HMRC Duty Relief
Manage duty paid spoilt product relief by reclaiming duty on damaged, contaminated, or unsaleable alcoholic products.
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HMRC Duty Relief on Spoilt or Destroyed Beer
HMRC allows breweries to reclaim Alcohol Duty where beer or other alcoholic products become spoilt, damaged, contaminated, or otherwise unfit for consumption after duty has been paid. This is known as duty-paid spoilt product relief.
HMRC expects breweries to keep evidence supporting the claim, including:
Details of the returned or destroyed stock.
Volume and ABV.
Original duty paid.
Records showing the product was destroyed or appropriately reprocessed.
Documentation linking the claim back to the original sale and duty payment.
Duty Reclaims on Duty Paid spoiled or damaged inventory that is set to be destroyed can be managed in Bevica using a Return Reason Code.
Return Reason Code
To set this up, navigate to Return Reasons. From here you can create the Return Reason code, give it a short description and apply the following fields:
Automatic Negative Adjustment - Where this is set against a Sales Return order line, stock will be returned normally then automatically adjusted out. This ensures Inventory is not impacted.
Duty Reclaim - When enabled, posting a Sales Return Order line with this reason code will post a negative duty reclaim entry and create an audit record in the Duty Ledger. Requires Automatic Neg. Adjustment to be enabled.
A Duty Reclaim reason code must have Automatic Negative Adjustment and Duty Reclaim selected.
General Ledger Setup
For Duty Reclaims, financial entries will post to the Sales Duty Account and COGS Duty Account. These accounts can be populated in the General Posting Setup.
Duty Reclaims in a Bin Mandatory Location
Inventory cannot be automatically negatively adjusted in a Bin Mandatory location, therefore when working in a Bin Mandatory location, a default location code should be set against the Return Reason. This is to allow for an automatic negative adjustment of inventory without impacting warehouse operations.
The default location used should be a location that does not have Bin Mandatory set.
Creating the Sales Return Order
When inventory has been identified as suitable for a Duty Reclaim, a Duty Paid Sales Return Order should be created for the customer. On the Sales Return Line, the Return Reason Code for the Duty Reclaim should be assigned. Where applicable, this will update the location code on the line. Once the Return Reason is populated, the Applies-to Duty Ledger Entry should then be selected to ensure the correct duty entry is reversed.
Posted Entries
Posting a Duty Reclaim will create the following entries in Bevica.
Duty Ledger Entry
On posting the Sales Return Order, a negative Duty Ledger Entry will be created. This entry will be flagged as a Spoilt Beer Return in the Duty Ledger Entries table. To navigate to the Spoilt Beer Returns efficiently, there is a button at the top of the page allowing quick filtering.
The Duty Ledger Entry can be used to report on Duty Reclaims that are due. The Duty Ledger Entries table contains the following fields which can be used for reporting.
Duty Code
Item No and Description
Production Date
Spoilt Beer Return (Y/N)
ABV %
Duty Rate
Quantity and UoM
Duty Status from and to
Amount (LCY)
Total Volume
Location
Original and Posted Document Nos.
Item Tracking fields (LOT, Package and Rotation No.)
Item Ledger Entry
Two Item Ledger Entries will be created, the first entry will have an Entry Type as Sale and a document type of Sales Return Receipt and will be a positive adjustment to the return location.
The second entry will have an Entry Type as Negative Adjustment and the document type will also be Sales Return Receipt. This entry will be a negative adjustment out of the return location, removing the item from inventory.
General Ledger Entry
Two General Ledger Entries will be created, the first entry will debit the Sales Duty account, the second will credit the COGS Duty account.
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