Tax relief for microbreweries

Ireland’s craft and microbreweries sector is growing. According to a recent report, the number of production microbreweries increased from 15 in 2012 to 62 in 2016 and the sector had an estimated turnover of €59 million last year. 

However, unlike the UK, where the real ale movement has gained steady momentum since the 1970s, craft and microbreweries were initially slow to get off the ground in Ireland. Barriers facing entrepreneurs include high entry level costs, competition from big brands, relatively low domestic demand and difficulties establishing routes to market.

Microbrewery visitor centres

To combat these difficulties and improve cashflow, many craft and microbreweries establish visitor centres. These centres, which provide information and guided tours, take advantage of tourism-related opportunities and help build brand awareness however their revenue-generating potential is limited under current legislation because they cannot offer tastings on site unless they have an off-licence or pub license. 

In an effort to address this problem, Alan Kelly, the Labour Party spokesperson on Jobs, Enterprise and Innovation, introduced a Bill late last year aimed at boosting craft-beer tourism in Ireland. When enacted, the Intoxicating Liquor (Breweries and Distilleries) Bill 2016 will allow breweries, microbreweries, cider makers and distilleries to sell their produce to tourists and other visitors on site. At the time of writing, this Bill is at Committee Stage.

Huge opportunities

Meanwhile, the Department of Agriculture, Food and the Marine recently flagged “huge opportunities” for growth with plans to increase the number of microbreweries to 100. According to Food Wise 2025, a 10-year vision for the Irish agri-food industry, emerging markets in Asia and the explosion of the craft alcohol market in the United States provide Irish companies with enormous potential to expand but the ability of the sector to develop new markets “will remain a key challenge”.

Tax relief for microbreweries

One of the ways in which Government supports craft and microbreweries is through the tax system. Since 2005 an excise duty relief has been available for microbreweries that meet certain conditions. Details of the scheme have changed several times, most recently in Budget 2016 when the relief became available upfront instead of as a tax rebate. Currently a microbrewery can qualify for relief if the quantity of beer brewed in the previous year is less than 40,000 hectolitres and the brewery meets certain other conditions laid down by Revenue. It is important to note that beer brewed under a licence, franchise or contract for another brewery is not eligible for relief although Revenue will include this beer when calculating the annual production quantity of the brewery.

Brady & Associates are keeping a watching eye on developments in this sector. If you are interested in establishing a craft or microbrewery or are already operating and would like to discuss particular concerns, please contact a member of our team.