British wine professionals are breathing a sigh of relief following the announcement by the recently-appointed chancellor of the exchequer - finance minister - Kwasi Karteng - that he has temporarily ditched his predecessor's Rishi Sunak's widely-criticised plan to tax alcohol by its alcoholic strength - ABV.
The model involves over 20 different duty levels is not only thought to be unworkably complicated, but would also lead to an increase in 20% in the tax on popular wines like Casillero del Diablo. If implemented as originally planned in February 2023 it would have additionally given the government £300m ($330m) in extra tax.
After "listening to industry concerns" Karteng, in a 'mini-budget' that included a long list of tax cuts intended to boost growth in the economy, has instead decided to freeze all alcohol duty from 1 August 2023 until 1 February 2025. The idea of linking tax to ABV appears not to have been dropped, however, and the new move that sets the tax for "all wine between 11.5% alcohol by volume (ABV) and 14.5%" at 12.5% is described as a "transitional arrangement" - an "easement" that will be in place for 18 months from 1 August 2023 until 1 February 2025.
After that, it look as as though Sunak's scheme will be imposed. As Miles Beale, head of the Wine & Spirits Trade Association said, in a statement, “We welcome the Government’s sensible decision to freeze duty on wine and spirits. However the Government’s response to the consultation on reviewing the way the UK taxes alcohol is a product of the Sunak era and clashes strongly with Chancellor Kwarteng’s desire to unleash the potential of the private sector and to simplify taxation.
"The proposals mean wine between 11.5% and 14.5% will be taxed at the mid-point - but only for 18 months. After that the Treasury are set to tax wine by strength adding a costly administrative burden for UK wine businesses and consumers. Fortified wine will be offered no transition, meaning the outlook is even worse.
"For months the WSTA has been calling for a simpler system for wine taxation which would cut costly red tape. The response published today fails to do so – or to understand the impact that taxing wine by strength will have on the UK wine businesses and consumers. We need a permanent and simple way of taxing wine, the UK’s most popular alcoholic drink. An 18-month transitional period fails to do this and it is not available to all wines. These latest proposals will be bad news for consumers worried about the cost of living; and create complexity, burden and cost for UK businesses. They also fail to take advantage of measures that could support the new Chancellor’s aims for private sector-inspired growth the British economy."
As Beale continued, "The new duty regime will take effect from 1 August 2023.
•Removing the higher rate for sparkling wine. •For an 18-month period between 1 August until 1 February 2025, all wine between 11.5% alcohol by volume (ABV) and 14.5% ABV will be taxed at 12.5%.
•After this period, all wine in that range will be expected to have duty calculated based on the labelled ABV.
•Draught Relief will be available for products below 8.5% ABV, including bulk products and spirits-based products below 8.5% ABV.
The draught rate for spirits will be £18.13/lpa for products between 3.5%-8.4% and £8/lpa for products between 1.2% and 3.4% (as for beers, wines and made-wines).
•Small Producers Relief remains only on products at 8.5% abv and below.
•There will be no cellar door relief.
•Further consultation will take place on a number of technical questions and also the definition of cider for tax purposes.
•The fiscal forecast will continue to be based on the assumption that duty rates will be increased – however rates will be frozen for this year."
This article was updated at 16.00 BST, in reaction to further information and clarification