Media reports have been circulating that during the COVID-19 lockdown alcohol consumption has risen inversely to the number of haircuts. However, the serious point to make here is that many breweries, pubs and clubs have seen their sales fall leaving beer unsold in kegs and increasing amounts of ullage.
Measures have been recently introduced by the Government to relax the existing regulations allowing breweries to destroy unsold and/or spoilt beer and reclaim the excise duty. This permission to destroy spoilt beer has been passed to the pubs and clubs to whom the breweries sell their beer. The public house is now authorised (in certain circumstances) to destroy unsold beer (as long as records are kept of destruction) rather than return the kegs to the brewery. Hence, both parties can now benefit from the refund of excise duty. This is a welcome revision.
However, many small breweries who benefit from Small Breweries Relief (SBR) are also realising that the estimates they provide to HMRC for production levels to be able to legitimately claim excise duty relief are now too high. Additionally, they have already paid too much excise duty and may want to take advantage of SBR for which they now qualify.
In theory, SBR allows small brewers to pay a proportionate rate of duty upon their beer. Typically, a brewer that brews up to 5,000 hectolitres (about 850,000 pints) of beer per year pays 50% of the standard beer duty rate. The beer duty rate is then tapered upwards until it reaches a maximum production of 60,000 hectolitres per year. At this level the full standard duty rate is applied. Therefore, for a small brewery to remain competitive, it is a business imperative to ensure that the amount of excise duty they pay is accurate.
These small breweries (and perhaps larger establishments if they feel that they have paid too much excise duty) could benefit from making a claim to recover overpaid excise duty. An excise duty taxpayer is entitled to make a claim under Section 137A of The Customs and Excise Management Act (CEMA) 1979 for overpaid excise duty – going back four years. This is by reference to the Excise Repayment for Overpaid Excise Duty guidance under the Revenue Traders (Accounts and Records) Regulations of 1992.
The application has to be in writing to the ‘Errors and Corrections Team’ of HMRC who will consider the application.
There is no prescribed format in law for the application. Therefore, in theory a detailed letter with an explanation of the reason for the overpayment of excise duty, and the supporting numerical evidence of lower stock production and other evidence relating to the current issues faced by business, should suffice as an ‘application.’
HMRC will then consider the application and evidence and make any adjustments and/or repayments as required. However, they may ask for more evidence and/or visit the brewing premises to confirm and check any details.
In these difficult times brewers, especially the smaller firms, should utilise the often obscure, but still extant processes and legislation, to safeguard their livelihoods.
This article is taken from the latest edition of our Customs Digest newsletter, looking to help businesses and individuals keep up to date with the latest customs and excise duty regimes and issues. If you would like to receive future editions of this publication, please register on our insights page here.
For more information, please contact Simon Sutcliffe.