HMRC clarification on how to determine the Small Producer Relief (SPR) rate that applies

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As part of the change from Small Brewers Relief to Small Producers Relief, HMRC seemed to announce a transition scheme that would mean beer produced before the 1st of August 2023 that qualified for Small Brewers Relief would be paid at the rate that applied at the time it was produced. So, rather than paying the rate that applied at the point the beer left duty suspense, it would instead be paid at the rate that applied at the point it was produced. You can read our update from the time here: UK alcohol & beer duty updates for August 2023 - #27 by max

Then, two weeks later (and after we had built the transition scheme into Breww), HMRC scrapped it so that all SBR-qualifying beer would be paid at the rate that applied on the date of dispatch. You can read the follow-up update from the time here: UK alcohol & beer duty updates for August 2023 - #31 by max

However, on seeking clarity on this from HMRC, it transpired that what the industry believed to be a change to the rules for the purposes of moving from Small Brewers Relief to Small Producers Relief, was actually HMRC’s rule the entire time. Rather than scrapping the scheme, they had actually implemented an exemption to their normal rules :exploding_head:

This means that going forward, HMRC’s rules are that all Small Producer Relief beer (and any other alcoholic drink) needs to be paid at the rate that applied at the point it was produced, not the rate that applied at the point it was dispatched.

This will only start having a practical effect from the 1st of February 2024, when your rate under the new alcohol duty rules will likely change for the first time due to your production totals from the previous year.

We have already built this into Breww, so if you are using Breww to calculate your duty returns, you have nothing to worry about.

If you don’t use Breww, you will need to handle the complexities of tracking not just how much you’ve dispatched but also when exactly you produced what was dispatched. Fortunately, when importing your stock into Breww, you can provide us with its production date so Breww can immediately solve this admin nightmare for you. Book a demo here.

FAQs

The online EX46 Beer duty return only lets me add one rate per duty band, and now I’ll have two rates to submit until I’ve sold all beer produced before the 1st of February. How is this handled by Breww?

We raised this with HMRC when we first learned of this change. They’ve acknowledged the problem and have informed us that they will be updating the online EX46 to allow submitting multiple rates per duty band (e.g. two rates for the Draught between 3.5% and 8.4% ABV with SPR band).

What about beer produced before the 1st of August 2023?

Any beer that was produced before the 1st of August 2023 will be treated as if it was produced on the 1st of August 2023.

What date will Breww use as my stock’s production date?

To determine when beer was produced, Breww will use the Date & time of the Racking on-site action if it’s packaged on-site and the Date & time of the Racking off-site sent action if it’s packaged off-site.

For Stock adjustment actions, the Date & time done of the action more accurately reflects when the additional stock was found rather than produced. Because of this, Breww will follow the following logic to determine when Stock adjustment actions were produced:

  1. Were any products using the same beer and container type packaged on this batch? If so, use the Date & time done of the latest matching action. For example, a stock adjustment for the product Floral Haze IPA - 330ml Can was made on the 1st of February. On the same batch, a Racking on-site action for a Floral Haze IPA - 24 x 330ml Can was made on the 1st of January. Because this was a packaging for the same beer (Floral Haze IPA) and container type (330ml Can) and was not a stock adjustment, Breww will use the Date & time done of this action instead.
  2. If no matching actions were found, Breww will look at the latest Date & time done anything was packaged (not including stock adjustments) and use that.
  3. If nothing has ever been packaged, Breww will use either the batch’s completion date or the stock adjustment’s Date & time done, whichever is earliest.
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Do you know if this policy is effective from the date of the duty reform (1 August 2023), and if so, will there be changes to the duty reports in breww from August so we can amend the returns we’ve already submitted?

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Hi Peter - the policy is effective from the 1st of February 2024, so there aren’t any changes or amendments that have to be made to your duty returns from the 1st of August 2023.

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Hi Max,

Just to clarify the below part of the article is in relation to the rules from Feb onwards?

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Hi Steven - yes, that’s our understanding. I’ll update the article to clarify :slight_smile:

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Following up my question from your SIBA webinar today: we understand that beer can be considered “produced” when “beer reaches that state of maturity at which it is fit for consumption.” For us, that means while beer is still in the lager tank. So we’d like Breww to use the date a batch is approved for packaging, not the date it is packaged, as the production date for beer duty rate-change purposes (subject to HMRC’s agreement with our understanding, of course.)

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Hi Erik! Firstly, thanks for attending the webinar; I hope it was helpful :sweat_smile:

We’ve always found that particular HMRC definition of “produced” a very strange one, especially when you consider that the section ends by stating: “In relation to these events, ‘beer’ includes unfinished beer.” Does this mean that as long as “unfinished beer” is technically fit for consumption, it’s to be considered ‘produced’? It seems so broad as not to be very helpful at all, although this might just be me being a bit too pedantic with their definition!

I suspect it’s a catch-all attempt to categorise beer that’s ready to serve but that you don’t intend on packaging, either soon (as in your case) or at all (e.g. if serving from the fermenter) as “produced” at the point it’s ready to serve.

In Breww, we recommend packaging beer that is being served from a tank into a part-filled product so that it can be added either to an invoice or moved to a Taproom location, so we considered that using the Date & time done on a packaging action still covered this scenario.

However, the idea of a separate “produced” date that you can optionally set on a batch to be used instead of the packaging action’s date would be very straightforward to add and would definitely add some flexibility (although you can, of course, put in the date you consider the beer produced in the Date & time done field when eventually packaging it, so that flexibility does currently exist already). I like the idea of using the Packaging approval date, although we plan to allow multiple packaging approvals per batch soon, and in a multi-approval setup, it doesn’t feel like such a neat fit - so I suspect keeping them separate would be better.

Before we add an extra option like this, I’ll get in touch with our contact at HMRC about what their interpretation of that scenario is - just to ensure we aren’t going to add something that isn’t, after all, in line with their understanding.

I’ll keep you posted!

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Hi Erik - sorry for the delay in updating you!

Based on your example, we’ve been in further conversations with HMRC about the best date to use within Breww for the purposes of calculating a product’s SPR rate and the definition of “produced”.

Our understanding based on these conversations is that they use “produced” in two contexts. The first and original context is determining the point you’ve produced a “chargeable” product for duty purposes. “Chargeable” here meaning that you have a product that is liable for excise duty and will ultimately pay excise duty at the duty point (i.e. normally on dispatch). It’s under this context that this much wider definition of “produced” was written.

The second context is when something is “produced” for the purposes of Small Producer Relief. In this (brand new) context, HMRC has confirmed that they are happy (and would, in fact, appreciate the clarity and consistency) of using the packaging date - so the Date & time done of the packaging action.

For situations where beer is packaged off-site, they have said that using either the date dispatched or the date packaged would be acceptable. In this case, we’ve decided that Breww will use the Date & time of the Racking off-site sent action, as this seems to be the most common understanding of the rules.

Given the advice we’ve had from HMRC, we’ve decided to retain the clarity and consistency of using only these two potential dates. We don’t want to introduce potential confusion with further options, especially when HMRC have said that they appreciate that it is clear and easy to understand from their point of view.

I hope that all makes sense, but please let me know if you have any questions!

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OK, thanks. That interpretation will cost us some £, but not life-changing amounts and I appreciate your efforts to clarify.

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Hi,

So just to confirm, when beer is sent for off site packaging, it is at this point that duty is incurred and not when the racking is received from off site packaging?

Thanks
Issy

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Hi Issy - the beer sent for off-site packaging won’t become duty-paid at this point in Breww, but the date it was sent will be considered its production date for the purposes of determining the duty rate to pay when it does eventually become payable.

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That’s great, thanks Max.

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