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A 'yes' vote from Scotland could cripple drinks firms with duty headaches

Published:  29 July, 2014

If Scotland splits from the rest of the UK drinks firms could face potentially crippling changes to duty which would add a significant cost and administrative burden - even causing some to go out of business.

That's the view of senior logistics and excise duty experts, who say companies would have to "export"alcoholic drinks back and forth across the border and manage excise duties in both regions.

ScotlandAn independent Scotland could create crippling duty headaches for drinks firmsDrinks companies both north and souht of the border would face major changes to excise duty - increasing the cost and administrative burden on firms - which could even make some businesses unsustainable.

Alan Powell, a specialist excise duties consultant and former HMC&E policy official, told the issue of excise duty was always a "Cinderella one", adding that while there have been extensive discussions around taxation implications should Scotland leave the UK, "no-one has thought about excise duty". He said changes could "cause people to go out of business - it's that significant". He said there would be a "real risk of business snarl-ups and cash-flow jeopardy for cross-border business.  Believe me, you really do not want to be involved in this administrative and fiscal nightmare". 

Even if there is a 'no' vote, it has already been mentioned that further devolved powers for Scotland could include taxation, which could apply to excise duty, Powell added.

David Mawer, managing director of logistics firm JF Hillebrand UK, told "At the moment our customers consider Scotland within the UK distribution network, with wine supplied from UK duty paid stock and delivery is often mixed with other, non-excisable products. For the Scotch whisky industry, the market south of the border is currently worth around 87 million bottles, with producers enjoying a level of certainty and distribution freedom within the UK domestic market.

"There is understandable concern that in the pro-independence manifesto, it is suggested Scotland would have its own fiscal regime, irrespective of whether there is a common currency. Under this scenario, distributors based south of the border would have to 'export' alcoholic beverages to Scotland, possibly also involving reclaiming duty paid in the UK, which would add an extra administrative burden, cost and complexity in supply chains. Suppliers of Scotch whisky into the remaining UK market would face a similar challenge in managing the excise duty payable the respective tax jurisdictions.

"Any regulatory divergence between Scotland and the rest of the United Kingdom would also potentially increase cost to business."

Mawer added that there would be a period of "negotiation and transition" should there be a 'yes' vote, and said Hillebrand was well-placed to "handle any eventuality" given its Scottish operation started up in 1979 and in England in 1983.

While the Scotch Whisky Association has already made clear it is "not taking a political stance on the referendum", it has asked questions about how taxation would be affected. Although it did not comment specifically on this issue, it has said previously "we see potential risks to these from an independent Scotland and we look for reassurance that any future arrangements would be at least as supportive as the current ones".  

A spokesman for the Wine & Spirit Trade Association said: "We don't really fully understand what the impact [of a 'yes' vote] could be. There's an element of speculation at this point."

Chancellor George Osborne has already intimated that should Scotland vote for independence, excise duties would be one of the last powers to be transferred.