A chap called Simon on Jim's Home Brew Forum has this to say about distilling. The bold is mine.
It is well nigh impossible to obtain a licence to home distill. Actually, I will go further, and say it is absolutely impossible. These kits you can buy are legal to sell, and to own, but illegal to use. The HMRC are tasked with protecting the revenue of this country - they are extremely reluctant to grant a licence for any organisation where there is a still of less than 18 hectolitres (1,800 litres) (400 gallons approx) as the largest, as the costs of inspecting the bonded warehousing (which you need for legit. distilling) are too high when set against the revenue likely to be reaped from a small still.
However,There is a small, commercial, microdistilling industry beginning to start in the UK, as a few enterprising folks have submitted proposals to HMRC for apparatus below 18 Hl, (around 250-500 litre, as I remember) but they have clear business aims, and pay their revenue. Other commercial setups have applied for small scale rectification licences - which are I think easier to obtain