The Wine and Spirit All-Party Parliamentary Group (APPG) has published its SME Inquiry Report probing the consequences of the Government’s proposed reform to alcohol duty for UK SME wine and spirit businesses.
Chancellor Rishi Sunak announced the most radical simplification of alcohol duties in the budget in October 2021 which cut the number of main duty rates from 15 to six, with the principle of 'the stronger the drink, the higher the rate'.
As part of plans all categories will move to a standardised series of bands with rates for products between 1.2 to 3.4% abv, 3.5 to 8.4% abv, 8.5 to 22% abv, and above 22% abv.
The proposed Small Producers Relief scheme will only apply for products under 8.5% ABV.
The APPG has written to Exchequer Secretary to The Treasury, Helen Whately MP, to share the findings and recommendations of its latest report following the closing of the consultation at the end of January.
It claims the Government should recognise that the current proposal does not achieve its suggested aim of being fairer. It has also raised concerns that there would be major increases in administrative costs falling to wine businesses as a result of potentially replacing three rates with 27 new rates. It called on the Government to work with the wine and spirit industry to consider an alternative solution.
There was also concern raised about the impacts on small producers, who receive no support under the plans. It calls for small producer support to be made available to all small producers irrespective of the alcoholic strength of the finished product.
According to the Wine and Spirit Trade Association (WSTA) the Chancellor’s proposed changes are set to 'heap more misery on British businesses'. It added that SMEs are vital to the vibrant UK wine and spirit sector, ranging from distilleries and English and Welsh Vineyards to independent merchants, importers and fine wine brokers.
Miles Beale, chief executive of the WSTA, said: “Far from being more economically rational, these proposals would embed and increase the illogical and unfair treatment of spirits and wine. Beer and cider tax remains the lowest and will not go up, but on the flip side 80% of all still wine, 95% of red wine and 100% of fortified wines. Spirit drinkers will face the highest taxes of all at 29p a unit.
“In addition, levying tax by degree will require huge changes to the supply chain and major changes to IT systems – all coming on the back of the changes required when we left the EU. These proposals will result in more costly red tape and will be particularly prohibitive for SMEs. It beggars belief that a Conservative government is responding to an opportunity to do things differently post-Brexit by choosing to impose cost and burden on British businesses! And all for marginal gain to Treasury coffers.”
Sam Linter, managing director and head winemaker at Bolney Wine Estate, said: “The economies of scale are not there for small producers and even a 10p tax increase on a bottle of wine has a major impact on an industry which is still in its infancy compared with its European counterparts. We very much welcome the reduction in sparkling wine tax, but not the proposed effect on the increase in still wine.
"We cannot understand why vineyards have been excluded from the Small Producers Relief scheme. For a small producer the most effective way of getting up and running is through cellar door sales which is an area where Government could be supporting us.”
Kathy Caton, co-founder of Brighton Gin, said: “I don’t resent paying taxes, I just want it to be fair across the board. The stifling duty costs act as a handbrake to growth for businesses like ours. Instead of putting barriers in our way the Government should be promoting and supporting ‘Brand Britain’.”