How should VAT be calculated when excise duty on alcohol released from bonded warehouse exceeds 20% of the total value?

VAT on goods released from bonded warehouse is charged on the cost price plus duty, not on the selling price or final wholesale price. **However, when duty represents more than 20% of the total value, you must alert HMRC to the discrepancy**, otherwise they will initiate a review process—which members report is tedious and time-consuming. The calculation itself should be: cost price + duty = VATable base, then VAT at 20% on that sum. Failure to notify HMRC when duty exceeds the standard 20% threshold can trigger compliance reviews.