Founder receives Special Award
26 September 2019
Interrupting his spot on craft distillery regulatory matters at his 7th consecutive Craft Distilling Expo, Alan Powell was surprised by Bill Owen of the American Distillers Institute and David T Smith, CDE organizer and gin expert and writer, when he was presented with a beautiful award crafted by David's son Trev, for his Outstanding Contribution to Craft Spirits.
British Distillers Alliance – campaign starts for reduction of spirits duty for craft distillers
14 November 2018
The British Distillers Alliance (BDA) represents the interests of new and smaller businesses involved with the production of spirits in the UK.
The sector has expanded rapidly over the last few years and is important for employment, tax revenues and, increasingly, exports. The paradox is that the high rate of spirits duty in the UK, and the time it must be paid, acts as a barrier to domestic growth and, moreover, there is no reduction of the duty rate for smaller spirits producers (as there is for small brewers).
Alan Powell, founder of the BDA says: “There is now a very good case for the UK to introduce a reduced rate of duty for spirits produced by smaller distillers/producers” and explains:
There is a confluence of events that give rise to a strategy being employed at this point:
The incredibly rapid expansion of small and successful UK producers of spirits.
Extension of exemptions and reduced rates in EU law for small producers of other alcohol products.
The UK may set its own duty rates post Brexit, so HMRC/HMT can be lobbied for reduced rates for small spirits producers.
If the UK remains in transition and subject to Single Market rules during the EU exit process, or, if indeed, the UK does not exit the Single Market/EU, there is scope for seeking a derogation for reduced rates of spirits duty for small producers.
Unbalanced UK alcohol duty hierarchy – there are hidden quirks and tax avoidance for other products that discriminate against spirits.
Powell explains “Our campaign has commenced with BDA members contacting MPs and other influencers to ask for support of our case for a reduction in spirits duty for small producers. We will then be seeking meetings with all relevant ministers to make the case, especially in comparison with the lop-sided and unfair alcohol duty structure. We are also seeking advice from senior expert EU lawyers. All we are asking is that the playing field is made more level.”
Cheers! British Distillers Alliance 2nd Birthday hits 130 members mark
The British Distillers Alliance – founded in July 2016 – has seen a rapid growth in membership from a core of many of the “craft” spirits pioneers to a broad and growing body of spirits producers and associate members totalling 130 members and continues to expand.
BDA founder and co-ordinator Alan Powell said “The 'craft' spirits sector has exploded and it has been hard to keep up with everything we set out to achieve. We have focused on the “hard” regulatory matters where we have seen a tough and burdensome excise regime develop, especially with AWRS and application of HMRC policies and restrictions that breach EU law, holding back many businesses and in some cases, access to vital export markets. We are also concerned with the high burden of taxation on spirits which is not subject to small production rates, like those applied to small brewers or, in the case of small cider-producers, total duty exemption. We will be pursuing these matters with the Treasury and ministers but we are aware of the parameters we have to work within”.
Powell adds “In terms of EU law on spirits production and labelling rules, we have found DEFRA to be very helpful and they were recently welcoming to a delegation of BDA members. Our members made the point that they usually represent the cutting edge of innovation and new product development for spirits and need to be in close consultation”.
This leads to the vexed issue of Brexit. Powell says “domestically, little should change for excise matters although we need to ensure the EU principle of excise duty as being a tax on consumption is retained – HMRC does not properly respect this principle nor EU law as it stands, so there is a great risk for the future. The main problem will be in intra-EU movements which currently may not be exactly frictionless, but are much smoother than movements subject to customs procedures.”
Excise – a consumption tax which must be legislated clearly, post Brexit
At the very moment Britain prepared to vote for Brexit, the EU court (CJEU) was giving a massive boost to the beleaguered UK alcohol excise industry by confirming a simple but highly significant principle - excise duty is a tax on consumption. This might seem obvious and trite, but HMRC has always refuted this principle because of its beneficial consequences to both the industry and taxpayers.
Alan Powell, specialist excise duties consultant, said: “The plain legal facts are now clearly spelt out and must be protected post Brexit. In summary:
excise goods must be produced in a tax warehouse and there must be a system to suspend the duty (i.e. a relay system of tax warehouses);
since excise duty is a tax on consumption, it is necessary that the duty is suspended as near to the real consumer as possible;
if goods do not physically leave tax warehouse/duty suspension, there is no availability for consumption and no duty liability, even for technical irregularities.
The UK has failed to apply these principles in most cases and, in terms of duty charged for ‘technical irregularities’ has been unlawfully plundering alcohol businesses for many years. HMRC must immediately recognize and implement EU law correctly.
The best principles of EU law for excise duty in UK law must be confirmed during the Great Repeal Act, especially the principle that excise duty is a tax on consumption.” Powell warns that “If industry does not press its case, there is a risk - as evidenced by HMRC’s latest attacks on the alcohol sector - that HMRC will look to drive the duty point further back for alcohol products, as they have already done for oil and tobacco and become, in effect, an ‘early’ tax and burden on business.”
Excise as a consumption tax
HMRC has always argued that “consumption” doesn’t mean consumption by a consumer, but this is not true and was proven to be the case in 2016 at the CJEU.
The CJEU case C‑355/14 Polihim-SS’ EOOD (“Polohim”) of 2 June 2016 has now ruled incontrovertibly that excise duty is a tax on consumption (per recital 9 to Directive 2008/118/EC as also found in the BP Europa SE case (also 2016)).
In looking at what a tax on consumption means, Polohim also builds on foundations set out in previous case law which identify that, whilst excise goods have a liability to duty following production or importation, there is a structure of duty-suspension (i.e. tax warehouses) which enables the duty liability to be suspended and that the duty, as a tax on consumption, should be suspended as near as possible to the (final) consumer.
Moreover, Polohim determines that “so long as the goods in question remain in the tax warehouse of an authorised warehousekeeper, there can be no consumption, even if those goods have been sold by that authorised warehousekeeper”.
UK law and HMRC policy both impose arbitrary duty points and restrictions upon duty suspension, which are in clear breach of EU law and in denial of fundamental rights.
It is vital that the best principles of EU law are not only carried over in the Great Repeal Act, but also confirmed clearly in UK law. Without industry vigilance, HMRC may unpick good law, legislate domestically to deny that excise is a tax on consumption and withdraw alcohol duty suspension. They cannot do so under existing fundamental EU law, but nevertheless it is reported that such action is being mooted at high level. HMRC’s end game may be to roll back alcohol duty suspension, although they already have severe and punitive powers - the latest example being AWRS.
British Distillers Alliance welcomes HMRC’s flexibility for alcohol production
The British Distillers Alliance has replied to HMRC’s consultation on revised and consolidated guidance for the licensing and approval of distillers, rectifiers and compounders on the deadline of 5 August 2016.
Alan Powell, co-founder of the BDA explains: “The new guidance is set in draft in Notice 39: Spirits Production, which brings together HMRC’s stated policies and procedures for the licensing and approval of all types of spirits production. For the first time, a single HMRC public notice now covers the manufacture of gin and other spirits alongside “traditional” distilling of alcohol. When finalized, it will give clear guidance and direction not only to the industry but also to HMRC staff having to deal with the licensing and control of spirits producers”.
Powell adds: “Notice 39 includes clear and fair guidance as to how to make a business case to be licensed as a distiller, together with certainty that HMRC will give approval in principle to an application where the details are not finalized but the overall plan is credible and the persons involved are “fit and proper”. We very much welcome this guidance and have made a number of recommendations to further clarify other procedures set out in the Notice or remove conditions completely.”
Alan Powell concludes: “We commit to work collaboratively with HMRC to produce an effective guidance document for both new applicants and established businesses. This exercise can also go some considerable way to map out a simplified system for the approval and control by HMRC of all alcohol production – what HMRC has previously called “the drinks factory” concept.
Photos courtesy of Barry Davies, Somerset Craft Distillery Ltd
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