The UK government has announced that from 1 August 2023, the calculation of excise duty on some alcoholic drinks will change from a standard amount per hectolitre to an amount per litre of alcohol. This will have an effect of increasing net duty rates. This will impact the prices of alcoholic beverages and affecting businesses involved in alcohol production, wholesale, and retail. The government plans to raise the duty on wines, spirits, and beer by 2%, alongside inflationary increases. However, there will be an increase in Draft Relief Duty Differential for qualifying beers, ciders, wines, and spirits. This is aimed to ensure that the price of some alcoholic drinks sold in pubs and restaurants will remain the same after 1/8/2023.
For instance, the tax on wine duty rates will rise by 6 pence per bottle, while a bottle of whisky will be priced 41 pence higher, and a can of beer will cost 1 pence more. These changes are aimed at addressing the public health and social impacts of alcohol by reducing alcohol consumption.
The duty hike and the change in the way excise duty forms have to be completed could result in an immediate impact on retailers and wholesalers, who may be forced to pass the increased cost of production onto customers. It could also affect the importer or producers of alcohol as they will have to calculate the amount of duty to be paid using a different method. This will have a larger effect on small beer and cider producers as they will have to use a different rate of duty depending on whether their product is being sold in barrels or bottles. The form that they use to declare the duty will also change.
This will also affect pubs that sell draft beer to be consumed off their premises as they will have to repay HMRC for the reduction in duty they have received by buying the beer or cider in barrels and receiving Draft Relief Duty Differential from their supplier.
Smaller businesses may be particularly affected by the rising cost of alcohol, leading them to increase their prices or absorb the cost. Thus, it is crucial to take necessary measures before the changes take effect.
If you run a business that involves the production or sales of alcohol, you should prepare for these changes by assessing their financial implications. You should carry out an audit of your products and operations to determine how the changes will impact your business. Once you have the figures, you can plan on how to adjust your prices to remain competitive while staying compliant.
As part of your preparation, you should also consider negotiating better deals with your suppliers or finding new ones to mitigate the impact of the tax rise. You should also review your marketing and pricing strategies to stay ahead in the competitive environment. Finally, you should consider obtaining professional advice on the tax rise to ensure that your business stays compliant with the new rules.
For example, A rise in alcohol duty would affect taxes by increasing the amount that individuals and businesses must pay for the production, sale, and consumption of alcoholic beverages. Alcohol duty is a type of excise duty, which is a tax on goods that are produced domestically or imported into a country. In the case of alcohol, the duty is levied on beer, wine, and spirits based on their alcohol content.
When the government raises the alcohol duty rates, it increases the tax paid by producers and importers, who then pass on this cost to retailers and ultimately to consumers.
In conclusion, the new alcohol duty rates, and the way the duty is calculated that will roll out on 1 August 2023 could have a significant impact on businesses involved in alcohol production, wholesale, and retail. CFOs and finance directors should prepare their businesses by assessing their financial implications, negotiating better deals with suppliers, reviewing their marketing, and pricing strategies, and obtaining professional advice on the tax rise. Failure to comply with the new rules could result in significant penalties, which could affect your business’s overall profitability and operations. Therefore, planning ahead and staying informed about the changes is crucial for staying compliant and maintaining profitability.
If you would like more information on this subject please call our tax team on 01292 265071.