Distillers fight government on two fronts

Link: Businesses still unclear about tax in UK

Tens of millions of pounds are at stake in the industry after the Revenue decided to change the corporation tax treatment of the depreciation of stock.

‘Since the early 1990s it has been accepted practice, agreed by the Revenue, that depreciation taken to stock is added back to the profit before tax in the year the maturing stock is sold or used,’ a Scotch Whisky Association (SWA) statement said.

But in 2002 the Revenue changed its view so that depreciation would be added back in the year incurred. ‘The effect on the Scotch whisky industry would have been an increased tax charge of £25m-£30m over five to 10 years,’ the SWA said.

While the case will be fought out initially this month by confectioner Mars at the Court of Appeal, whisky producer William Grant will represent the whisky industry at the Court of Session in May this year.

The battle is just one of two blows to the Scotch whisky industry, after the government announced its controversial ‘strip-stamp scheme’ in last year’s Budget.

The scheme was designed to clamp down on diversion fraud by forcing distillers to stick tax-paid stamps on the bottle tops instead of paying duty when the whisky is released for sale.

Sara Bishop, finance director of whisky producer Burn Stewart, said Brown’s new regime could have a serious effect on some aspects of the whisky industry.

‘I’d be very surprised if jobs weren’t lost over this and if some of the smaller companies didn’t end up being either swallowed or just closed,’ she said.

‘We’re hoping we don’t directly have any job losses over the cost of implementing it.’

The regime is due to come into force next year.

A spokesman for the Scotch Whisky Association said: ‘We are currently in discussions with Customs about the implications of duty stamps and discussions are continuing about how best to implement it.’