Section 12 — Draught Relief and Small Producer Relief
Guidance on Draught Relief and which products qualify for Small Producer Relief and what to do if you export small producer products.
If you are a small producer, you may be able to pay a lower rate of Alcohol Duty on any product with an alcohol by volume or less than 8.5%.
You will qualify for Small Producer Relief if:
- the products you made in the previous production year contain 4,500 hectolitres or less of pure alcohol
- you reasonably expect that the products you make in the current production year will contain 4,500 hectolitres or less of pure alcohol
- less than half of the total alcohol you produce in a production year is made under license
You also need to be aware that different production limits apply to Northern Ireland. Check if you’re eligible for Small Producer Relief on Alcohol Duty for the production thresholds by product type for Northern Ireland.
The production year for Small Producer Relief is 1 February up to and including 31 January.
You should read the following guidance to check if your products are eligible and to work out your reduced rate:
- Check if you’re eligible for Small Producer Relief on Alcohol Duty
- Find out your Alcohol Duty rates if you’re eligible for Small Producer Relief
- How to work out your Alcohol Duty rates if you’re eligible for Small Producer Relief
- How your business set up can affect your eligibility for Small Producer Relief
Section 12.2 has force of law under regulation 6 of the Revenue Traders (Accounts and Records) Regulations 1992
You need to keep an Alcohol Production Account showing these:
- a record of your estimate of the current year’s alcohol production together with details of how you arrived at the estimate
- previous production year’s actual alcohol production (to be recorded each month)
- the calendar month and year in question
- the total quantity (in hectolitres of pure alcohol to 2 decimal places) of alcohol that you’ve produced in that calendar month split if appropriate between your own alcohol and alcohol you’ve produced under license
- the quantity should be reduced to take account of any alcohol you subsequently determine to be spoilt or destroyed before the duty point
At the end of each Small Producer Relief year, your annual alcohol production totals shown in the Alcohol Production Account will determine your continued eligibility for the scheme and the reduced rate for the following year. Production must be under 4500 hectolitres of pure alcohol to continue to qualify for the scheme.
Where exceptional circumstances affect your alcohol production amount, we will consider the impact on a case-by-case basis.
In addition to the Alcohol Production Account, all producers are required to keep an Alcohol Duty account, details of which can be found at section 9 — records and accounts.
You must take all of the relevant factors into account, including any contracts you already have to supply small producer alcoholic products and any expansion plans.
Be as accurate as possible. If, for example, you make an untrue estimate by stating the production premises will produce 4,000 hectolitres of pure alcohol in the current small producer year when you know that a reasonable estimate would be 5,000 hectolitres of pure alcohol, we can recover all of the duty unpaid.
You only have to tell us how much alcohol you reasonably estimate that you’ll produce when you apply for approval with us in respect of that production premises. You do not need to notify us of subsequent estimates, but you must record in your business records each small producer year’s estimate at the time you make it, together with details of how you arrived at the estimate. This information must be kept in the form of an Alcohol Production Account.
The previous small producer year’s alcohol production figure is the total quantity of alcohol in all alcoholic products produced by a production premises or group of connected premises in the previous small producer year. The figure includes all alcoholic products you’ve produced, whether for yourself or for another producer or third party. It is the quantity of alcohol produced and put into tanks, casks, kegs, bottles or other receptacles of a kind in which alcoholic product is distributed or sent in bulk to be packaged elsewhere. It is not the quantity of alcohol removed from the production premises.
The previous year’s production figure includes any alcohol in product:
- produced in that year and held in stock at the end of the year
- consumed on the premises
- used for sampling or research
Details of your production must be kept in the form of an Alcohol Production Account.
Your alcohol production figure must include the total alcohol in products made on your premises in a year (1 February to 31 January). You’ll use this figure to:
- work out if you’re eligible for Small Producer Relief
- calculate your reduced rate
The section includes principles and examples for working out your alcohol production figure for Small Producer Relief. It includes examples of when:
- packagers add ingredients, as the product would become unstable if added before transportation
- alcohol moves between different producers
- alcohol change classification
- production takes place across different production years
You can use the examples and the following general principles to work out what to include in your alcohol production figure for Small Producer Relief. These are not exhaustive.
12.6.1 General principles
You should consider these principles when working out your alcohol production figure:
- you can measure the alcohol at various points in the production process, as long as you take a consistent approach
- you must count alcohol when there are no more processes that alter the pure alcohol of the product. Under an alcoholic products producer approval (APPA) a producer may carry out packaging (alongside production), but a business only carrying out packaging cannot be considered as a producer
- for the first production year (ending 31 January 2024), HMRC accepts that producers may not have enough records to calculate alcohol production accurately
- you should include alcohol produced that year in your alcohol production figure, even if products increase in strength slightly after production
- the premises where the product is made determines the rate of Small Producer Relief — it does not matter whose premises the product is in when it passes the duty point
Example 1 — sending cider for packaging
A producer must include the alcohol in product they send to a packager in their alcohol production figure. The packager does not need to include this alcohol in their own alcohol production figure. This applies even if the packager pays duty on the product.
If the packager is also a producer, the Small Producer Relief rate for the products is the original producer’s rate. This applies as long as the packager has not significantly changed the:
- alcoholic strength of the product
- type of alcoholic product
(a) Company A makes cider and includes the alcohol in their alcohol production figure. They do not have bottling facilities, so company A sends the cider to company B who bottle it. The Small Producer Relief rate for the cider is company A’s rate.
(b) Company A makes cider. They blend the cider with fruit or flavours to produce a fruit cider (other fermented product). Company A sends the blended product to company B who package it. The Small Producer Relief rate for the fruit cider (other fermented product) is company A’s rate.
(c) Company A makes cider on their premises and sends a base cider to company B, a large cider maker for packaging. Company A is not able to blend the sugar and other items at their site as this would result in an unstable product. At company B’s site, they blend the base cider with the other permitted ingredients and package it. The amount of pure alcohol provided by company A does not change at company B’s site and neither does the duty category. Company A includes the alcohol in their alcohol production figure. They also pay any Small Producer Relief rate they’re eligible for.
(d) Company A makes cider and sends it to company B for packaging. Company A includes the alcohol in the cider in their alcohol production figure. Company B uses their own ingredients to blend the base to produce a fruit cider (other fermented product). The Small Producer Relief rate for the fruit cider is now Company B’s rate. Company B includes the alcohol in the fruit cider (other fermented product) in their alcohol production figure. They must do this even if they return the cider to company A, who market and sell it.
Example 2 — Cider to sparkling cider
(a) Company A makes still cider, some of which is subject to secondary fermentation. They include the total alcohol after secondary fermentation in their alcohol production figure. If company A produces the cider in one Small Producer Relief year, and secondary fermentation takes place in the next Small Producer Relief year, they must include it in their alcohol production figure for the second Small Producer Relief year.
(b) If company A sells the still cider to company B who then renders it sparkling: - company A includes the alcohol in the still cider in their alcohol production figure - company B includes the total alcohol in the sparkling cider after secondary fermentation in their alcohol production figure
Company B also pays the Small Producer Relief rate they have on the sparkling cider.
Example 3 — Separate producers, one product category to another
Both companies must include alcohol in their alcohol production figure if:
- company A sells an alcoholic product to company B
- company B uses the product to produce a different alcoholic product
For example, company A makes cider and they include the alcohol in the cider they make in their alcohol production figure for that year. They sell some of the cider to company B who use it to make cider brandy. Company B includes the total alcohol in the cider brandy in their alcohol production figure that year.
Example 4 — Cask conditioned products
Cask conditioned products increase in strength after leaving production premises. This is because they continue fermenting. You must include the alcohol in the product when it leaves the production premises, in your alcohol production figure.
For example, company A makes 1,000 litres of 4.5% cask product. This means the product contains 45 litres of pure alcohol. Company A expects the alcoholic strength of the product will be 4.7% when sold for retail, because the product continues fermenting. As a result, the final product will contain 50 litres of pure alcohol. Company A only includes 45 litres of pure alcohol in their alcohol production figure for Small Producer Relief duty rate calculation, but they must still declare 50 litres of pure alcohol for duty purposes.
Example 5 — third party produced alcohol held in duty suspension
Company A will not include alcohol in their alcohol production figure if the product is:
- produced by a third party
- held in duty suspension on company A’s site
For example, company A makes cider. They also receive cider from company B that they bottle and hold in duty suspension. Company A only includes the alcohol in the cider they produce in their alcohol production figure. Company B includes the alcohol in the cider they produce in their own alcohol production figure.
Example 6 — Mixed bases
Company A makes cider from a mix of:
- their own cider base
- cider base purchased under duty suspense from company B (another small producer) and company C (a large producer not eligible for Small Producer Relief)
Company A includes the total alcohol of the product they make from the different cider bases in their alcohol production figure. The final packaged cider, when passing the duty point, is eligible for the Small Producer Relief rate of company A.
(a) Where more than one person produced small producer alcoholic products in the premises in that small producer year and there was no break in production (because the cancellation and new approval dates are together), the production figure for the purposes of the Small Producer Relief will be the combined total of each person’s production in that small production year.
For example:
- company A produced 2,500 hectolitres of pure alcohol in the premises from 1 February to 30 September and then sold the premises to company B
- company B produced 1,000 hectolitres in the premises from 1 October to 31 January
Therefore, the combined production figure for the purposes of Small Producer Relief is 3,500 hectolitres of pure alcohol — the sum of company A and company B’s production figures.
(b) If there was any time during that year when the premises were not used to produce alcoholic products, for example, company A stopped production in July but only sold the business to company B in September, the 2 companies’ alcohol production figures must be grossed up using the formula:
Amount of alcohol produced in the premises in the previous year ÷ the number of days in that part of the previous year × the number of days in the Small Producer Relief year
For example:
- company A produced 2,750 hectolitres of pure alcohol during the period 1 February to 30 July
- company B produced 1,175 hectolitres of pure alcohol between 1 September and 31 January
The grossed up small producer year production figure for the premises will be 4,289 hectolitres of pure alcohol, being 3,925 (2,750 + 1,175) divided by 334 (the number of days on which the premises was used to produce alcohol) multiplied by 365.
In either case, company B will need to know details of company B’s previous alcohol production. In the case of a transfer of a going concern, the business records, including the Alcohol Production Account should be transferred to the new owner.
Where persons share the use of production premises to produce alcohol in a small producer year, the production figure for the purposes of the Small Producer Relief will be the total production within the premises in that year.
For example, company A produced 3,350 hectolitres of pure alcohol in the premises from 1 February to 31 January, and company B produced 675 hectolitres of pure alcohol in the same premises from 1 February to 31 January the production figure for the purposes of Small Producer Relief is 4,025 hectolitres of pure alcohol — the sum of company A and company B’s production figures. Therefore, each person will be applying the same rate to any small producer alcohol product that they produce.
On application for approval, each producer must notify if there is another producer already approved at the premises. The plan, which accompanies the application, must show the position of the vessels, plant and any separate area held for each producer’s product.
Each producer’s alcoholic products must be clearly identifiable in the approved premises and in any records, including the duty status of all the alcoholic products at any time.
If the group comprises for example of 6 premises:
- 4 of which have been in production for the whole of the previous small producer year
- one of which began to produce alcoholic product part way through that small producer year
- one of which is to start producing alcohol during the current small producer year
You simply determine each premises actual or deemed production figure.
You’ll need to add all of those figures together to arrive at the group’s production figure for the purpose of making sure you’re eligible for Small Producer Relief.
Any question as to whether a person is connected with another is determined in accordance with section 1122 of the Corporation Tax Act 2010.
The definition ‘connection’ is very wide but some examples of the circumstances in which people are ‘connected’ are:
- individuals that are connected by marriage, family relationships and the like
- a partner is connected with their business partners and their spouses
- companies under the same control are connected with each other, and the persons controlling them
- a company is connected with any shareholder (whether an individual or a company) which has control of the company, whether on it’s own or together with persons who are connected with the shareholder
- companies are connected as a result of their being controlled by connected persons, for example, a husband controlling company A and his wife controlling company B
In exceptional circumstances and at the Commissioners discretion, HMRC may treat 2 connected persons as if they are not connected for the purposes of Small Producer Relief. For instance, if 2 family members are estranged and have no relationship with each other.
If you are unsure about whether a person is connected, contact excise and gambling duties enquiries.
You may be able to get transitional relief for 3 years after you merge with one or more businesses. For further information read ‘how your business set up can affect your eligibility for Small Producer Relief’.
You’ll need to establish in advance of delivery or exportation that the consignee is authorised to receive the small producer product.
If the country you’re exporting to operates a small producer scheme, the consignee may ask you to provide a certificate, endorsed by HMRC, that the product you’re exporting is small producer alcoholic product produced in the UK. This is so they can establish in advance of the importation to their country that the premises in the UK and the product is eligible under their rules. It is your responsibility to be aware of the rules and production volume limits of the small producer scheme in the country you’re exporting to, so that their requirements are met.
If a certificate is required, you’ll need to make a self declaration of your production volumes which HMRC will certify. You must follow the steps set out in subheading 22.6 small producers in Great Britain (England, Scotland and Wales) and in Northern Ireland exporting alcoholic product to outside the EU in section 22 — exports.
A movement guarantee is required for exports.
For more information on deliveries and exports through Excise Movement Control System, read receive goods into and remove goods from an excise warehouse (Excise Notice 197).
Relief for small producer product is granted in Ireland through a repayment system. In order to qualify for repayment, the importer will need a declaration of your premises production on form APT3 for small producers of beer or APT5 for small producers of cider and perry. These forms will need to be validated by HMRC for UK brewers and cider makers.
Details of the scheme and the forms are available below:
- Microbreweries — establishment and relief on the Irish Revenue website
- Small producers of cider and perry — establishment and relief on the Irish Revenue website
The completed form for validation should be sent to the Excise Processing Team who will arrange its validation and return it to you.
At the end of an Small Producer Relief production year, alcoholic producers must recalculate the Small Producer Relief discount they can apply to alcoholic products produced in the next production year.
When the next Small Producer Relief production year begins, alcoholic producers will need to apply the new Small Producer Relief rate to alcoholic products produced in that year.
Any Small Producer Relief rate that applies to a production year stays with the alcoholic product, even if the alcoholic product passes a duty point in another production year. Small Producer Relief duty rates are fixed to the alcoholic product when it is produced, irrespective of when the goods pass a duty point. This means you may have multiple Small Producer Relief rates to use on a monthly duty return against the same tax type.
For example, if we are in the Small Producer Relief production year 1 February 2025 to 31 January 2026, alcoholic products produced since 1 February 2025 will pay the Small Producer Relief rate calculated at the start of this production year. As of 1 February 2026, alcoholic products produced after that date will pay the Small Producer Relief rate calculated for that new Small Producer Relief production year.
You may be eligible to pay a reduced rate of Alcohol Duty on draught alcoholic products with a strength of less than 8.5% alcohol by volume if you:
- produce these alcoholic products
- import these alcoholic products to the UK
- hold the products in duty suspense at an excise warehouse and release for consumption
The reduced Draught Relief rate is used in place of the standard duty rate. The reduced rate that you can get depends on the type and strength of the alcoholic product you make. Read section 5 of this guide for more information.
You must declare the draught rate of duty on your monthly Alcohol Duty return.
If you also qualify for Small Producer Relief, you should subtract the Small Producer Relief discount from the draught rate for qualifying alcoholic products.
12.15.1 Qualifying criteria
Draught Relief applies to qualifying draught alcoholic product in qualifying containers.
Qualifying draught alcoholic products that must both:
- be of an alcoholic strength of less than 8.5% alcohol by volume
- at the duty point, be contained in a large draught container or are being transported to a place in the UK for the purpose of being transferred to, a large draught container
Large draught container
A large draught container must:
- have a capacity of at least 20 litres
- be designed to be connected to a qualifying system for dispensing individual drinks —this could either be a pump delivery system or a pressurised gas delivery system
A qualifying dispense system includes bag-in-box formats and containers using gravity dispense through mechanisms like cask taps.
If your container does not meet the qualifying criteria, you’ll need to pay the full rate of Alcohol Duty.
Transferring draught products to eligible large draught containers
At the duty point, where draught products are being transported in bulk (for example, in a road tanker) you can pay the draught rate only if the alcoholic product is to be transferred to an eligible large draught container within the UK. This is a container with a capacity of at least 20 litres designed to be connected to a qualifying pump system.
If the alcoholic is not to be transferred to an eligible large draught container, you’ll need to pay the full rate of Alcohol Duty.
Repackaging draught alcoholic products means transferring them to other non-draught containers and not for immediate consumption. For example, decanting from a keg into bottles after the duty point is classified as repackaging.
Serving draught alcoholic product in a glass at a bar or pub is not classified as repackaging as the alcoholic product is served for immediate consumption on those premises. However, if the alcoholic product is repackaged into a container for take away, this is prohibited.
You can only repackage draught alcoholic products if:
- you are an approved producer with an alcoholic products producer approval (APPA) or an excise warehouse keeper, or both
- duty has been paid at the full rate on the alcoholic products
If you are an approved producer or excise warehouse and you repackage draught alcoholic product for which the Draught Relief rate of duty has been paid, you must pay the duty shortfall (difference between the draught rate and full Alcohol Duty rate). You’ll need to pay the difference on your monthly duty return. You should declare this as an ‘undeclaration’ in the previous period.
If you repackage draught alcoholic products and do not hold these approvals and the full rate of Alcohol Duty has not been paid, you may liable for a financial penalty and(or) an assessment for the duty shortfall.
The draught duty rate will apply to all eligible draught products at the duty point by default. However, where draught products are intended for take-away sale (and therefore not immediately consumed on premises) then the full rate of Alcohol Duty should be paid.
At the duty point, your customer should advise that the draught product is intended to be sold for consumption off premises.
The person holding the goods at the duty point must then ‘elect’ to pay the full rate of Alcohol Duty on each container which will be used for take-away sales.
The following three paragraphs have force of law under Regulation 7(3) of The Alcoholic Products (Excise Duty) Regulations 2023.
If an election is made to pay Alcohol Duty at the full rate on qualifying draught products, information or documents noting that the full rate of duty has been paid must be passed along the supply chain each time there has been a supply by one person (a ‘supplier’) to another person (a ‘recipient’).
Evidence can be any commercial documentation, including:
- invoices
- packing lists
- labels
- delivery notes
The evidence should clearly demonstrate that the full rate of Alcohol Duty has been paid on the qualifying draught product.