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Showcasing the British spirit
Budget musings.... Alan Powell
I’m writing this with the recent announcement in the Autumn Budget regarding HM Treasury’s Alcohol Duty Review following calls for evidence from the industry last November and the government’s proposals now out for consultation.
A lot of folk have been confused by the proposal and timings. The opacity derives from how the Condoc communicates the main proposed changes. It is actually very simple (after one cuts through the fog).
Per Table 4.B at page 31 of the consultation document, there will be 5 alcohol strength bands to establish a rate for duty on products within each band. For the 4 of the 5 duty bands, the duty rate (an amount per litre of pure alcohol) is exactly the same for all products within each respective band. The band for strengths 3.5 – 8.4% abv has the exact same rate for wine, made-wine and spirits with a slightly reduced rate for beer and very much reduced rate for “plain” cider (fruit cider is still to be treated as a made-wine). It occurs to me that this ought to be 4 bands. The proposed “1st band” is from 0 to 1.2% abv and is set at nil duty. But the definitions of all alcohol subject to taxation under section 1 of the Alcoholic Liquor Duties Act 1979 requires the products to exceed 1.2% before they “become” a taxable alcoholic product. Until they exceed 1.2% they don’t exist as an alcoholic product subject to ALDA and therefore not subject to alcohol tax any more than eg a tin of shoe polish is a taxable alcoholic product. I have written to HM Treasury to suggest 4 bands only.
So what of spirits?
Spirits at “normal” spirits strength,
and which have to be a certain strength, eg whisky at 40% abv, will bear the highest of the 5 bands. On the other hand, the reduced rates will be attractive for RTDs made from spirits and also stronger “shots” type drinks at say 15 -22% abv (many of which are currently made as fortified made-wines from a neutralized ferment/spirits base, then flavoured; they also used to be subject to post duty point dilution. Since ethyl alcohol is cheaper than ferment/alcohol as a basic cost, I can see a quick switch to spirits by those producers).
that the artisan sector is no less deserving of a reduced rate for spirits of any strength. And the main spirits brands at full strength will have the most cachet, not a derivative as an RTD.
There is no justification given by the government for not including spirits producers as “craft” producers to benefit from a reduced rate at full strength. The reduced rates will apply to “craft” producers of spiritsbased drinks below 8.5% abv. So an RTD made from spirits by a small producer would be eligible for the reduced rate. But it misses the point
Alan Powell
More broadly, In terms of lower strength products being treated the same regardless of alcohol type, this was the case for the “cooler” regime from 1988 for a all alcoholic of drinks 1.2 - 5.5% abv which had five bands (which subsequently reduced to two from 2002 and spirits became re-dutied as spirit). I pointed this out in the Call For Evidence to explain the existence of the 1.2 - 4% and not exceeding 5.5% bands and give the historical context; HMT says the cooler band started in 1990; they got that wrong.
The British Distillers Alliance (BDA) is a non-profit making body which provides a professional service for independent and craft businesses in the spirits production industry and supply chain. The BDA represents distillers, rectifiers and compounders and those in related sectors.
New members always welcome.
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In terms of administration, several sensible proposals have been made in the Condoc to simplify and rationalize licenses and approvals for all alcohol regimes, which is an on-going with HMRC. Of particular interest is paragraph 5.14, which says: “The requirement for rectifiers and compounders working with duty paid spirits to be licensed or approved will be removed under new system.” This is long-overdue since it is utterly pointless, but ought to be removed for those operating on spirits in duty suspension (warehouse) as well. The law permits rectifying and compounding as a specific operation in warehouse but does not require a licence to be held for that trade/operation. So a simple revocation of section 18 of the Alcoholic Liquor Duties Act (which requires a rectifier or compounder to be licensed by HMRC) ought to do the trick.
Alan Powell is a specialist excise duties consultant, formerly a Policy official within HMCE’s HQ teams. He is excise duties advisor to the Chartered Institute of Taxation, honorary advisor to the UK Warehousing Association and founded the British Distillers Alliance as a conduit for consultation with, and representation to, Government bodies and to assist and advise on technical matters. For further information: www.britishdistillersalliance.com
BREWING & BEVERAGE INDUSTRIES BUSINESS • Winter 2021/2022
