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Sparkling wine premium could be scrapped in alcohol duty overhaul

Published:  19 October, 2021

Reports from the national press suggest that the premium on sparkling wine duty could be scrapped by chancellor Rishi Sunak in the upcoming Autumn Budget in a move which could bring sparkling wine duty in line with still.

According to The Times, Sunak is expected to make the changes as part of an overhaul of the UK’s antiquated tax system, which currently has 15 bands of taxation, including six for wine.

Still wine between 5.5% to 15% abv currently incurs £2.98 of tax per litre, while a litre bottle of sparkling wine between 8.5% and 15% is hit with duty of £3.81.

If still and sparkling wine are given duty parity, this could wipe 83p off a bottle of bubbles.

“This is welcome news to the wine industry of Britain,” Simon Thorpe MW, CEO of WineGB said. “WineGB has long lobbied the Treasury as part of our engagement on the government’s Excise Duty Review and these changes, if they are announced, would represent a significant benefit to the British wine production industry. We look forward eagerly to the Chancellor’s Autumn Budget Statement on 27 October.”

The tax system for alcohol in the UK has long been regarded as over-complicated and ripe for reform.

In 2019, re-assessing the system formed part of the Tory manifesto. This commitment was then followed up by Kemi Badeoch, Exchequer Secretary to the Treasury, in September 2020, when a call for evidence said that the “arguably outdated” system of alcohol taxation is in need of review as the “traditional boundaries between products are breaking down”.

“A brewer might operate a side business in making cider or spirits. Larger companies may hold a mixed portfolio of many different products. These days a consumer might wish to have a cocktail spritz in the pub beer garden as much as a cask ale, or a gin and tonic with their evening meal instead of a glass of wine,” her statement said.

The plans are also likely to benefit Britain’s wine producers. Re-structuring the tax for sparkling would give English and Welsh winemakers a tax advantage over imported competitors such as Prosecco, and would benefit British producers now that we are operating outside of the EU.

However, it has also been warned that the review could push up prices of other products.

The government is expected to address the problem of abv, whereby a rosé and fortified wine pay exactly same amount of tax, even though the latter has 50% more alcohol in it. These changes could result in a “levelling up” of some duties, for example, expensive red wines.

Justin Langham, owner of Langham Wine Estate, added his view. He told Harpers that "different alcoholic drinks should surely have duty levelled on them on a similar basis between one category of drinks and another. As an English Sparkling Wine producer it seemed anomalous to me that a brewery down the road from me should have duty levelled in a totally different way to us. 

"Microbreweries were granted by Gordon Brown, when he was chancellor in the early 2000s, a very much reduced rate of duty, although the definition of microbreweries encompasses quite large brewers. Therefore, when I had the opportunity to directly address Rishi Sunak earlier this year during lockdown, at an online drinks party, I put this question to him. He had researched the answer previously and slightly disappointingly gave me the stock Treasury answer that due to World Trade Organisation rules it wasn't possible, but this didn't answer why it was possible for microbreweries."

The government is also up against a wall when it comes to recouping the money it has spent during the pandemic.

The treasury has spent almost £372 billion fighting Covid, a figure which includes the coronavirus job retention scheme, which came to an end in September.

Many have issued a call against the usual duty increases, including the Centre for Policy Studies, a think tank who said that – alongside fuel – raising alcohol duties would aggravate the “cost of living crisis”.

Raising excise duties in line with RPI would add 2.4% to the typical price of a tank of petrol, 2.2% to a bottle of wine, 3% to a case of beer, 3.1% to a bottle of whisky and 3.4% to a bottle of gin.

British excise duties are already high by European standards. Wine and beer duties are the third-highest in Europe, spirits duties fourth-highest, and fuel duties seventh-highest.