How your business set up can affect your eligibility for Small Producer Relief
Find out how to work out your annual alcohol production if you’re part of a group, or you merge with, or separate from another business.
If you have group premises
You must make sure your combined annual alcohol production is 4,500 hectolitres or less.
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Work out the annual pure alcohol production for each of the premises in group.
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Add these totals together to confirm you meet the 4,500 hectolitre threshold.
If you’re not sure you have group premises
You have group premises if, as well as your own premises, another producer connected to you makes products on their premises.
Ways you could be connected include:
- the relationships between people like:
- family relationships
- business partnerships
- the relationships between businesses like, if you have control of:
- one or more of the businesses
- one business and a family member has control of another
If you merge your business with another
You may be able to get transitional relief for 3 years after you merge with 1 or more businesses.
These 3 years are called transition years and include:
- the production year your businesses came together
- 2 full production years after the merger
You’ll need to work out an adjusted production amount for the newly connected businesses, for each transition year.
Eligibility to get the transitional relief
You cannot get transitional relief if you join with any businesses that are not eligible for Small Producer Relief on their own.
For all 3 transition years, you must also make sure that:
- the adjusted production amount is 4,500 hectolitres or less of pure alcohol
- for each set of premises in the post-merger production group, less than half of the alcohol produced in the previous year was in products made under licence
How to work out your adjusted production amount
You must work out each transition year’s adjusted production amount in the following way.
Year 1
Year 1 is the production year when the businesses merged.
To get your adjusted production amount, you need to use the production figure from the largest producer’s premises in the production year before the merger.
You will also need this figure to help you work out your adjusted production for transition years 2 and 3.
Year 2
To get your adjusted production amount for year 2 you need to:
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Subtract your year 1 adjusted production from the merged business’ actual production in year 1.
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Multiply your answer by one-third.
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Add your answer to your year 1 adjusted production figure.
Year 3
To get your adjusted production amount for year 3 you need to:
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Subtract your year 1 adjusted production from the merged business’ actual production in year 2.
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Multiply your answer by two-thirds.
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Add your answer to your year 1 adjusted production amount.
After the third transition year, you must use your actual production amounts to calculate your reduced rate.
Example of how to work out adjusted production amounts
Business A merges with business B to become business C.
In the production year before the merger business A makes 1,000 hectolitres of pure alcohol and business B makes 500.
Business C’s adjusted production amount for year 1 is 1,000 hectolitres.
Business C’s actual production amount in year 1 is 1,700 hectolitres.
To get the adjusted production amount for year 2:
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Work out (1,700 – 1,000) × (1 ÷ 3) = 233 hectolitres.
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Add your answer to the year 1 adjusted amount (233 + 1,000) = 1,233 hectolitres.
Business C’s actual production amount in year 2 is 1,900 hectolitres.
To get your adjusted production amount for year 3:
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Work out (1,900 – 1,000) × (2 ÷ 3) = 600 hectolitres
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Add your answer to the year 1 adjusted amount (600 + 1,000) = 1,600 hectolitres.
| Business C transition year |
Adjusted production amount (pure alcohol) in hectolitres |
|---|---|
| 1 | 1,000 hectolitres |
| 2 | 1,233 hectolitres |
| 3 | 1,600 hectolitres |
When the transition period ends early
Your transition period will end early if:
- the actual amount of alcohol made on all the premises of the businesses that have merged in a production year is less than the adjusted amount for the same year
- you merge with another small producer during the transition period
If you merge with another business during the transition period
If you are already in a transition period and you merge with another small producer, then the first transition period will end.
You can start a new transition period from the date the new merger happens if you meet the eligibility conditions.
If you merge with 2 or more other small producers at the same time
To work out the adjusted amount of the businesses that have merged, you need to know who the larger producer is.
The larger producer is the one who has made more alcohol on their premises in the year before the merger took place.
If 2 or more producers made the same amount, any one of them can be classed as the large producer.
If you separate your business from another
Your alcohol production amount for the year before the separation is counted as nil.
You must estimate your production for the current production year to recalculate your small producer rate. Your estimate is used as your annual production figure for the current year.
You will not be eligible for transitional relief if you remerge with the same businesses within 7 years of the date of the separation.