The U.K. Government announced on Tuesday to make changes to the Small Brewers Beer Duty Relief (SBR). “ In order to support growth, boost productivity and remove ‘cliff-edges’, the scheme’s taper will be smoothed,” the Government’s statement reads. “It will take effect more gradually over a wider range of production, starting at 2,100 hectolitres [instead of formerly at 5,000 hectolitres] per year, and be converted to a cash basis. A technical consultation will be brought forward in the Autumn. The Government will also consult on the potential for a grace period for small breweries that decide to merge.”
SBR was introduced in 2002 to help smaller brewers who have significant dis-economies of scale and therefore much higher production costs than larger brewers. Up to 5000hl annual production attracts duty relief at 50% and this rapidly tapers down to 25% relief at 10000hl. This created a “cliff edge” between 5000hl and 10000hl which has been recognized for years as an unintended fault in the SBR system and which clearly acts as a disincentive to brewers who wish to grow their business.
James Calder, Chief Executive of the Society of Independent Brewers (SIBA) in the UK said that his organization was generally “welcom[ing] the Government’s fundamental review of business rates” and that “the forthcoming alcohol review presents a long awaited opportunity to fully assess and address the inconsistencies within the duty system”. However, the association is also “hugely disappointed” because “there are around 150 breweries in the UK who, pre-covid, sat between 2,100hl and 5,000hl of production volume who will under the proposals announced today see the beer duty they pay go up.”
At the beginning of the pandemic, SIBA has been calling on the Treasury to suspend beer duty payments due on 25 April and for the next quarter to assist breweries with their cash flow (inside.beer, 23.4.2020). Despite this, brewers have not been eligible for the business rates holiday or the GBP 25,000 (USD 32,000) cash grants offered to the retail sector, including to many pubs.
Financial Secretary to the Treasury, Jesse Norman, announced the necessity of an alcohol duty review, as well as a review of the business rates system following UK exit from the European Union earlier this year. “The government recognizes the need to reform the current duty system to support the alcoholic drinks and pubs sector in the longer term, and will publish a call for evidence before end September 2020,” he said.
The government has confirmed to publish details on the new scheme as soon as possible. “Without this detail we are unable to evaluate accurately who will win and who will lose, and by how much,” Calder says.