Peter Stuart, who makes Thistly Cross Cider on South Belton Farm, Dunbar, said that his tax would more than double because inspectors ruled the whisky casks they use in the brewing process flavours the drink, turning it into a “made wine”.
Mr Stuart and his business partner Ian Rennie fear the “crazy” decision could cost them thousands of pounds in back-dated tax, potentially tipping the business to go bust.
It means they will be paying duty of 78 pence per litre of cider produced instead of 36 pence – a rise which Mr Stuart believes could force them to sell all their whisky cask cider abroad rather than locally.
Tax bosses have requested them to pay back-dated tax on around 60,000 litres already produced, which would set them back almost £2500.
The successful pair had planned to brew 200,000 litres of cider in whisky casks over the next year – but this would cost them more than £15,500 instead of £7200.
They claim they informed HMRC about their whisky casks when they started using them two years ago and said they were merely brewing cider in the traditional way.
Mr Stuart said: “Traditionally, cider is stored, transported and matured in rum barrels. We use good, clean whisky casks and the natural properties of the wood really help the cider to mature. Using casks is the traditional way and whisky ones are reusable. We had this duty officer come and visit.
While we understand he was in an awkward position as we’re unique in Scotland, he ruled that if we mature cider in a wooden barrel and it picks up the flavour of the wood, it becomes flavoured cider. That’s twice the duty. It’s Catch 22 as to whether we should put the price of our already premium products up by 40p, or attempt to cover it ourselves. Around a third of our cider is produced in whisky casks, and we want to expand their use because they’re reusable and effective, so this could cripple us.
“For us, that is crazy. The American market has been so much better for us, as it’s only 22 cents for four gallons there. Obviously we want to promote and expand this unique product at home and abroad, but we may not have a choice.”
He added: “The whisky casks are representative of Scotland, and we’re proud to be a local business, but this rule does not help an independent business such as ourselves.
“According to HMRC, we aren’t categorised as a cider, we’re a ‘made wine’, which is what alcopops come under.
“We’ve been doing this successfully for about two years and we’ve been inspected previously. Nothing was said about the casks. If putting cider in a wooden cask is adding substance I think the whole cider industry will be up in arms.”
The HMRC confirmed that the cider was considered to be a “made wine”, which commands a higher level of tax.
A spokesman said they would not comment on individual cases, but explained that as the cider is purported to be coloured or flavoured from a whisky cask, it changes the product from cider to made wine for duty purposes.
He added that whisky casks are not listed in a section of allowed ingredients under the HMRC cider production rules.
Chic Brodie, SNP MSP for South Scotland, said he would take up the pair’s case.
“It has to be a level playing field. It is inequitable that a thriving Scottish cider maker is being punished for his method of fermentation. It is quality cider, not wine. We should be encouraging quality, local products. This particular cider is up for an international award in Michigan this weekend, which speaks for itself.”