While we await a drop in draught beer duty on 1st August, promised by the chancellor earlier this year, the full duty picture is more complex, says Steven Gibbs, co-founder of Durham Brewery.
“Madam Deputy Speaker, British ale may be warm, but the duty on a pint is frozen. But today, I will do something that was not possible when we were in the EU and significantly increase the generosity of draught relief, so that from 1st August the duty on draught products in pubs will be up to 11p lower than the duty in supermarkets, a differential we will maintain as part of a new Brexit pubs guarantee.”
Chancellor Jeremy Hunt in his spring Budget speech earlier this year.
As with all political statements, the truth is selective and refers to draught beer up to 8.4% ABV. The definition of draught is beer that is delivered direct to the glass through a dispense system including handpull, keg, and even bag-in-box, as long as it is sold from the brewery in at least 20 litre containers. Anything else sold in small closed containers, such as bottles, cans, growlers, or repackaged in a craft beer shop, will pay a higher non-draught rate.
Craft beer has a special place in the modern beer scene. Usually produced by small breweries, innovative, using lots of flavourful ingredients, often strong and expensive. At present, small producers are given relief of up to 50% of full duty on beers in a band up to 7.5%. Above that, an extra charge is made for higher-strength beers, but the relief still applies to the lower band content. The bands are changing to integrate all alcoholic products in an effort to make a more logical duty structure. Small producers will still get relief, but only up to 8.4% ABV.
Despite previously getting some relief on strong beer above 8.4% ABV, there will now be none. As an example, the Durham Brewery has calculated that the duty on its flagship imperial stout, Temptation, will rise by 87.5%. The brewery stores large quantities for maturation in wooden casks for the Christmas market, and there is no way these can be sold prior to the duty rise.
There should be a smoother transition to the higher duty for small breweries through an extension of the relief band or affected beers could be unsellable.
