Monday, 18 January 2016

So you wanna open a brewery? Part II

In the first part of this series of blog posts I covered a fairly broad range of subjects and ended with a question about addressing different markets. The response to that and other points raised in the post drew some incredibly helpful comments from the owners of a number of fantastically successful breweries, so I would recommend revisiting that post and having a read before continuing on here.

In wrapping up that post, I suggested this second part would cover premises build-out, layout, pricing and sales. However, I'm going to stray slightly from that and focus instead on the administrative/permission side of setting up a brewery in the UK first. I received a number of emails from others in a similar position (or considering starting a brewery) that suggested to me that this might prove a useful area to drill down further into and also received some advice offline that I'd like to share as part of that. I'll cover premises build-out, layout, pricing and sales in Part III.

Before we get into the detail of how to go about obtaining them, here are the things you'll need to cover as a minimum before you can operate a commercial brewery:
  • Obtaining planning permission, or obtaining premises that already have B1C or B2. I'm not going to re-cover this below - contact the local authority to see what they expect and go from there!
  • Setting up a limited company (or registering as a sole trader)
  • Opening a business banking account
  • Registering for VAT
  • Registering with HMRC for beer duty
  • Registering for Corporation Tax 
  • Informing the local Environmental Health department
  • Obtaining permission to discharge effluent
  • Registering under the Alcohol Wholesaler Registration Scheme (AWRS)
  • Obtaining Insurance

Limited Company

The process of registering is actually pretty straightforward and is completed entirely online. You'll need to provide the registered address of the company, names and address of directors and the number of shares each has etc. The process may be simple but in following it, you're signing up to some legal obligations so would do well to read up on those (e.g. requirement to submit accounts by certain dates or face fines). The place to go is here. I received my company number by email a couple of days after applying followed by lots of bumph in the post. If you use your home address as the registered company address expect to receive your first junk mail a few days later! Also, be alert to spam callers from that point - I had one who sounded very convincing and timed it perfectly to try to deceptively obtain my electricity supply contract, no doubt with a nice commission for them.

The other option is to register as a sole trader. There are pros and cons to each, certainly, and it may depend on your personal circumstances as to which is best. This article outlines some of the differences. Consider consulting with an accountant if you're not sure which is the best path

Business Banking

Now, you'd think trying to give a bank some money would be easy but you can end up jumping through a few hoops to open a business account including being credit checked and providing a good amount of personal information, especially if you'd like an overdraft facility etc. I started out by reading through the information available on Martin Lewis' excellent Money Saving Expert site which listed a few deals for free business banking for a certain period etc. I ended up going with my own bank and it just happened to be offering free banking to new business for a period of 18 months. Do read through the charges you can expect after that period - nothing is really 'free' in business! It took me about five days to open an account and this included an interview with an advisor who asked me a few questions about the cashflow forecast I'd submitted and also pointed out that I'd used Andy as my name with Companies House and Andrew in my banking application. Changing it on the application would have meant resubmitting the whole thing (yep!) but fortunately changing the director details with Companies House can be done online.

VAT

For details of how and when (and if!) to register go here. You can elect to register voluntarily before you're required to but be aware that if you do, you're then automatically on the hook for the legal obligations as if you were required to register. I registered voluntarily once I'd paid for my brewery kit because VAT was charged and I'd like to claim it back along with any VAT paid out on during the build-out process. You'll be asked for the business bank account, company number, directors details and offered a number of options/schemes as part of the application process. Once you start, you can save your progress and come back so don't worry about reading up on something you're not sure about. Once the application was completed, I received my VAT number the next day. As part of applying you set up an account on a portal that you'll return to in order to submit returns etc. Tip: the login username is only shown once (a long number) so screenshot it!

Beer Duty

All breweries must be registered with HMRC by law and are required to pay duty on what's produced. The notice that covers this is Excise Notice 226: Beer Duty and reading that from top to bottom is a good place to start! The document covers the application process towards the end. You'll need to copy the questions into a new document and provide answers as required, attaching the required supporting information which includes a plan of the premises where duty suspended produce will be stored. I've had a few tips from others here including something relatively new whereby HMRC will visit you and interview you as a matter of course (this used to be at their discretion). They'll ask to see your brewery premises, the equipment and details of how you're planning to monitor and track the amount of duty you should be paying once you're up and running. I actually submitted my application today so can't write about my personal experience yet. The application also asks for your VAT number and company number so you should look to complete those processes first.

Corporation Tax

All limited companies must register for corporation tax. This is the tax you pay on profits of the company and requires you to submit audited accounts according to a schedule set based on your first accounting period (determined based on when you register). Everything you need to know is covered here. Again, there are legal obligations here. If you're not comfortable with them it's probably best to speak to a small business accountant.

Environmental Health

Breweries are now assessed under the same guidelines as food producers and you can expect to receive a visit from an Environmental Health Officer once you notify them that you're producing beer. When and how to do with this will vary depending on the local authority so contact the local council to discuss it with them. Most will assess under the Food Hygiene Rating scheme and you'll receive a rating like any food production facility might.

Effluent Discharge

You'll need to contact your water supplier to discuss their requirements here. Since breweries produce waste that requires treatment you'll need to register with your supplier and they'll charge you based on the volume you expect to discharge and the type of effluent you're discharging. Some breweries I've spoken to are visited periodically to have samples taken for analysis. The permit application process for Thames Water is covered here.

AWRS

The Alcohol Wholesaler Registration Scheme introduces a requirement for anyone who sells, offers or exposes for sale or arranges to sell alcohol to other businesses on or after the point at which excise duty is payable, to be approved by HMRC. This is a new scheme which is covered by Excise Notice 2002. I plan to register for this once I've completed my duty registration. Note that in future, you'll be required to check that anyone you sell alcohol to is also registered, if they'll be selling on to others (e.g. distributors).

Insurance

All small businesses should have insurance to protect them against theft, loss/damage and public liability. This isn't something I have in place yet but will look to do so before I start trading. It's also likely your building lease will be issued on a repairing basis - that is, you're liable for repairs to any damage that occurs during your tenancy. This may be worth considering as part of insurance coverage too.

So that's the end of Part II of this series of posts - perhaps duller than Part I but hopefully interesting and useful to some! 

Breweries - is there anything you can add to the above? Please do pitch in and share your experiences of the above processes and any tips you can offer!

9 comments:

  1. It's worth mentioning the effluent consent that covers the volume and strength you'll be allowed to discharge. A number of breweries have found to their cost that they haven't been able to increase the volume they were allowed to discharge as they grew. If the site isn't large enough to add some pretreatment then you're left with either moving or tankering effluent off site. Also in some cases an unrealistically low COD/BOD set up at the start meant that the brewery was discharging effluent out of consent from day one.

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    1. Thanks for commenting Fergus - future volume certainly something to think about when going through the registration process with the water board.

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  2. This is great Andy - useful stuff for anyone looking to make their way into the industry.

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  3. Just to comment on the HMRC registration, you don't require to be VAT registered to apply. I'm not as I'm so small scale, it wasn't worth the hassle, plus I am using pre-existing kit so there was no major savings to be made.

    The HMRC was relatively painless, they just ask A LOT of questions. Be prepared to keep answering them after they leave. I had 3 weeks of questions back and forth. You'll also need to show them a statement of intent to trade, so a few emails from stockists agreeing to take on your beers. I also had to give details of the suppliers of malt. It's nothing difficult, just a pain in the arse going back and forward!

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    1. Thanks for confirming it's possible to gain a license without being VAT registered, Dave. I'm sure others will find that useful to know. I started my HMRC application yesterday so will be interesting to see if my experience is the same as yours. Fortunately I do have some customer inquiries and malt supplier quotes on hand and have also prepared the means by which to track my duty exposure etc.

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  4. Brilliant work Andy, a tip I would add is that HMRC told me they have to make a decision within 60 working days (if I can remember correctly) from receiving your application. Therefore you need to be quite close to the finishing line before submitting your application. From my experience they were lovely people and very accommodating, just hard to get hold of at times!

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    1. Good to know - thanks William. I hope I'm near the finishing line now but it has been a long race with a few twists, so who knows!

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