Fuelled by the increasing popularity of craft beer and artisan gin, the Brewing & Distilling sector has grown vastly in recent years. With Christmas and Brexit upon us, this could well be the making or breaking of those established and new to the industry.

An article [1] last month voiced ambitious growth plans for Scottish brewers. The strategy, coming from an industry body, urges Scottish drinkers to ditch imported beer for local brew. This, together with other initiatives such as cost cutting and financial efficiencies, aims to grow the sector to £1bn by 2030.

The backbone of the plan is to create a strong Scottish brand which would be recognised and desired worldwide. The plan would involve successful utilisation of the export/EU movement market.

As an industry VAT expert, EU movements and exports are very much the focal point of both drinks businesses and their supply chains. We are seeing drinks businesses looking to streamline their EU VAT obligations. For some this will be the use of Fiscal Representation overseas, or clever use of different Incoterms within business contracts, to pass the VAT burdens on to their customers and avoid unnecessary EU VAT registrations.

On the flip side, we have EU businesses contacting our UK storage and logistics companies looking to stock pile product ahead of March 2019. These businesses are stocking up in the UK to avoid potential UK Duties in the event of a no-deal Brexit. Some might say this is a wise move, but do our logistics companies have capacity to store such quantities?

Below are key areas in relation to VAT which those in the brewing & distilling sector should be aware of:

  • Place of supply – Consider the place of taxation of your international sales. Ensure you are aware of your overseas VAT liabilities and plan ahead of large contracts or proposals.
  • Incoterms status – Linked with the place of supply, your Incoterms status will have a big impact on your liability for overseas’ import VAT and Duty. Where commercially possible, consider the different options available.
  • VAT registration status – If you do have a potential EU VAT registration requirement, take advice in advance. Some EU countries require formal fiscal representation. It is also worth noting that there are some generous EU warehousing options available, however please be aware that there are often subtle differences between member states.
  • Bonded warehouse facilities – Efficiencies are available for both UK and overseas businesses within the sector. These can be achieved either through your own facility or through your storage/logistics provider.
  • Brexit – We will all be keeping our eyes on the seemingly endless possibilities Brexit could bring, including changes to Duty, VAT and EU movement/distance selling rules. To highlight one interesting point from the many HMRC publications….a promise from HMRC that “UK VAT-registered businesses will be able to account for import VAT on their VAT Return rather than paying import VAT on or soon after the time that the goods arrive at the UK border.” This will be welcomed by many in this ‘unlikely’ event from a VAT/cash flow perspective, however, we would note that Duty would continue to be due at the point of entry, unless you have use of a Bonded Warehouse system.

If you would like to discuss this or other concerns affecting your business, please contact me here, or another of our Brewing & Distilling industry specialists.

Martin Keenan
martin.keenan@campbelldallas.co.uk
0141 886 6644

[1] https://www.bbc.co.uk/news/uk-scotland-scotland-business-46451060

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The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2018. Laws and tax rules may change in the future.