UK Craft Distillers Unit in Call for Spirits Inclusion in Small Producer Relief Scheme in Advance of Autumn Budget

In a November blog post, Liam Hirt has explicitly asked the Chancellor to extend Small Producers Relief to alcohol over 8.5%. 

Currently, a lower rate of Alcohol Duty is only permitted on products with an ABV of less than 8.5%.

Hirt is arguing that the current framework unfairly excludes small producers of gin, whisky, rum, and other higher-strength drinks.

Liam Hirt told That's Food and Drink: “Duty relief for beer and cider has proven its value. It has helped small producers compete with global corporations, encouraged hundreds of new entrants, and driven diversity and innovation. 

"Extending the same support to spirits would deliver exactly the same benefits - and strengthen the UK's position as a world leader in craft distilling.”

The Small Producer Relief Scheme was introduced to correct structural disadvantages faced by small drinks producers. However, by restricting eligibility to products below 8.5% ABV, it excludes the vast majority of craft spirits, which typically sit at 37.5% ABV or higher.

“This limitation discriminates against distillers and contradicts the scheme's intended purpose. There's no public health basis for this exclusion,” he added. 

“A unit of alcohol in a gin is no more harmful than a unit in a beer. In fact, many spirits consumed with low or zero-sugar mixers have fewer calories than most beers or ciders. According to recent HMRC data, spirits duty receipts have fallen by up to £700 million over the past two years, despite duty increases. 

"A reformed, inclusive SPR could reverse this decline by encouraging investment, compliance, and sectoral growth - boosting long-term revenues for the Treasury.”

Spirits sales now represent 38% of pub alcohol profits according to The Scotch Whisky Association, despite a smaller share of total serves, and over half of consumers report a preference for spirits when drinking out.

Hirt went on to say: “Premium and locally made spirits are key to pub profitability and consumer engagement. Giving small distilleries access to duty relief would allow more collaboration between pubs and local producers, keeping value in local communities.”

With the UK craft spirits sector continuing to grow in global reputation but facing mounting tax pressures, small producers say reform is long overdue.

“The UK's duty framework should reward innovation, not penalise it. Including spirits in Small Producer Relief would deliver fairness, drive exports, and strengthen the entire drinks ecosystem - from distilleries to pubs to the Treasury.”

The full list of co-signees include:

Liam Hirt - Circumstance Distillery

Richard Foster - Exploring Whisky

Shaun Watts - Ludlow Distillery

Paul Abbott - Grasmere Distillery

Jordan Lunn - West Midlands Distillery

Anthony  - Spirit of Birmingham

Stephen Russel - Copper Rivet

Jordan Morris - Abingdon Distillery

Jared Cave - Integrity Malts

Ben Mordue - Elsham Wold Distillery

Laurence Coinsbee - Wharf Distillery

Matt Kay - London Distilling Co

Karl Bond - Forrest Distillery

Phil McLaughlin - Weetwood

Dan Humphries - Summerton Whisky Club

Amy Seton - Grain and Glass

Tim Ethrington-Judge - Avallen

https://circumstancedistillery.com/content.php?content_id=40

One month to go until Alcohol Duty system changes

Today marks one month until the biggest Alcohol Duty reforms in 140 years come into effect.

On 1 August 2023, the Alcohol Duty system will become much simpler, taxing all alcoholic drinks based on their alcohol by volume (ABV).

This replaces the current Alcohol Duty system, which consists of four separate taxes covering beer, cider, spirits, wine and made-wine.

It's aim is to make the system fairer and responsive to new products entering the market as consumer tastes evolve and change.

Small producers, including pubs and restaurants, will benefit from reduced rates on qualifying products, like draught beer and cider.

The new system reflects the government’s commitment to tax simplification, helping to foster the right conditions for businesses to prosper and the economy to grow, which reportedly one of the Prime Minister’s five priorities.

Exchequer Secretary to the Treasury Gareth Davies said: “Because we left the EU we can make certain our alcohol duty system works for us. From next month the whole system will be much simpler, the duty will reflect the strength of the drink.

“We will also protect pubs and brewers with our Brexit Pubs Guarantee keeping Draught Duty down, and a new Small Producer Relief."

Jonathan Athow, Director General of Customer Strategy & Tax Design, HMRC, said: “After listening to feedback from industry, economists, public health groups and many business owners, the new Alcohol Duty system will be based on the founding principle of taxing alcoholic products by strength, ensuring consistency across the board for the first time ever.

“The new system will support the government’s public health objectives and provide extra support to small producers, pubs and the hospitality sector.”

The new system will create six standardised alcohol duty bands across all types of alcoholic products and apply to all individuals and businesses involved in the manufacture, distribution, holding and sale of alcoholic products across the UK.

These reforms will replace and extend the existing Small Brewers Relief with Small Producer Relief. This means all small businesses that produce any alcoholic products with an ABV of less than 8.5% will be eligible for reduced rates on qualifying products, if they produce less than 4,500 hectolitres per year.

To support the hospitality industry, and recognising the vital role played by pubs in our communities, there will also be a reduced rate for draught products, which is known as Draught Relief. This will reduce Alcohol Duty on qualifying beer and cider by 9.2%, and by 23% on qualifying wine-based, spirits-based and other fermented products, sold in on-trade premises such as pubs and restaurants.

The reforms will mean every pint in every pub across the UK will pay less duty than their supermarket equivalent, in line with the government’s Brexit Pubs Guarantee.

To support wine producers and importers in moving to the new method of calculating duty on their products, temporary arrangements will be in place for 18 months from 1 August 2023 until 1 February 2025.

To support innovation and responsible drinking, low strength drinks below 3.5% ABV will be charged at a new lower rate of duty. In making these changes, the government aims to encourage product innovation and ensure the Alcohol Duty system works for business and consumers.

More information on the new Alcohol Duty rates and reliefs can be found on GOV.UK.

Those involved in the production of smaller quantities of alcoholic products, can check the reduced rates of duty that apply to them by using the Small Producer Relief calculator. HMRC is also running a series of live webinars throughout July 2023 and in the months ahead to further support the alcohol industry through these changes.