I'm fairly sure Not_a_Number is correct---when my half sister moved to France she celebrated at being able to distill stuff---a portable still comes round her village once a year, and they pay to use it (and then pay tax on the product too I think). They apparently only still allow it in France because it helps to keep ancient orchards going---what better reason to grow fruit??
I guess they're allowed to sell distilling kits 'cos it is legal with a licence, I suppose they can't be prosecuted for that even though you can. Similar to how selling bongs in Camden market (and everywhere else) doesn't make it legal to smoke pot :) and I'd guess you're also right that the police aren't going to bother much until you start having a large scale operation.
Having tried my family's homemade wine though, I can attest that it is possible to get pretty highly concentrated stuff (~20% I think) without distilling. Their stuff is evil enough without letting them loose on a still!! (*feels slightly sick at the memory*)
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