Clause 61 - Mergers: general provisions

Part of Finance (No. 2) Bill – in a Public Bill Committee am 3:30 pm ar 16 Mai 2023.

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Photo of Abena Oppong-Asare Abena Oppong-Asare Shadow Exchequer Secretary (Treasury) 3:30, 16 Mai 2023

The clauses under discussion in this group form part of chapter 3 on small producer relief, as the Minister mentioned. I thought it would be helpful to remind the Committee that Labour introduced the small brewers relief in 2002, and we are proud of the effect it has had in supporting small brewers, creating the vibrant UK beer scene, and supporting British business. We therefore support its extension to other producers.

In the context of small producer relief, clauses 61 to 68 specifically deal with the regulations and provisions for when mergers take place. Clause 61 sets out general provisions, determining that a merger of two small producers is to be called a post-merger production group, and is deemed to be in a transition phase for the three years following the merger. Clause 62 introduces modified conditions to determine whether the premises of two small producers that newly merge are small production premises for the purposes of small producer relief. A merged small producer will be eligible for small producer relief if the adjusted post-merger account does not exceed the small producer threshold of 4,500 hectolitres and if, for each set of premises in the group, fewer than half of the alcoholic products produced on those premises in the previous year were produced under licence.

Clause 63 sets out that, in calculating small producer relief for a post-merger group, the adjusted post-merger amount is used for the “relevant production amount” as set out in section 59. Subsection (3) sets out that the exclusion in clause 58(c) does not apply to the premises in a merger transition year. The Minister will not be surprised that I want to ask why that is the case. I cannot find anything about the purpose of the subsection in the explanatory notes, and it would be helpful to get the background as to why it exists.

Clause 64 provides a definition of the adjusted post-merger amount, which is used to determine eligibility and calculate the rate of small producer relief for companies transitioning post merger. Clause 65 sets out that a merger transition period will end early if the total amount of alcohol produced on all premises by a post-merger group in the preceding production year is less than the adjusted post-merger amount for the current year.

Clause 66 lays out provisions for subsequent mergers of alcohol producers. If a second merger takes place, the producer is no longer considered to be in its merger transition period for the first merger. The second merger could be considered a new merger transition period if the eligibility conditions are met. On the other hand, clause 67 lays out provisions for simultaneous mergers, setting out which producers will be considered the “larger producer” and the “smaller producer” for the purposes of determining the small producer relief. Clause 68 sets out what happens when a production group demerges and the regime to be applied for demerged businesses looking to receive small producer relief.

As we know, clauses 69 to 71 provide some guidance on the interpretation of chapter 3. Clause 69 lays out definitions of the terms producer, production premises, group premises and connected premises. Production premises are premises where alcoholic products are produced, including premises outside the UK. Group premises are all the premises on which the same person produces alcoholic products. A production group includes the group premises and all connected premises. A producer is a person who produces alcoholic products.

Clause 70 states that two people will be considered to be connected persons if they meet the test contained in section 1122 of the Corporation Tax Act 2010, although HMRC’s commissioners can overrule that if they think it necessary. Finally, clause 71 provides a table of expressions used in the small producer relief chapter. These clauses are all administrative in purpose, and we will not oppose them.