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Excise duty refund on diesel for road transport: publication of new refund rates


David Richardson Regulatory and Commercial Affairs Director, of the UK Wine and Spirits Trade Association (WSTA) has kindly commented on important developments affecting businesses in this sector. This article covers – the Alcohol Duty Review at Spring budget 2023; UK border processes (including Northern Ireland) and the path to simplification, and finally Plastic Packaging Tax/ sustainability.


Alcohol Duty Review


The key feature is to introduce taxation of all alcoholic beverages by degree. This affects wine and non-beer fermented drinks the most. It adds substantial inflationary rate rises (10.1%), adding around 44p of excise duty to a typical bottle of wine. This will have a massive and continuing impact across the sector


There are some good points:


  • The higher rate of excise duty on sparkling wines has been abolished from 01 August

  • There is a temporary easement for wine between 11.5% and 14.5% abv for 18 months, during which all those products will be taxed as if they are 12.5% - this covers about 70% of wines on the market

  • Products below 8.5% abv pay a lower rate, so pre-mixed cocktails will benefit

  • Small producers’ relief and draught relief will have price benefits, although that’s mostly for beers and ciders


The government is also taking the opportunity to introduce some simplifications in the new laws (for example the rather odd concept of a “made wine” is replaced with a broader definition of “other fermented products”). The Public Notices will also need to be rewritten. 


There are lots of bad points:


  • If the policy objective is to tax all alcohol equally (“alcohol is alcohol”) then beers and ciders have an unfair advantage

  • The reliefs don’t apply to most wines or spirits

  • Fortified wines take a massive hit of over £1 more excise duty a bottle

  • Wine drinkers and spirits drinkers are disproportionality punished by this

  • Margins, contracts and price points will need to be looked at by each business, on a product-by-product basis

  • Significant software changes will be needed to make sure that duty is calculated correctly

  • Declarants will have to be even more alert to ensure that the strength shown on the label (on which duty is calculated) is accurate

  • The new guidance and forms are only just starting to emerge, which means that industry has less time to adapt

  • The evidence suggests that the tax-take will go down

  • The incentives and value proposition for smugglers and fraudsters have got better


Border 2025 and Northern Ireland


The Brexit transition period is behind us and traders have migrated to the Customs Declaration Service for imports. Migration of exports takes place later this year. The system has not been perfect, with several outages in the early part of the year. I think the problem is that at (roughly) a million declarations a day, even a 99% success rate means that 10,000 declarations a day might expect problems.  This is clearly problematic if it is your consignment that is part of that 10,000.


The Government’s ambition is for this country to have the best electronic border in the world by 2025. A customs programme was announced as part of the budget, aiming to simplify the raft of authorisation that are needed.


Similarly the excise world is looking at  how the holding and movements regime can be improved.


We’re talking about a single electronic gateway - The Single Trade Window and a regime where excise traders are trusted to be compliant – the Ecosystem of Trust.  This would enable data to be entered once and then shared more easily between different regulatory regimes.


Other regimes, such as guarantees and duty stamps, are also in line for review and possible simplification.


There is a genuine desire on the part of officials to co-design solutions, not simply impose bright ideas. That’s refreshing and welcome – it shows the value of a trade body in coordinating and reflecting industry views.


There are a few downsides to look out for, though.


Firstly, to the extent that all this entails software and system changes, we want to see traders being given long implementation times and maximum choice about which software to use. We also want the software to be sufficiently flexible to allow traders to have a choice over the elements or modules that they use.


Secondly, we can see there is going to be an audit burden, in the sense that more liberal regimes and greater regulatory flexibility will require traders to be even more scrupulous about generating and retaining records. 


Thirdly, if data is being shared more widely via a government platform, data security and commercial confidentiality become issues.  I’ve no doubt that traders will want practical security measures to be in place.


The situation with moving goods to Northern Ireland is also developing in the right direction. The Windsor Framework ought to make life easier for trading with Northern Ireland. New guidance is being issued at speed, so businesses are working hard to get to grips with this, as the first phase comes into effect on 01 October 2023. The new processes will take 12-18 months to work through and we will be seeking clarity on how these apply to beverage alcohol. 


Sustainability and environmental taxation


How packaging and waste is taxed and paid for is also controversial.


Although the price of Packaging Recovery Notes has increased beyond any bound of feasibility, it remains very hard to convince government that the market is not working as a fair and proper market. 


Plastic Packaging Tax, Extended Producer Responsibility and Deposit and Return Schemes in England Wales all promise to add significant further layers of complexity and cost to doing business.


We don’t take issue with the mission to reduce the impact of our sector on the environment. We see lots of good examples of innovation in packaging and transport, so we’ll continue to advocate for close co-operation between industry and government.


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