Alcohols Limited – investment into a new manufacturing facility

Alcohols Ltd can trace its roots back to 1805 when Mr W H Palmer opened a store on Old Street in central London supplying ‘chemicals and sundries’ and the Langley Distillery in Birmingham followed thereafter.

Five generations later, employing 65 people and with a turnover of £35 million, the business is still owned by the Palmer family, still distilling alcohols from the Langley Distillery and, in 2023, from its smart new facility and head office in Rugby, Warwickshire.

The specialist manufacturing business that exists today emerged in the mid-1950s with two distinct arms – (i) the bulk distribution of fine alcohols and the production of beverage products and (ii) chemical products and the production of raw spirits used by the drinks trade.

“The largest part of the business is the distribution of alcohol and chemical products,” says Richard Evans, Group Finance Director at Alcohols Ltd. “We buy in bulk chemicals from the major oil and chemical giants and break them down into smaller components and specialist products”.

“These are used across an enormous range of products and manufacturing processes for many application industries globally, from hand sanitisers to personal care, automotive and healthcare products, print packaging – the list is endless.”

The second arm of the business is the distillation of beverage products used by the drinks trade.

“We work alongside the growing number of artisan drinks companies, particularly gin producers, innovating and helping them develop and build their businesses.”

Alongside the growing number of specialist gins, Alcohols Limited Langley Distillery produces and markets a wide range of beverage products including vodka, brandy, rum, whisky and Ready To Drink products.

For most of its history, Alcohols Limited Langley Distillery has been the “invisible” powerhouse behind manufacturers and drinks producers. Now, it has stepped into the limelight, producing its own award-winning London dry gin, Palmers 44, and a range of liqueurs.

“The market for gin is growing around the world,” says Richard, “and we are now one of the largest family owned, yet artisan gin distillers in the UK.”

Fire and rebuild – a taxing time

At the heart of the Langley Distillery are its copper stills, named as tradition dictates, after family members and those who have played a key role in the company’s growth. Its smallest still, McKay dating back to the 1860s, has a 200-litre capacity, with its largest, Natalie, capable of producing 15,000 litres, recently added to its Rugby site.

Alcohol and its derivatives are highly flammable, and despite the highest health and safety policies, a fire at the Langley Distillery in 2012 destroyed a three-story warehouse. The insurance proceeds received was additional income potentially subject to tax.

As it turned out the fire was the spur and start of a journey that will secure the business for future generations.

“Instead of rebuilding on the site, it was an opportunity to build a new, purpose-built facility on land purchased by the business in Rugby,” said Richard.

Building was delayed by planning permissions, Brexit and then Covid, with the £23 million state-of-the-art facility eventually completed in 2023, with the head office relocating and the site becoming operational in 2024.

“It is a modern site, meeting the very highest health, safety and production standards, with a distillery, chemical facility and warehouse storage,” says Richard. “The new 15,000 litre still will, in fact, be one of the largest in Europe.” 

Capital allowances and Business rollover relief

The decision to invest in the new Rugby facility also came with potential attractive tax incentives; generous Capital Allowance reliefs and Business Asset Rollover Relief.

We have worked with Alcohols Ltd for many years as their auditors and tax advisers. The Government’s capital allowances programme allows a business to deduct the cost of qualifying assets from taxable profits. It is a generous relief, up to 100% of the cost of some qualifying assets. Helpfully, the relief, whilst not extending to land, does include certain buildings and plant structures, not just the plant and machinery inside a building.

When a business also sells an asset, such as a redundant manufacturing site, its underlying growth in asset value over the period of ownership, becomes taxable. For land in particular, this tax liability can be sizable. However, if the same business were to invest and build a new plant facility, those gains can be ‘rolled over’ assuming that qualifying assets are acquired within a specified time frame, with the gain only being taxed when and if the new facility is later sold without further replacement.

There are, as reasonably expected, stringent criteria in claiming both these reliefs, and it pays to take expert advice.

“Alcohols Ltd, with the support of Kreston Reeves, has managed to claim significant capital allowances at a much higher rate than first envisaged,” said Richard. “It certainly paid to take specialist advice.”

“Furthermore, Kreston Reeves have helped us navigate through the rollover relief criteria with a view to maximising the tax benefits available to the Group”.  

Visit Alcohols Ltd to learn more. To understand more about rollover relief and capital allowances, please do not hesitate to get in touch with our expert team.