From 1 August six new standardised bands are being introduced across all types of alcoholic products, with tax rates being calculated based on the nature of product and litres of pure alcohol. See the details of the new rates on HMRC’s website.
As Gerry Myton – head of indirect tax at HW Fisher – explained, while the changes will help simplify a currently complicated system, both manufacturers and retailers will be faced with new costs as a result.
“It will require many manufacturers, retailers, wholesalers, and importers to adjust their processes of completing duty forms and calculating duty, and so it is important that they fully understand the new rules that will apply,” said Myton.
Costs for producers
While many of the changes are set to benefit the food service industry, Myton warned that businesses producing and importing goods for off-trade consumption will likely be faced with increased costs.
“These are the biggest changes to the alcohol duty system in 140 years and businesses need to be prepared,” Myton added.
“As well as simplifying the system, the government is hoping that lower rates of duty on lower strength drinks will drive innovation into their production, and in the long-term help to encourage more responsible drinking habits in the UK.”
Tax relief for brewers
In addition to the new bands, HMRC will also be introducing new reliefs, a temporary easement and a consultation:
- Small Brewers Relief Scheme - This is being replaced and extended, and as a result small businesses who produce any alcoholic products with ABV of less than 8.5% will be eligible for reduced rates of alcohol duty on qualifying products.
- Draught Relief - This will reduce duty on draught products under 8.5% ABV in large containers holding at least 20 litres.
- A temporary easement for some wine products - All wine ‘of fresh grape’ between 11.5% and 14.5% ABV will be treated as if it is 12.5% ABV for calculating duty. This will be in place for 18 months from 1 August 2023 and is aimed to assist wine producers in managing the new alcohol duty rates.
- Consultation on the definition of cider - The government has indicated that a consultation will begin later this year that focuses on the retention of the 8.5% ABV, minimum juice requirements and fruit additives/flavouring.
Meanwhile, Carlsberg is lowering the alcohol content of its Danish Pilsner to 3.4% in response to the tax hike.