A bonded warehouse is a storage facility regulated by HMRC (His Majesty's Revenue and Customs). Its purpose is twofold. Firstly, it allows the whisky to be stored without incurring VAT and Excise Duty. Secondly, it ensures that the whisky is stored under appropriate conditions for successful maturation.
There are two main types of storage facilities for whisky: "Dunnage" warehouses and "Racked" warehouses.
A Dunnage warehouse is a traditional-style storage facility with clay floors and no windows. It allows a maximum of three casks to be stored on top of each other. Although less efficient for distilleries in terms of capacity, it maintains the authenticity of the traditional storage method.
A racked warehouse, on the other hand, is a modern-built facility with larger dimensions. It utilises racks that can accommodate the stacking of 15-20 casks on top of each other, thereby maximising storage capacity.
There are over 20 million casks stored in Scottish bonded warehouses, which totals over £70 billion of taxable revenue owed to HMRC. Due to this, HMRC keeps the warehouses highly regulated and secure.