Insight for food businesses
Old Mill Food & Drink contents
Let’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
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
We look forward to seeing you. Any comments or
ideas for future editions of this newsletter will be very
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
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 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 .
The 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.
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 Wage
Workers 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-
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.
No 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.
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 Tax
A 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.
Following 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 allowance
The 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.
Single tier State Pension
A 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.
Pension 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
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
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?
Grants available for food
businesses in England
As 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.
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.
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.
Grants are available for a wide
range of projects provided you
can show how your business plan
will benefit the rural economy.
The Bath and West
Showground – developing
into a regional hub for food
and drink producers
As 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
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
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
“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
“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
Exporting for food and drink
businesses and issues around
With 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
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
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
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
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.
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
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.
Correlation between a
balanced diet and a balanced
It 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
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
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.
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
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 Planning
n Disaster Recovery
n Risk Management
n 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 CII
Adrian has over thirty
years’ insurance broking
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 local
The 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
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
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
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
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
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.
“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
There 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.
At 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.
UK 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.
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.
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.
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
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
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
Mark was National Chairman of the British Institute of
Agricultural Consultants from 2010 to 2012
Charlotte has worked at
Old Mill for nearly three
years, having graduated
from Plymouth University
with a first class degree in
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
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 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 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
Lucy joined Old Mill in
September 2015 after
completing her A levels and
has now started to train as an
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 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
Contact Old Mill
Wessex House, Challeymead Business Park,
Bradford Road, Melksham, Wiltshire SN10 8BU
Tel: 01225 701210 Fax: 01225 709817
Leeward House, Fitzroy Road,
Exeter Business Park, Exeter, Devon EX1 3LJ
Tel: 01392 214635 Fax: 01392 214690
Bishopbrook House, Cathedral Avenue,
Wells, Somerset BA5 1FD
Tel: 01749 343366 Fax: 01749 344986
Maltravers House, Petters Way
Yeovil, Somerset BA20 1SH
Tel: 01935 426181 Fax: 01935 431852
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.