CIDER05012 - CIDER05012 - Example scenarios for working out SPR eligibility and annual alcohol production amounts
The amount of alcohol to be included for determining eligibility and calculating the reduced rate for Small Producer Relief (SPR) is the total amount of alcohol in all alcoholic products made on the producer's premises in a production year (1 February to 31 January).
Alcohol in:
- alcoholic products that are spoilt or destroyed before the duty point; and
-
unfinished products produced in the
course of producing a different alcoholic product (for example wort)
should not be included.
Below are examples of different scenarios when alcohol moves between different producers, changes classification or production takes place across multiple production years. The examples provide an indication as to how alcohol production volumes should be treated for SPR purposes.
This list is not exhaustive, but the principles should be used to determine what to include in alcohol production volumes for SPR.
General principles
Alcohol is counted when there are no further processes performed to alter the product (packaging is not counted as a process for this purpose).
For the first year (2023-24), it is accepted that producers may not have the necessary records to assess alcohol production accurately.
All of the alcohol contained in products produced in the year should be included in the alcohol production amount, regardless of whether products increase in strength slightly after the point of production.
The premises on which product is made determines the rate, regardless of on whose premises the product passes the duty point. This reiterates the importance of ensuring that documentation outlining the applicable duty rate accompanies goods when they move in duty suspense.
Scenario 1 – One producer with different sites - one product category to another
Producer A has 3 different sites and makes cider at one, spirits at another, and other fermented products at the third.
The producer moves distilled product from the site where spirits are made to use it in the production of a ready-to-drink (RTD) other fermented product at the third premises. The alcohol in the distilled product used in the production of the RTDs is not counted in Producer A’s alcohol production amount but the alcohol in the final RTD is.
Scenario 2 – Unfinished product from one producer to another
Producer A makes an alcoholic product as an interim part of their production process. Legally, this product is an alcoholic product as it is above 1.2% ABV but it couldn’t be consumed in that state because it’s unfinished.
If the interim product is sold to Producer B, the alcohol in that product is not counted in the production volumes of Producer A but when it is used by Producer B to make the final product, the alcohol in the final product will be included in the production volumes of Producer B.
Example – Producer A makes beer and as part of the process produces wort. Some of the wort is used to make beer but some is sold to Producer B, a distillery. For producer A, only the alcohol contained in the final product (beer) is counted towards their alcohol production volumes. For Producer B, the alcohol contained in the final distilled product they produce from the wort is counted in their alcohol production volumes.
Scenario 3 – Cider to sparkling cider
-
Producer A makes still cider, some of which is subject to secondary
fermentation. The total alcohol in the product the secondary
fermentation is included in the producer’s alcohol production volumes. If the
original production of the cider happens in one SPR year and the secondary
fermentation in the next SPR year, the alcohol is counted in the volumes for
the second SPR year.
-
If Producer A sells the still cider to Producer B who then ‘renders’ it
sparkling, Producer A will count the alcohol in the still cider in their
alcohol volumes and Producer B will include the total alcohol in the sparkling
cider (secondary fermentation) in their alcohol production
volumes.
Scenario 4 – Two separate producers – one product category to another
If Producer A sells a product to Producer B and the latter uses it to produce a different alcohol product, both producers count the alcohol in their product in their respective alcohol production volumes.
Example – Producer A makes cider. They must include all the alcohol in the cider they make in their alcohol production volumes (for the year in which the cider is made). They sell some of the cider to Producer B who then uses it to make cider brandy. Producer B must include the total alcohol in the cider brandy in their alcohol production volumes (for the year in which the cider brandy is made).
Scenario 5 – Cask conditioned product
For cask conditioned products where the strength increases after it has left the production premises, the alcohol contained in the product when it leaves the premises should be included in the alcohol amount for the year in which it leaves the premises.
Scenario 6 – Third party produced alcohol held in duty suspension
Products produced by a third party and held in duty suspension on Producer A’s premises will be included in their alcohol production volumes.
Example - Producer A makes beer but also receives beer from Producer B that they bottle and hold in duty suspension. Only the alcohol in the beer Producer A produces will be included in their alcohol production volumes; Producer B should count the alcohol in the beer they produce in their own alcohol production amount.
Scenario 7 - Yeast slurry and other waste products
Yeast slurry is a waste product that contains between 4% and 8% ABV and is produced during the brewing process. Yeast slurry can be sent to be used as livestock feed or otherwise destroyed, in which case it is not liable to duty, or the alcohol can be extracted in which case it is liable to duty.
If yeast slurry is sent to be used as livestock feed or otherwise destroyed the alcohol contained in it will be included in a producers’ alcohol production volumes.
If ethanol is extracted from the yeast slurry and subsequently used in the manufacture of an alcoholic product the alcohol in the product will be included in the producers’ alcohol production amount.
Scenario 8 – contract packaging
The alcohol in products sent by a producer to a 3 party packager will be counted by the producer, and not the packager, even if the packager ultimately releases (i.e. pays the duty on) the products. Even if the packager is also a producer in their own right, the SPR rate for the products remains that of the producer (and not of the packager), provided the packager has not carried out any material operations on the products.
Example – Producer A makes cider (and counts the alcohol in their production volumes), but does not have bottling facilities so sends the cider to Packager B who does the bottling. The SPR rate for the cider remains that of Producer A.
If there is additional processing impacting the final product, the products might no longer retain the original producers SPR rate, instead attracting that of the packager. In this instance, both the original producer and the packager will need to count the alcohol in the products in their annual production amounts.
Example - Producer A makes cider (and counts the alcohol in their production volumes) and sends this to Packager B. Half of this cider is bottled and released – this retains Producer A’s SPR rate. The other half is mixed with other ingredients by Packager B to produce a fruit cider. This fruit cider is now liable to any SPR rate Packager B may have, and the alcohol in the final, fruit cider, products is to be counted in Packager B’s production amounts.