediting regime
- s.187 Election for losses to be treated as special loss deferred tax assets
- s.198A Power to make provision about treatment of payroll costs and assets
- s.214 Taxable distribution method election
- s.216 Election where assets and liabilities adjusted to fair value for tax purposes
- ... and 5 more powers
Definitions 110
- Schedule 12 Alcohol duty: duty stamps
- s.25 Relief relating to net pay arrangements
- s.30 Transfer of basic life assurance and general annuity business
- s.36 Share exchanges involving non-UK incorporated close companies
- s.39 Payments to farmers under the lump sum exit scheme etc
- s.43 Relief on disposal of joint interests in land
- s.44 Meaning of “alcoholic product”
- s.45 Alcoholic strength
- s.49 Excise duty point and payment
- s.51 Alcoholic products qualifying for draught relief Qualifying draught products large draught container qualifying system
- s.52 Repackaging qualifying draught products
- s.55 Small producer alcoholic products
- s.56 Small production premises
- s.61 Mergers: general provisions Post-merger production group Year 1 Year 2
- s.62 Modified “small production premises” test
- s.64 Adjusted post-merger amount
- s.65 Early termination of merger transition period
- s.68 Demergers
- s.69 “Producer”, “production premises”, “group premises” etc Production premises
- s.70 Connected persons
- ... and 90 more definitions
Exemptions 54
- s.4 Freezing starting rate limit for savings for tax year 2023-24
- Schedule 10 Penalties for contraventions of alcohol wholesaling provisions
- Schedule 16 Multinational top-up tax: transitional provision
- Schedule 18 Administration of domestic top-up tax
- s.38 Double taxation relief: foreign nominal rates
- s.57 “Alcohol production amount” etc
- s.58 Exclusions
- s.63 Modified duty discount
- s.66 Subsequent mergers
- s.72 Exemption: production for personal consumption
- s.76 Imported medical articles
- s.77 Flavourings
- s.82 Approval requirement: producers
- s.84 Exemption: production for personal consumption
- s.85 Exemption: research and experiments
- s.90 Denatured alcohol
- s.116 Temporary provision: cider
- s.118 Regulations: supplementary and general
- s.119 Regulations: procedure
- s.127 Excluded entities
- ... and 34 more exemptions