Odin interviews Alan Powell from the BDA
Alan, can you tell us a bit more on who you are and what your background is?
I’m an independent excise duties consultant, formerly with HMRC excise Policy, and then senior manager with a Big 4 accountancy firm before setting up my own consultancy business. Before joining HMCE (as was) in 1988, I had been a microbrewer and keen whisky buff, so I was a “good fit” for excise work. I liberalized a lot of HMRC alcohol policy in the mid-1990s, especially regarding spirits production, but the message was simply not acted upon by HMRC for many years and I wasn’t aware of the difficulties experienced by the “pioneers” of craft spirits production because most of my clients were then in the “established” alcohol sector. It wasn’t until about four years ago, that “craft” spirits production became a line of my work. Since then, I’ve helped small and independent producers to obtain the necessary regulatory approvals from HMRC or eased restrictions that were unreasonable.
How did you come to start BDA?
I was aware that many independent spirits producers wanted to have a trade voice, which is necessary because UK government departments, and HMRC consult only through trades bodies as a rule. I already represent trade and the tax profession at high-level meetings with HMRC, so offered to “slot in” representative work for small spirits producers. This was very well-received by craft producers, so I literally kicked the whole thing off in a day or so. I didn’t charge any joining fee or subscriptions because I didn’t want to delay matters and there was a lot of urgent work to undertake with HMRC. The point was to raise a flag to rally around.
What’s the BDA’s goal? What would you like BDA to achieve?
I would like the BDA to be the respected trade voice for small independent UK distillers in the same vein as SIBA for small brewers. As an obvious goal, there is a real need for an effective reduced rate of excise duty for smaller producers which currently is tied to EU law but in the post Brexit world there is an opportunity for the industry to lobby nationally. In terms of BDA organization, I’m currently a sort of benign dictator but, in due course, the BDA will need to consider a structure for a steering group or council and perhaps articles of association. The problem is – inevitably – that small producers are so busy and this leads to pressure on time able to be committed to such committee work.
What did BDA do so far? What was it able to organize for its members?
We’ve contributed a thorough response to HMRC’s draft revised public Notice 39: Spirits production, which is going to be the key guidance to existing and applicant distillers and other spirits producers. This is a great opportunity to work with government to clarify law and policy (including the fact that the “18 hectoliter” still size for distillers is not a barrier to being licensed). Bear in mind that applications for approvals to HMRC from small spirits producers are greater than any other sector and HMRC wants to provide more helpful and clear guidance to reach this target audience.
We’ve worked with HMRC to establish a policy for HMRC to issue “approvals in principle” to applicants (ie to give a fair degree of assurance of approval before an applicant commits to buy equipment or acquire property). This relies upon a credible business plan to be submitted by the applicant but that should be a fundamental commercial consideration anyway. Where that policy has not been applied consistently, we’ve successfully approached HMRC at Policy and operational level to assist.
We’ve also worked with HMRC and members to understand the purpose and extent of the “Due Diligence Condition”, which is a mandatory requirement for operators in both the duty-paid and duty-suspended supply chains for deterring alcohol fraud. In many cases, HMRC’s requirements have been excessive and not in accord with its own risk assessment guidance. On the other hand, small spirits producers have not always been alert to risks in the supply chain – there needs to be vigilance (but always subject to assessment of the objective risk – there is minimal risk in (relatively) low volume artisan products).
On the longer term: how do you feel about the Craft Spirits Industry? Its chances and challenges?
It’s a tough question to answer. From a regulatory point of view, it’s an excellent time to start up or develop because the UK government is willing to work to bring down as many barriers as possible to promote economic growth and HMRC’s excise Policy is very receptive to the needs of well-planned new spirits businesses. A new credible business should really be pushing at an open door – but the homework needs to thorough (or engage a consultant!) On the other hand, there are now a lot of small spirits producers and a finite domestic market for gins nationally, but there is always room for local followings, particularly in bars and pubs. There’s also the chance for innovation, especially for distillers producing their own spirits (and not restricted outside Scotland about new techniques for whisky production). And there is always room for exports, of course. Obviously, some of the gin pioneers in the UK have been bought or acquired significant investment and there will be more public interest and awareness as these brands are marketed, hopefully fuelling more interest in artisanal products. The future for small whisky and other distillers of fermented liquor is going to be interesting – I have no doubt there will be some stars to emerge as the product matures and becomes available.
Any final words of wisdom for our audience?
For start-ups, plan thoroughly and immerse yourself in the seemingly boring accounts and records (especially duty accounting and payment) and impress HMRC with your preparation. For everybody, never ignore the “unglamorous” stuff; it’s a highly-regulated dangerous game if you “play” at it (though we aim to work with HMRC to simplify and rationalize as much as possible over the next 20 months or so). Assume nothing – even when HMRC tells you something is forbidden (or sometimes when they say it allowed). It’s a new world for them, too. Having sounded a load of warnings, don’t be intimidated either! Get it right and you can crack on confidently making and marketing your own special products, which is what it’s really about.
Alan Powell …