Tax relief boosting Scottish distillery boom

L-R, Michael Murray, partner, and Robert Winters, director.
L-R, Michael Murray, partner, and Robert Winters, director.

Johnston Carmichael’s Capital Allowances team has advised on £100m of new distillery developments across Scotland, as investment into the industry shows no sign of slowing with a spate of developments in the pipeline and an increase in available allowances announced.

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Scotland’s largest accountancy and business advisory firm revealed its specialist advisers have successfully identified capital allowances of between 40% and 60% for seven completed distillery projects across Scotland in the past year.

The number of new, and refurbished, distilleries opening continues to climb as the industry benefits from consumers moving towards craft and prestige drinks. Whisky leads the way as one of Scotland’s most successful exports, but capacity constraints and long lead times mean new distilleries are needed. Gin is also a key driver behind the surge in new openings, with more than 200 Scottish gin brands on the market and rising. In 2019, the number of distilleries is expected to increase by at least 10.

The introduction of further tax relief through the Structures and Buildings Allowance (SBA), which was announced in the Autumn Budget, will further increase the levels of allowances available to distilleries in 2019. The SBA gives a flat rate 2% allowance on eligible construction costs.

Michael Murray, partner, Johnston Carmichael, said: “Over the past five years, I’m proud to say we have worked with many of Scotland’s most iconic distilleries to deliver effective tax relief strategies to enable their businesses to go from strength to strength. In the last year alone, we estimate we have advised on £100m of deals.

“We get involved at the earliest possible stage in either a transaction, new build or redevelopment, which is the ideal time to maximise the capital allowances position. Capital Allowances is a complex area of UK tax legislation, but by taking the time to plan the approach and by engaging a specialist advisor early in your project, the benefits can be significant.

“The recent changes to the Capital Allowances legislation, introduced in the Autumn budget, will further increase the levels of allowances available which is very positive for all new developments.”

Previous distillery projects include: Ncn’ean, Dalmunach; Kingsbarns; Glenwyvis; Glenrinnes; and Lindores.

An independent west-coast distillery, Ncn’ean has just launched its first product to market – a botanical spirit. The distillery, which is focused on sustainability and innovation, is now forging ahead with producing quality spirit as its warehouses begin to fill up. Of late, the team has been experimenting with yeast to produce flavour changes.

Annabel Thomas, CEO and Founder, Ncn’ean Distillery, adds: “Johnston Carmichael’s team were a great support in identifying the capital allowances available to us in relation to the distillery construction. The team understand how a distillery works and, therefore, know what to look for in a distillery context. They were easy to work with and always clear on what they needed from us, and helped us identify valuable Enhanced Capital Allowances, as well as the main pool and special allowances.”

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