old-mill-fooddrink-summer-2016

Summer 2016

fooddrink&

Insight for food businesses

Old Mill Food & Drink contentsLet’s look ahead to the summer 1

Budget 2016 – how will it affect you? 3

R&D Tax Relief – a real opportunity for food and drink businesses of all sizes 5

Sugar tax – could this be the herald of further food taxes? 7

Grants available for food businesses in England 8

GUEST SPOT | Rupert Cox – The Bath and West Showground 9

Exporting for food and drink businesses and issues around currency 11

CLIENT PROFILE | Adrian Webb – Castlemead Insurance 13

Support for your village local 15

EU - In or out? 17

Old Mill Food & Drink team 19

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Let’s look ahead to the summer Welcome to the second edition of our new Old Mill food and drink newsletter. This edition was supposed to have been a supplement to focus on our sponsorship of the food and drink outside area at the Bath and West Show – however, it seems to have grown as there were so many topics we wanted to cover.

In this edition we have an article from Rupert Cox – the CEO of the Bath and West about the very exciting developments for food and drink both at the Bath and West Show itself and future developments as the showground itself becomes an Enterprise Zone for Food and Drink Businesses. This will become an important asset for our sector over the coming years. Rupert will be speaking on this at our reception for food and drink businesses at 6.00pm on Wednesday 1 May in our marquee at the show.

Our friends at Castlemead Insurance have identified some areas where your existing cover may not quite be doing what you hope – please check it out. We cover the recent budget, which has as usual brought a few things that need checking – and we all wonder if the sugar tax is the shape of things to come.

The opportunity to get the Government to pay your tax (and more) offered by Research and Development (R&D) tax relief is one that smaller food and drink businesses have been generally slow to capitalise on – we are here to help’.

Please look out for members of the Old Mill food and drink team during the summer shows. Where there is an Old Mill stand a member of our specialist team will be on hand and would love to meet you over a drink or some food.

We look forward to seeing you. Any comments or ideas for future editions of this newsletter will be very welcome.

Jolyon Stonehouse

www.oldmillgroup.co.uk

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The opportunity to get the government to pay your tax (and more) offered by Research and Development tax relief is one that smaller food and drink businesses have been generally slow to capitalise on – we are here to help.

Budget 2016 – how will it affect you?George Osborne’s 2016 Budget came with a warning of the ‘dangerous cocktail of risks’ facing the global economy but that the government will continue to implement long term solutions to ensure Britain is ‘fit for the future’.

The key to this is balancing the books and in this update, we have picked out some of the key announcements affecting the food and drink sector, as well as those impacting individuals and the wider business community. We also recap on some of the previously announced changes that come into effect from April 2016 and in the future.

Alcohol duties

Alcohol duties on beer, cider and spirits were frozen at their current levels. Although this allayed fears of a possible increase, this arguably represents a missed opportunity for the government to back the continued revival of production in the UK. Indeed, CAMRA Chief Executive Tim Page was quick to point out that UK drinkers still face the second highest rate of beer duty in Europe. The emerging English wine production industry was dealt a blow with the announcement that duty on wine would be subject to an inflationary increase. There will be concerns that this move will stifle investment and innovation in an industry which is widely regarded as having enormous growth potential.

It is notable that wine was the only alcohol duty not to be cut in Mr Osborne’s previous budget in 2015, and many commentators have expressed the view that the English wine industry is faced with an unfair proportion of the tax burden. Historically, duties are an area on which the drinks industry has campaigned heavily and it appears that a concerted effort will be required from the English wine industry to ensure its views are heard and that a seemingly punitive duty does not impinge on growth .

Companies

Corporation TaxThe Summer Budget last year announced upcoming reductions in the rate of Corporation Tax. This theme has continued with the announcement that the rate will fall further than planned to 17% from 1st April 2020,

rather than 18% as previously stated. To summarise the upcoming changes, the rates of Corporation Tax are as follows:

To 31st March 2017 20%From 1st April 2017 to 31st March 2020 19%From 1st April 2020 17%

Whilst no further measures were announced to support Research and Development (R&D) in this budget, food and drink businesses should continue to consider carefully whether the current R&D tax relief schemes may be relevant to them. We frequently see R&D claims opportunities in areas that may initially have been overlooked.

Participator loans Many small company owners hold a loan or current account with their company, from which personal expenses can be paid and salary and dividend income credited. Where such a loan account becomes overdrawn the company is subject to a tax charge. The tax charge was 25%, but The Chancellor has announced this is to increase to 32.5% with effect from April 2016, to align it with the higher rate of tax suffered on dividends. The tax charge is in place such that it compensates HMRC when shareholders borrow cash from the company without it being taxed as part of their income. As the shareholder repays the overdrawn loan account, HMRC refund the tax charge paid by the company.

National Living WageWorkers aged 25 and over are entitled to the national living wage (NLW) rate of £7.20 per hour from the first pay reference period beginning on or after 1 April 2016. Employers should check, in particular, that employees’ pay is not brought below the new rate by salary-sacrifice arrangements.

Whilst the idea behind the NLW is supported in many quarters, many food and drink businesses will inevitably feel the squeeze as a result of the new arrangements. This includes those that were previously paying employees above the national minimum wage, who may feel the need to maintain their wage differential in order to attract and retain staff.

Individuals

Income TaxNo change was announced to the levels of personal allowances and tax bands which will apply from 2016/17. It had previously been announced that the personal allowance from April 2016 will be £11,000 and the higher rate tax threshold will be £43,000.

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Kevin Wheldon

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For people who have adjusted net income of more than £100,000, the personal allowance will be reduced on a sliding scale. At £122,000 it will be completely lost. The government stands by its intention to raise the personal allowance to £12,500 and the higher rate tax threshold to £50,000 by 2020. To move closer towards this target, the levels for 2017/18 have been announced at £11,500 for the personal allowance and a higher rate tax threshold of £45,000.

Capital Gains TaxA surprise announcement was the slashing of Capital Gains Tax (CGT) rates from 6 April 2016. The CGT rate is set to reduce from 28% to 20% for higher rate taxpayers and from 18% to 10% for basic rate taxpayers. The 28% and 18% rates will however continue to apply to gains arising on the sale of residential property which does not qualify for Principal Private Residence relief. The fall in rates is a welcome move, particularly for disposals which do not attract CGT relief, such as non-business assets.

Dividend taxationFollowing the announcement at last year’s Summer Budget, with effect from April 2016 the existing system for taxing UK dividends (i.e. the 10% tax credit and grossing-up) will cease to apply. Instead people will pay tax on the actual dividend they receive. All individuals will receive an annual Dividend Allowance such that no tax is payable on the first £5,000 of dividends received. Above that, dividends will be taxed according to the marginal rate(s) of income tax that an individual pays – 7.5% (basic rate taxpayer), 32.5% (higher rate taxpayer) and 38.1% (additional rate taxpayer).

Personal savings allowanceThe new personal savings allowance was introduced from 6 April 2016. This allows for savings income of up to £1,000 for basic rate tax payers and £500 for higher rate tax payers to be tax free.

It has been confirmed that the zero rate savings income band introduced last year will remain at £5,000. Combined with the personal savings allowance, this allows for savings income of up to £6,000 for basic rate taxpayers to be tax free, providing other income does not exceed £11,000.

Pensions

Single tier State PensionA single-tier state pension was introduced on 6 April 2016, replacing the previous basic state pension and additional state pension. The maximum single-tier state pension that will apply will be £155.65 a week, although for many people it will be less. The lifetime allowance for pensions was reduced from £1.25 million to £1 million with effect from 6 April 2016. Despite speculation ahead of the Budget that contribution limits would be reduced and tax relief restricted, there have been no such changes.

Automatic EnrolmentPension contribution increases were originally scheduled for 1st October 2017 (employer and employee contributions rise to a minimum of 2% and 3%, respectively) and 1st October 2018 (3% and 5%, respectively). These scheduled increases have now been delayed by six months so that they are aligned with the tax year. The October 2017 increases will take effect from April 2018 and the October 2018 increases will take effect from April 2019.

For more information on how the changes announced in the Budget may affect you and your business, please do not hesitate to contact the Old Mill Food and Drink team.

George Osborne’s 2016 Budget came with a warning of the ‘dangerous cocktail of risks’ facing the global economy...

Research and Development Tax Relief – a real opportunity for food and drink businesses of all sizes Most entrepreneurs who have attempted to get a business off the ground would agree that starting out isn’t easy. If you talk to inventors and researchers they would go further and say the odds are always stacked against them.

But it has never been easier for a small business to make its first R&D claim. This includes innovators in the Food and Drink sector who are amongst the most successful in the South West.

We have recently helped a number of Old Mill clients successfully claim R&D tax relief in respect of new processes, products, packaging, substitute ingredients, improved storage, eco-friendly solutions and animal health – to name just a few. It seems the Food and Drink sector is not only heavily regulated, which brings its own technological challenges, but in addition there is no end to the desire for new and improved products.

There are separate R&D tax relief schemes for large businesses and small and medium enterprises (SMEs). The scheme for SMEs works by lowering the amount of Corporation Tax small businesses pay, allowing them to claim 230% of their qualifying R&D expenditure. This reduces the cost of R&D by 46%.

SMEs who make a loss can also claim, and have the option of instead receiving a payable cash relief at a rate of 14.5%. This reduces the cost of R&D by around 33%. These companies have a choice between an immediate benefit, or carrying forward the loss to set against income at a later time. R&D tax credits have provided vital cash flow to enable these companies to keep going in the important earlier years where R&D may be the only activity.

HMRC have recently finished a consultation aimed to help us understand the issues faced by small businesses in undertaking R&D and accessing the relief, and to inform future improvements.

In November 2015 HMRC launched Advanced Assurance for R&D claims, focussing on first time claimant smaller companies (turnover under £2m and fewer than 50 employees). A voluntary and non-statutory scheme, Advance Assurance is for companies which have already undertaken R&D, and also for those intending to do R&D. Successful applicants will receive assurance that HMRC will allow their first three years of R&D tax relief claims without further enquiry.

To make the claim you need to supply HMRC with some basic company information and details about the R&D you are carrying out or intending to carry out. After that, HMRC say they will deal with the application via a telephone call or possibly a visit to your premises. They will then write to you with confirmation that your application is accepted or reasons why it is rejected.

The good news is that you can appoint an agent such as Old Mill to do this for you and manage all the


Elaine Kinsella

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communication with HMRC. It certainly seems like a positive step forward and we will wait to see over the coming months if the Advance Assurance Scheme works as well for our clients as advertised by its creators.The consultation promised some other improvements including further guidance on qualifying activities, which is always welcome, for later this year. For 2017, a review and more guidance on subcontracted R&D is scheduled. This is a complicated area applicable to many small companies. I hope by taking their time over this HMRC’s review will provided some much needed clarity, we shall have to wait and see.

It is worth mentioning that it is not compulsory to use the Advance Assurance process. A company can still make a claim in the normal way and indeed many companies will breach the limits above which it is not available. We have much experience in guiding companies through this process and in particular we have seen an increase in successful claims in the food and drink sector. We have unfortunately also seen an increase in the level of enquiries. Although these can often be successfully defended, it is a distraction the business can do without. The key is not to make your company the easy target by putting the correct documentation in place and making a robust claim in the first place. Also maximising your claim through best processes and planning can make a significant difference.

In most cases it is left to the finance person to collate the claim after the accounting year-end, after all it is the costs incurred by the company which form the basis of the claim. But is this the best way? Leaving it up to a person probably not even connected with the R&D

activity to identify projects, write descriptions and trawl around the rest of the team (if they are all still in the business) asking them how much time they spent on a project up to two years ago doesn’t seem like the way to maximise your claim.

Most of us have a tendency to underestimate when asked how much time we spent on a task in the dim and distant past. I’m sure it is not just accountants who suffer with this affliction, especially when you know the figures will be going to HMRC!

We have had much success in helping our clients to capture the necessary data in real-time, thereby maximising the claim and taking the stress out of the situation. Furthermore it is better to finalise your claim and make a reduced corporation tax payment on the due date, than to pay the full whack of Corporation Tax and then wait, hopefully, for your repayment at some later time when you make your claim.

These are the simple non-technical ways to maximise your claim but tax planning can also be helpful. R&D relief for capital expenditure is a generous and often overlooked aspect of the regime. Structuring remuneration packages for owner managers who are often involved in the R&D can increase claims, but has to be looked at in the round of total tax planning for the company and its owners. And finally grants, potentially of great benefit to companies carrying out R&D but they impact on your claim. Finding the right path through is something many companies need help with, whilst they focus on the all-important business of R&Ding their way to a successful future.


Sugar tax – could this be the herald of further food taxes?Many health enthusiasts have welcomed the new sugar tax on drinks, but it could be the forerunner of further food taxes, according to accountants Old Mill.

Introduced by the Chancellor in the Budget earlier this month, the ‘soft drinks industry levy’ will be paid by producers of soft drinks that have added sugar. However, given that there are promised exemptions for smaller producers and it won’t come into effect until 2018 it would appear to be little more than a gesture.

It is also unlikely to have much impact on consumer habits. Soft drinks already have a huge price variation depending on where they are purchased. The price in a supermarket is far less than a corner shop, at an event, a café, or a motorway services, so this extra cost is unlikely to act as a deterrent to consumers.

There are also plenty of directly comparable low sugar or sugar free products available which do not appear to have had any significance in changing purchasing patterns. Perhaps the more important question is: ‘Is this just the start?’

There are concerns that this may be the first step by the Government towards further taxation on sugary food and drinks, following a similar trend to tobacco and alcohol taxes. The new tax will be levied at one rate for drinks with 5 grams of added sugar per 100ml and a higher rate for drinks with 8 grams per 100ml.

The money generated will supposedly fund work to tackle childhood obesity, which health enthusiasts have welcomed. If this is a forerunner, then there are plenty of other foods containing high levels of sugar, that the Government may look to target next.

Fortunately, there are likely to be tax exemptions for smaller producers, so regional manufacturers are generally unconcerned about its impact. But in an industry already flooded with sugar-free alternatives, there are questions about whether the tax will make any difference to consumer habits at all. Is it just a tick in the health box for government policy?

Lorraine Bolland

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Grants available for food businesses in EnglandAs low prices continue to bite some might be wondering where they will find the cash to invest in business projects.

As a related “consultation” process draws to a close The Government has several schemes running from 2015 to 2020 offering grants to small and medium sized businesses who are looking to grow their business, create jobs and improve the local economy.

LEADER Funding

Across the country Local Action Groups (LAGs) have been set up to identify priorities for developing the rural economy in their area. Each LAG has then been awarded funding to support business development.

Grants are available for a wide range of projects provided you can show how your business plan will benefit the rural economy. Grants of between £5,000 and £100,000 are available and will typically cover 40% of total project costs. Examples of food projects which have previously been awarded funding include:

n A farm shop who were running out of space received £45,000 to purchase a marquee, tables, chairs and building equipment to expand their tea shop.

n A family run dairy received £40,000 to install a new bottling plant and buy a refrigerated van so they could expand their home deliveries diversification.

n A catering company received £10,000 for equipment to help them expand their operations in a new location.

If you have an idea which you think may qualify for funding the first step is to contact your LAG to run through the project proposal. If you would like help finding out which LAG you fall into and their contact details your usual Old Mill contact will be able to help.

Growth Programme

If you are considering a larger project, Growth Programme grants may be available covering 40% of eligible costs. Minimum grants are £35,000 meaning the minimum project spend must be £87,500 to qualify. Again these grants are aimed at developing the rural economy and applicants must demonstrate that there is a market demand for their plan and that it will create growth.

If you have any queries about whether your project could be eligible for grant funding please do not hesitate to contact your usual Old Mill Contact for advice.

Hannah Ridley

Grants are available for a wide range of projects provided you can show how your business plan will benefit the rural economy.

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The Bath and West Showground – developing into a regional hub for food and drink producersAs the Royal Bath and West Show evolves into a contemporary agricultural show ready for the next 50 years at its showground at Shepton Mallet, so does the work of The Society that hosts it.

Formed in 1777 for the encouragement of agriculture manufacture, commerce and fine arts, the objectives of the Royal Bath and West of England Society of changed little with “fine arts” being replaced by “rural crafts”. While it may seem odd that manufacture and commerce is noted, it was in fact the early origins of agricultural societies where the manufacture and commerce referred primarily to food and drink – the result of the primary process; agriculture.

Race forward in time from those early days in the late 1700s to 2016, and The Society is remembering its roots and in so doing, making a strong case for supporting not just food production, but manufacture and commerce, by developing a new food and drink strategy that will be rolled out over the next four years.

This approach has been stimulated by DEFRA choosing the Bath & West as a base for one its Food Enterprise Zones (FEZ), and while they are uncertain of what a FEZ actually is or does, The Society is very clear how it can stimulate interest in the sector by delivering a range of objectives within the new strategy, being to:-

1. Improve the quality of catering available on the showground, not just for The Society’s own shows.

2. Create a new “Bath and West Food and Drink” village at the Royal Bath and West Show to raise the profile of and showcase local producers.

3. Create and manage the Royal Bath and West Food and Drink Business Network, to provide a platform for knowledge transfer and access to greater market share.

4. Within The Society’s proposed Agri-tech and Food Innovation Centre provide a facility for small and micro food producers to test products in a purpose built commercial test kitchen and to provide bespoke business support through the Society’s established membership network.

5. Working with Mendip District Council and The Society’s development partner seek ways of developing purpose-built small food standard business units on the Showground for young food or drink business to grow into.

As The Society’s Chief Executive, Rupert Cox explains;“The work of the Bath and West is built around farming and food production, so it is vitally important that as a society we develop a strategy that embeds

good quality food production from local businesses at the heart of its thinking. This starts with our regular catering requirements where we are insisting on better traceability and procurement from local suppliers, through to showcasing great local food & drink at the Royal Bath and West Show, and to helping young and aspiring food and drink businesses grow and thrive through the work of The Society.

I am personally very keen that we work toward creating a Food and Drink Business Network, because, from my experience in the world of Chambers of Commerce, it is vital that businesses have the opportunity to network with like-minded people, and to have at their disposal a range of business support services to help their business to grow.”

The Society has set out an ambitious four year programme to deliver its food and drink strategy, and is keen to hear from any food or drink business which would like to be involved in this innovative approach to business development in the Food and Drink sector.

The work on improving the quality of catering at the showground has already started; the new food and drink area will be open at the Royal Bath and West Show from 1st June where it is hoped the Business Network will be launched, with the Innovation Centre and Food Units to follow in the next couple of years.

For more information, you can email Rupert Cox at [email protected]

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“ The work of the Bath & West is built around farming and food production, so it is vitally important that as a society we develop a strategy that embeds good quality food production from local businesses at the heart of its thinking.”

Rupert Cox, CEO of the Royal Bath and West Society

Phil Mills

Exporting for food and drink businesses and issues around currencyWith the rush to get the year end accounts and tax computations behind us, spring affords us longer days, better weather (we live in hope!), and with it, the opportunity to pause and consider the next steps for your business.

One area often overlooked for businesses looking to grow their turnover is the option to export and this could be a big missed opportunity. The Food and Drink Federation report that in 2015 annual food and non-alcoholic drink exports totalled £12.3bn of which £8.9bn was exported to the European Union – a big potential market to be a part of. Between Q4 2014 and Q4 2015 the South West saw the third largest regional growth in number of exporters and in excess of £550m worth of food and drink exports were made.

So why don’t more people export?

When quizzed it is apparent that businesses believe there are, or may be, a number of barriers that will prevent them from exporting. Our clients in the sector cite the following as barriers to entry: excessive overseas regulation; language or cultural differences and difficulty in identifying the right market to logistical challenges and difficulty in obtaining finance. For

businesses looking to export, or currently exporting, one if the biggest decisions that needs to be made is when, and how should I hedge my exposure to sales in a foreign currency? As with many things in life, the answer is – it depends.

Foreign Currency Risk

When? For businesses starting their export journey and with relatively few transactions it may not make sense to over complicate (or over invest in) hedging strategies. It may be best to test your chosen market, make sure that you are able to sell the volumes you hoped for and then build your hedging strategy as you build your export sales. For businesses with more a more established market presence, or indeed businesses looking to expand internationally there are a range of ways in which you can manage your exposure to foreign currency fluctuations.

How? Invoice in your currency

One solution is to issue your invoice in pounds (or agree to pay in pounds). This is a great way to ensure you’ll receive (or pay) exactly what you expected, however this will expose your foreign purchaser to exchange rate movements as they face the problem of converting their local currency to pounds in order to pay you. When exchange rates are relatively stable this might be OK but if exchange rates go against your customer it might ultimately mean your product starts


to look unattractive to foreign buyers who may view your product as expensive, reducing your likely volume of your sales.

Payment and receipt matching

Another relatively straightforward solution will be to try to match any payments and receipts in a foreign currency such that receipts can be used to cover any payments required. As your transaction volumes grow, you may wish to open a foreign currency bank account extending this solution and allowing you to avoid the need for regular translation of your foreign currency transactions to sterling.

Hedging products

For businesses with a high number of foreign currency transactions or transactions of a high value there are other alternatives for managing currency exposure. These may be more costly, more complex, involve a greater investment of time to set up, a greater level of thought in arriving at the right solution for your business or all of the above.

Perhaps most common is a forward contract. A contract entered into that locks in the exchange rate for the purchase or sale of a currency on a future date. Forward contracts have the advantage of being tailored to suit a particular transaction size and give the business certainty regarding future receipts.

Another similar tool is a currency future. Currency futures lock in an exchange rate for currency to be bought or sold at a future date. Currency futures differ

from forwards as they are a standardised size, and the future contract can readily be sold to others on a futures exchange. Currency options are an extension of the currency future – entering into an option gives you the right, but not the obligation to buy or sell currency at an agreed rate at a specified point in the future. Currency options give much greater flexibility – if it doesn’t make sense to buy or sell at that price then you have the option not to – this of course comes at a prices and will be more expensive than a standard future contract.

Getting your hedging strategy right is key to making exporting profitable, and it is not straight forward but one thing is certain – exporting takes commitment. It’s worth really thinking about whether it’s what you want to do and creating a business plan that clearly sets out how you will achieve your goal. There are a number of decisions along the way that will affect the financial position of your business and will underpin how successful your decision to export is.

This might be the margin you can achieve on sales abroad, availability of working capital, how you’ll manage exposure to foreign currencies, how to account for your foreign currency exposure, what taxes you’ll be liable to pay or how to deal with VAT. Whatever it is the Old Mill Food and Drink team have the experience and knowledge to help you and your business navigate these challenges and can provide expert advice to help you reach your goals.

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Correlation between a balanced diet and a balanced insurance programIt is generally accepted that there are two types of food – junk food and health food. There is a nutritional and dietary imbalance in junk food. Most will, if honest, admit that in the majority of cases it’s cheap, convenient, tasty, and it satisfies at the time. We all lead busy lives and so the convenience of junk food allows us to tick the box “job done!” But it fails to perform the primary function intended for food – to make the body grow, function, and repair itself. A healthy diet composed of the right mix of nutrients, fats, proteins, carbohydrates etc. will help maintain a healthy body and mind.

Many people take the same approach when it comes to arranging their Business Insurance. Due to time pressures and other demands, they settle for a product that is cheap and convenient and satisfies at the same time. It ticks the box ”job done”.

However, like junk food it’s highly probable that it will fail to perform adequately when most needed. It’s only then that the tasty, convenient product turns sour and leaves an unsavoury feeling in one’s gut.

There are a number of essential elements to be considered when arranging a ‘Food and Drink’

Insurance policy especially those involved in the manufacturing/production sector. In addition to the basic Material Damage and Liability covers, the following should be considered to ensure the cover is adequately balanced:

Bartoline Extension

Bartoline were a UK manufacturer of adhesives and following a fire at their premises in 2003, chemicals and firefighting foam severely contaminated two nearby watercourses. Under the Water Resources Act 1991, the Environment Agency used its statutory powers to carry out emergency work to minimise the environmental impact and decontaminate the polluted areas.They sent the bill to Bartoline whose insurer refused to pay, and it ended up in court.

The policy provided an indemnity ‘’against legal liability for damages’’ for accidental injury, accidental loss of or damage to property and nuisance, trespass to land or goods, or interference with any easement or right. The judge ruled that ‘clean up costs’ did not constitute damages. Damages are limited to losses arising from third party claims rather than the result of statutory action by an enforcing authority. This cover can be bought back on a policy with an inner limit.

Bacardi – Mixers and processors extension

This much publicised case raised a few eyebrows in 2002. It involved Thomas Hardy Packaging who supplied Carbon Dioxide (CO2) to Bacardi-Martini Beverages Ltd who mixed it with an alcohol and water concentrate thus creating a new product, Bacardi Breezer. However, the CO2 was contaminated by


There are a number of essential elements to be considered when arranging a ‘Food and Drink’ Insurance policy especially those involved in the manufacturing/production sector...

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a toxin, benzene, which triggered a recall. The Court found that there was no damage to property because the product didn’t exist until the CO2 was mixed with the alcohol and water.

The alcohol and water on its own was not the product. The product was created after the mixing resulting in a defective product rather than a damaged product. Therefore the loss was purely economic.

Previously it was commonly held that if you mix ingredients of which one is contaminated then the resultant contaminated product was deemed ‘damaged’ by definition and a standard product liability policy would trigger.

Products recall

This cover compensates the Insured for financial loss resulting from accidental, unintentional, or malicious contamination, tampering, mislabelling, or impairment of a product.

The financial costs involved can be significant and in many cases will close a business. In addition to the recall costs, there are costs involved in destruction of the product, interruption to the business, and reputational damage.

Product guarantee insurance

This cover is really a ‘safety net’ for a company’s quality control/management processes. It may be triggered when a product fails to perform its intended function or purpose. Unlike a product liability policy, there is no requirement for damage or injury to have occurred.

In addition, unlike a product recall policy there does not have to be a risk of injury or damage. It simply guarantees the product.

These are just a few of the ‘ingredients’ that need to be considered when constructing a proper insurance program. To mitigate risk and reduce premiums, it is vital to have sound, robust risk management controls in place such as:n Business Continuity Planningn Disaster Recoveryn Valuationsn Risk Managementn Supply Chain management

If you would like a free audit of your insurance arrangements, which will be documented by way of a forensic report,or if you have any questions arising from any of the issues raised in this article, please do not hesitate to contact Adrian on 07795 053738.

Adrian Webb Cert CIIAdrian has over thirty years’ insurance broking experience having managed his own business for twenty one years until it was purchased by a national brokerage. Adrian continued to run the business for its new owners

prior to joining Castlemead where he has been tasked to develop a new office in Exeter as part of Castlemead’s continued growth strategy.


Support for your village localThe tax freeze on beer and cider duty in the recent budget gives us a reason to raise a glass to public houses at a time where increasing costs for the industry including the new National Living Wage make it hard to see a light at the end of the tunnel.

However, the National Living Wage alongside the personal tax allowance increase and a further freeze on fuel duty could lead to increases in disposable income that members of the public have available to spend.

It is an important time for pubs to create a focus in order to attract more clients who are likely to find their offering attractive. The attraction can vary from pub to pub. At the moment key focuses would seem to be sports bars or of course the ever popular offsetting the wet sales decline with food sales. But are these the only way forward?

Sandie Richards, landlady at the Gainsborough Arms in Milborne Port, comments: “It’s really important to emphasise the community aspect of a village pub in particular. By holding events such as beer festivals, themed nights such as Halloween fancy dress, bringing in local bands and nights with food from different countries it has allowed me to bring people of all ages from the village together.”

The Gainsborough Arms, like many, has had a recent history which can only be described as a succession of highs and lows. A particular deep low was being bought by a retail property developer with a vision of bulldozing the pub and erecting a single story convenience store in the village.

They acquired The Gainsborough Arms as part of a portfolio of 202 ‘underperforming’ pubs sold by Marston’s in late 2013.

This caused an outcry from the villagers who started a ‘Save Our Pub’ campaign in order to try to stop this. A Milborne Port Parish Council meeting on the 17th February 2015 was full of around 50 members of the public who opposed the planning. Some of the opposition arguments put forward included the

location as it is ‘demolishing a viable pub’ as well as moving the current shop away from the people who use it. There were also issues around people with limited mobility and proximity to a children’s play park where increased traffic and lorries could potentially endanger children.

The importance of the pub to the community and as a mark of history was emphasised as well as it holding sentimental value. One local said: “Both my parents and grandparents dined and drank in the pub so it holds many memories of for me. Seeing it knocked down would be heartbreaking to say the least.”

After a petition reached over 2,500 signatures; the planning decision was delayed due to a wildlife survey and the application to declare the former 17th century farmhouse listed status was denied – the campaigners sought Asset of Community Value (ACV) status for the building.

Under the Localism Act 2011 “assets of community value”, such as public houses, can be added to a list of properties that the council has to allow local groups 6 weeks to express an interest if the property is put on the market then a further 6 month ‘protected period’ when it cannot be sold to anyone while the community raise finances and plans. The group were successful and The Gainsborough Arms has ACV status valid until March 2020.

Since then, the pub has only grown, with Sandie leading the way. When she first started as a manager of the pub the order was set at only four barrels coming in compared to now when Sandie as landlady buys in around 16 barrels per week – proving the difference which has been made. Recently the pub has been entered into a Marston’s competition due to its growth rate over the last couple of years.

This is just one example of an increasing ‘glass half full’ spirited approach to pubs in our communities and also how important they are to people of all ages and backgrounds. The public house has, and should, be a recognised British institution because of this. But like other renowned British institutions the public house is quickly becoming outdated with 100 pubs a month still calling their very last orders. Although declining they are far from extinction, the ones that survive will be the ones which embrace the modern tastes and innovations alongside the traditional charm.

Lucy Bennet

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“ It’s really important to emphasise the community aspect of a village pub in particular. By holding events such as beer festivals, themed nights such as Halloween fancy dress, bringing in local bands and nights with food from different countries it has allowed me to bring people of all ages from the village together.”

Sandie Richards, landlady of Gainsborough Arms

EU – in or out? With the referendum on the UK’s membership of the EU less than a month away from the publication date of this newsletter we considers some of the implications of the decision for the UK food and drink industry.

Food has always been an important consideration in EU policies which cover areas such as primary production (Common Agricultural Policy and Common Fisheries Policy), trade, standards (such as weights, composition and labelling), food safety and public health. Food businesses are also affected by a range of more general policies such as worker health & safety, free movement of labour, and transport. In this article we consider three areas of particular relevance.

Cost of purchases and ingredients

Exchange ratesThere has been much talk about the impact that an exit from the UK will have on the exchange rate between Sterling and the Euro. The general consensus is that the uncertainty will cause Sterling to fall, at least in the short term. What is less clear is the duration and extent of any impact on exchange rates. With UK food imports worth more than twice as much as our exports (€57bn v €26bn) a reduction in the value of Sterling would have a significant net effect on food prices. The net effect of a 20% reduction in the value of Sterling relative to all other currencies would be an average increase of 5% in the price of all food consumed in the UK.

Import tariffsAt present the UK trades with the rest of the EU with no tariffs or other import costs. As a member of the EU, the UK trades with other countries under preferential trade agreements, in many cases at rates of tariff well below the WTO Most Favoured Nation Rates. Without these preferential trading arrangements the costs of imported food could rise significantly. The average duty for food imported into the EU is 12% whereas the maximum rates permissible range from 50% for cereals, up to 180% for fruit and vegetables.

There has been much argument about the ability of the UK to renegotiate trade agreements following an exit, both with the EU and with other states or blocks, and much analysis of the various possible trading arrangements. What is clear is that no-one knows what trading arrangements will apply if we are outside of the EU.

SubsidiesUK farmers currently receive €3.8bn of support from the CAP (of which 84% is for market and income support). This represents a subsidy to the food sector but the impact that an exit from the EU will have on food prices would depend upon the extent to which a UK government would continue to provide support to farmers. At this stage the impact of an exit from the EU on food prices of exchange rates, trading arrangements and agricultural support payments seems impossible to predict.

Labour costs and availability

The UK food industry relies heavily on the free movement of labour across the EU. Nearly 27% of all employees involved in the manufacture of food products come from EU countries other than the UK. EU labour is also seen as being important in terms of the picking and packing of food crops on farms. It has to be said that workers from certain other EU countries are prepared to do the sort of work and at rates of pay that would not be acceptable to most UK workers.

The question is whether an exit from the EU would alter this position. Across all sectors, 6.1% of employees come from EU countries other than the UK. If the UK were to leave the EU it is difficult to see how the UK could continue to operate without some arrangement for EU workers to continue to work in the UK. However, for those businesses that depend heavily on workers from other EU countries there is uncertainty over how they will operate in future.

Regulation

If the UK is looking to continue to trade with the EU (and over 60% of our exports are currently to EU countries) will the UK need to comply with EU food regulations if it is to continue to trade on favourable terms? Or would the EU raise tariffs to level the playing field? It is difficult to imagine that the EU would allow imports that are not subject to the same regulation to compete with its own producers and manufacturers.

Conclusions

There appear to be no real facts on which food businesses can base a decision on whether to leave or remain in the EU. Not only do we not know what a UK outside of the EU might look like, we also do not know the direction in which the UK will travel if it remains within the EU. The only certainty is the level of uncertainty that is facing food businesses as we approach the referendum.


Mark Shelton

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The only certainty is the level of uncertainty that is facing food businesses as we approach the referendum.

Old Mill Food & Drink team Jolyon Stonehouse - Board Member

Jolyon has spent 20 years looking after owner managed businesses in Old Mill after joining from Price Waterhouse. Having become a partner in 1999, he took over as Regional Managing Director in 2004 (when the firm was part of

national firm Tenon) and led the Management Buy Out of the business that became Old Mill in 2006 and was Managing Partner until 2012. He now heads a team looking after key owner managers and entrepreneurs. He specialises in providing tax planning and strategic advice to owner managers, focussing on the needs of the business owner themselves, and how their business can help them achieve their own objectives.

Jolyon’s client portfolio includes prominent regional food retailing, food wholesaling and food manufacturing businesses and he has developed a particular passion for the sector which is such an important part of the rural economy in the South West of England.

Kevin Wheldon

Kevin relocated from Cornwall to Dorset to join the Old Mill Food and Farming team in 2012. He has built his experience dealing with a wide variety of largely owner managed rural based businesses. Before joining

the firm, Kevin worked as a Management Accountant for a major Cornish food manufacturer, giving him an excellent insight into the more commercial aspects of the food industry.

Kevin takes a keen interest in the region’s thriving food industry and enjoys attending local food events and learning more about the fantastic local businesses that are contributing to its success. For the past two years he has been fortunate enough to represent Old Mill on the judging panel for the Taste of Dorset awards. Kevin is drawn to the dynamic and fast-paced nature of the food industry and is excited to play a part in supporting the region’s future success.

Mark Shelton – Consultant

Mark has a degree in agriculture and spent ten years in practical farming and farm management consultancy before entering the accountancy profession. He spent ten years with Deloitte in Bristol

working almost exclusively for clients in the food and agriculture industries, latterly as a Director in the Food & Agriculture Group. In 2002 Mark set up his own specialist practice based in Wells, Somerset providing forensic accounting, business advisory and general accountancy services in the food and agriculture industries. He joined Old Mill in 2014.

Mark has provided accountancy and business advisory services for a range of food businesses including cheese makers, liquid milk processors, a dairy dessert manufacturer, meat businesses and food retailers as well as livestock markets and land-based FE colleges. He spent two years as finance director for a £12M turnover, vertically integrated farming and meat business selling through a chain of retail butchers in London and a wholesale operation supplying top London restaurants.

Mark was National Chairman of the British Institute of Agricultural Consultants from 2010 to 2012

Charlotte Smith

Charlotte has worked at Old Mill for nearly three years, having graduated from Plymouth University with a first class degree in Psychology.

Since starting at Old Mill she has worked with owner-managed businesses in the food and drink sector including cheese production, milk and cream production, ale brewing and fishing. She has undertaken annual audits, tax work and statutory accounts preparation.


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Lorraine Bolland – Director

Lorraine joined Old Mill as a manager in 2006. She has 20 years’ experience as an accountant and has worked on many owner managed food and drink clients. She has covered all business aspects of accounting, audit and tax. Her

clients have included many food producers, distributors and outlets such as hotels and venues including coffee shops and conferencing facilities.

Lorraine is responsible for the day to day running of the food and drink team and her focus is now on audit for the larger food clients.

Hannah Ridley

Hannah joined the Old Mill Food & Farming team in 2013 after graduating from the University of Reading with a degree in Animal Science. Highlights of her studies involved looking into the effects of animal nutrition on their food outputs and how

cooking methods affect the nutritional value of the foods we eat.

Her parents started a family-run food business in the South West when she was a child and she has a passion for producers who make quality produce. She has seen how the ups and downs of running an owner-managed business can affect the whole family. Her interest lies in helping small producers establish and achieve their goals whether that is expanding the business, developing a niche market or creating a sustainable business with the desired work-life balance.

Chris Bennett

Chris joined Old Mill in 2011 having relocated to Somerset from Liverpool. He graduated from the University of Chester with an undergraduate degree in Business Studies and a postgraduate degree in Management with Finance.

During nearly five years working with Old Mill he has worked on audit with some of the West Country’s larger owner managed food businesses in the food and drink sector.

Lucy Bennett

Lucy joined Old Mill in September 2015 after completing her A levels and has now started to train as an accountant.

Despite her youth Lucy has already worked part time in a

number of roles in a local public house and last summer she achieved her personal licence to sell alcohol. Lucy brings both enthusiasm and a fresh approach.

Phil Mills

Phil Mills has recently relocated to Somerset having trained as a Chartered Accountant in London and is excited about the prospect of translating his experience in the City into opportunities to help Old Mill clients. Phil is

relishing the opportunity to work in the thriving West Country food and drink industry. Phil first became interested in food and drink when, as a teenager, cooking in the local pub proved to be a good way to generate some pocket money. This continued throughout his time in the South West studying at Bath and Exeter where he cooked in a number of pubs and restaurants in order to fund his student life.

Contact Old MillMelkshamWessex House, Challeymead Business Park, Bradford Road, Melksham, Wiltshire SN10 8BUTel: 01225 701210 Fax: 01225 709817E-mail: [email protected]

Exeter Leeward House, Fitzroy Road, Exeter Business Park, Exeter, Devon EX1 3LJTel: 01392 214635 Fax: 01392 214690Email: [email protected]

WellsBishopbrook House, Cathedral Avenue,Wells, Somerset BA5 1FDTel: 01749 343366 Fax: 01749 344986Email: [email protected]

YeovilMaltravers House, Petters WayYeovil, Somerset BA20 1SHTel: 01935 426181 Fax: 01935 431852Email: [email protected]


The content of this newsletter is for general information only. It should not be relied on and action which could affect your business should not be taken without appropriate professional advice. Please contact your usual Old Mill contact or local Old Mill office.

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