UK alcohol & beer duty updates for August 2023

The way alcohol is taxed in the UK is being updated on the 1st of August, 2023. As well as rate changes, the new Alcohol Duty System includes a few major structural changes. These include replacing Small Brewers Relief with a unified Small Producer Relief and a new Draught relief system that provides reduced rates for qualifying products.

This guide outlines managing Small Producer Relief and Draught Relief in Breww. Breww is a brewery management software system which will calculate your beer duty for you (and much more). If you’re not already using Breww and you’re concerned about the changes, please see our website at breww.com and get in touch to see if we can help you.

Small Producer Relief

Breww will automatically calculate whether you qualify for Small Producer Relief and your reduced rates based on the production volumes you enter in Beer dutyAnnual estimate & settings. Unlike the old Small Brewers Relief, the new regime doesn’t use the total hL of beer produced in the previous calendar year. Instead, a production year is now the 12 months from the 1st of February until the 31st of January the following year, and it is based on the total hL of alcohol produced in the previous production year, only including products produced that are over 1.2% ABV.

It is possible to enter these figures into Breww now, and we recommend entering them before the 1st of August 2023, as they will be required before you can dispatch any orders from then.

You can easily get this figure from Breww’s Total volume packaged report in ReportingPre-built Production & inventory report (or you can also navigate to it from Beer duty → under the Current annual production totals section → Total packaged report).

This report allows you to filter your final packaged volumes by the key information affecting your alcohol production total for the purposes of Small Producers Relief. These include allowing you to include only products over a certain ABV (e.g. over 1.2% ABV), only include batches with a certain duty payment option on them (e.g. were they produced under your licence or not), and an option to remove lost or spoiled volumes that were destroyed before leaving the excise duty point (which Section 57(3)(a) of the draft legislation states can be removed from your production total).

Draught relief

The new Alcohol Duty System includes reduced rates for qualifying draught products.

A product qualifies if it is of an alcoholic strength of less than 8.5% and is dispatched in a container with a capacity of at least 20 litres. The container must be designed to connect to a pressurised gas or pump delivery system. HMRC have confirmed that they “deem gravity systems as qualifying” as well.

In Breww, any container type that is a type of either Cask or Keg with a gross capacity greater than or equal to 20 litres will be considered a large draught container for the purposes of Draught relief.

However, any product sold with draught duty relief applied cannot be “repackaged”, which, in other words, prevents those products from being sold for takeaway. This means that if any of your customers want to sell takeaway beer from qualifying draught products that they’ve purchased from you, you need to elect to pay the full rates to allow them to do so.

How do I configure when draught relief applies, and how can I elect to pay the full rates?

In Breww, you can configure whether or not you’d like draught relief to be applied automatically.

As well as setting a default in Beer dutyAnnual estimate & settings → Toggle Apply draught relief by default, if applicable

you can also set a default per Customer type in CustomersSettings & toolsCustomer typesEdit → Select an option under Duty options

Screenshot 2023-06-28 at 16.27.11

and directly on an Invoice item by clicking the Edit icon → select an option Duty options.

This flexibility allows you to have draught duty relief automatically applied to any qualifying products sold to customer types that don’t sell takeaway beer, such as a traditional pub, but stop Breww from applying it for customer types who need the ability to sell takeaway beer, such as a bottle shop.

How do I know if Breww will apply draught relief on an invoice item?

If your settings are set up so that Breww will not apply draught relief to an invoice item, this will be made clear with an alert on the invoice item.

If Breww will apply draught relief, you won’t see this alert.

Draught duty relief on PDF invoices

If you haven’t applied draught relief on a product and have elected to pay the full rate so that your customer can sell takeaway beer (or any other reason), then HMRC require this to be made clear on any documentation you provide your customers.

We have updated both Breww’s default invoice and delivery note template to include a message if draught relief has not been applied so that your customers have the required documentation.

If you are not using Breww’s default template, you will need to update your own template to include the same or similar message. To help, we’ve provided the snippet that we’ve used in Breww’s template to display the message when required:

<td class="row-item">
    {{ line.product_name }}
    {% if line.draught_duty_relief_applied == false %}
        <br><small>Draught duty relief has not been applied.</small>
    {% endif %}
</td>

This change can also be seen here in our template version comparison tool (v19 vs v20).


Webinar recording

We ran a webinar recently (28th July 2023), organised in conjunction with SIBA (open to their members only), to demonstrate these changes and answer your questions. A recording of this webinar can be watched below. If you were not able to attend the webinar and have any questions, this video is well worth watching :smile:


20th July 2023 Update - Small Brewers Relief transition period

This has been cancelled, so we've hidden this section, but you can see it by clicking on this line

On the 18th of July 2023, HMRC updated Excise Notice 226 to include seemingly new information about a transition period from Small Brewers Relief to Small Producer Relief. The exact wording in Section 8 is as follows:

SBR eligible beer produced before the 1st of August 2023 will be charged at that SBR rate even if released on or after the 1st of August 2023.

Beer production in the UK - GOV.UK

We’re working on implementing this into Breww now, and Barry Watts at SIBA is kindly helping us clarify this scheme with HMRC beyond the single sentence they have provided above.

However, our understanding is that this means beer eligible for Small Brewers Relief that was produced before the 1st of August 2023 will be charged at the rate it would have been charged at if dispatched before the 1st of August 2023.

This means any Small Brewers Relief beer will not be eligible for Draught relief, as it is now being charged using the old rates. To ensure that your customers can take advantage of the fact your existing SBR eligible beer can’t have draught relief applied and they can therefore sell the beer for takeaway, Breww will warn you if you try and dispatch an order where you’ve specified that draught relief should apply, but the order has SBR eligible beer assigned. This allows you to then go into the order and remove the requirement to apply draught relief, so that your customer receives an invoice with the “Draught duty relief has not been applied” message displayed, allowing them to sell the beer for takeaway. Or, alternatively, you could assign non-SBR eligible stock and save the old stock for a customer who requires the full rates to be paid.

To determine when beer was produced for the purposes of this transition scheme, Breww will use the Date & Time of a packaging action. Or for any delayed racking releases with a reason of Conditioning or Maturing, Breww will use the date it was released.


28th July 2023 Update - Small Brewers Relief transition period CANCELLED

They've done another U-turn! Read about this by clicking on this line

We’ve had further news on this! HMRC have made a U-turn on the Small Brewers Relief to Small Producer Relief transition scheme - it will no longer be going ahead.

HMRC emailed us with the following:

Just to update you, the minister has now agreed to a policy change, under which all SPR-eligible goods which pass a duty point on or after 1 August will pay the SPR rates, rather than only those which are produced or imported into the UK on or after 1 August.
We understand that this is how industry has been managing the transition from one SBR year to another for many years, but this is not currently what the legislation says, so we will be amending that today or tomorrow.

For more, please see the post below:

UK alcohol & beer duty updates for August 2023 - #31 by max


Frequently asked questions (FAQs)

Why am I getting an error saying “This order requires 1 x Floral Haze IPA - 30L Keg to have draught duty relief applied, but is missing 1 that is eligible for draught duty relief”?

With the new duty regime, Breww now has a couple of extra checks to ensure that when you have asked Breww to apply draught relief to a product on an order, that the actual stock assigned to that order qualifies for draught relief. This discrepancy, where you have a product that in theory qualifies for draught relief, but where the physical stock doesn’t, can occur for a couple of reasons.

The first is where you have assigned stock that was duty paid under the previous duty regime, as this stock doesn’t qualify for draught relief, even though the product itself would normally. In this case, you will receive an error message warning that “K0001 was paid under the previous duty regime. To deliver it on this order, please mark the corresponding invoice item as ‘Don’t apply draught relief’”.

The second reason is when the ABV of the beer is different from the ABV of the batch. If your beer’s Advertised ABV is 8.4% and therefore qualifies for draught relief, you’ll be able to set any invoice item with that beer to apply draught relief. However, if you’ve brewed a batch of that beer stronger than that, for example, you’ve manually set the batch’s ABV to 8.6%, then the stock of this batch doesn’t qualify for draught relief, and so when it is assigned to an order requiring draught relief to be applied, you’ll receive the warning: “Floral Haze qualifies for draught relief, but Batch 100 of Floral Haze doesn’t. To deliver it on this order, please mark the corresponding invoice item as 'Don’t apply draught relief”.

To resolve either message, you will need to go to the relevant invoice item, click Edit, and mark it as Do not apply draught relief. In the case of stock that was duty paid under the previous duty regime, the reason Breww requires this is only so that your customers can benefit from the fact the stock they received was paid under the old rates, and they can therefore sell it for takeaway. If you didn’t update the invoice item, the “Draught duty not applied” message would not appear on the customer’s invoice, and they would, therefore, not be legally allowed to sell the stock for takeaway, even though the actual stock doesn’t have draught relief applied.

However, we are aware this is extra admin that you may not want, so if you don’t mind sending your customer stock paid on the old rates without informing that they are eligible to sell it for takeaway, you can bypass this warning by going to SettingsBeer duty settings → Enable Treat stock duty-paid before August 2023 as Draught relief eligible. When enabled, Breww will not prevent dispatching orders that require Draught duty relief to be applied but have stock duty paid before August 2023 assigned. This will only bypass Breww’s check and won’t actually apply Draught relief, as they don’t qualify.

How do I calculate the volume of alcohol in a beer?

If you have a 5% ABV beer, then 5% of the volume of the beer is alcohol. If you produced 100L of 5% beer, then you produced 5L of alcohol.

Express the ABV percentage as a decimal (i.e. 5% = 0.05), then multiply this by the volume of beer produced to get the volume of alcohol.

Why are HMRC asking for 1 Feb to 31 Jan rather than a calendar year?

That’s a great question, but it’s one for HMRC - they came up with this idea, not us :joy: Your guess is as good as ours! Maybe they wanted you to be able to celebrate New Year properly?

Where can I find the excise duty notice from HMRC

You can see this here.

Does HMRC have an online duty calculator?

Yes, they do. However, it’s been buggy as we’ve reported to them a number of mistakes in their calculations. They said they would fix it, but we’ve not been told either way whether the fix is live yet. Assuming you’re looking for the right answers, we’d suggest using Breww’s duty calculations, but if you want to use HMRC’s calculator, you can find it here.

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If you have a connected brewery, i.e. part of a group owned by 1 controlling company, you will need to combine the production volumes in your annual estimate. Presumably this figure will override Breww’s calculation of yearly production.

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Hi Rob! Yes, that’s right - Breww will only use the production figures you provide, and won’t use any production figure that it has calculated itself.

So although you can use Breww to calculate your production volumes based on what’s been recorded through your account, if there is additional production outside of this (e.g. you’re a connected brewery) that affects your eligibility for Small Producer Relief, you will need to take this into account when calculating your figures and provide those to Breww.

I reckon most brewers will want to add a surcharge to no-draught-relief containers. (Otherwise, customers would always request them just in case they decide to repackage.) To avoid creating separate products or calculating a surcharge manually, would be nice if Breww could automatically apply some user-defined formula?

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This is something we were wondering about as well, so very interested in getting everyone’s thoughts! Price books offer a pretty flexible option within Breww currently that you could use, but we’re keen to hear what else everyone might be interested in.

For example, you could create a “Non-draught relief” price book with a rule that applied a surcharge to the pricing for qualifying products. If you enable rule-stacking, then this will be applied in addition to any discounts/surcharges you might already have on the “Parent price book”.

So you could create the price book with rule-stacking enabled:

and then create a rule on that price book applying a surcharge (negative discount) to qualifying container types and beers:

You could then apply those price books to the customer types who’ve elected to pay the full rates, and the surcharge would be applied automatically. Would this allow you the flexibility you’re looking for, or would you want to implement it in another way?

Out of interest why wont BREWW use its calculated HCL of pure alcohol in the duty rate calculation? Or am i missing something?

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Not sure if this is slightly off topic but will probably effect most people here.

From what I can tell, on the 1st of August 2023 anything passing the duty point from then on is under the new rules/rates. Even products manufactured prior to this date.

Currently we operate like most breweries and hold in duty suspension until dispatch. However, the duty on 8.5%+ beer will be up significantly for smaller producers as there is no relief anymore. Is there an easy way that I can move all of my already produced 8.5%+ stuff past the duty point before that date and leave everything else as normal?

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I have a similar query. We’re due to go live 1/8/23 but there is nowhere for me to enter the hL of pure alcohol to generate the correct rates.

You can enter your alcohol production totals now by going to Beer dutyAnnual estimate & settings, and then entering them under the Alcohol totals for new duty regime section. There’s a screenshot above below the following quote:

Breww needs two figures to calculate your Small Producer Relief, the actual production total from last year, and your estimated production year for the coming year. This is because if you estimate that you’ll produce over 4,500 hL of alcohol in the current year, you don’t qualify for Small Producer Relief. Since both figures are required, Breww simply asks you to confirm that you’re happy to use the figure it calculated for last year’s production total before continuing.

There are also reasons Breww’s calculated total might not be correct when Breww doesn’t have the full picture of your brewery. For example, the situation mentioned above involving connected breweries or any other factor that might affect the figure, but that Breww wouldn’t be aware of.

Another example might be that you know you’ve entered production totals into Breww incorrectly and have duplicated some production figures by mistake and need to account for it before confirming your figure. Given these factors, we thought it would be sensible for Breww just to ask for confirmation that your figure is correct and in line with what you’re expecting before continuing.

However, if your situation is very straightforward and you’ve been entering the correct data into Breww, there isn’t usually a reason to change Breww’s suggested production total to use :+1:

Apologies, I had misread the nuance in the change from beer production to alcohol production so the latter is the pure alcohol figure. Thanks.

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Hi. Is there a way of using Breww to produce a list of the change of duty for all our products? So we can then use that data to update the price books and inform customers etc, rather than having to calculate the changes for each product manually? Apologies if this has been covered elsewhere, I couldn’t see it.

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Breww will calculate the duty on any beer moving past the duty point in the same way you’ve described here. So anything that leaves duty suspense before the 1st of August will use the current duty regime and anything that leaves after the 1st of August will use the new regime, regardless of when that beer was produced. If you are moving stock in bulk between bonded and non-bonded locations, then a stock take is currently the most efficient way to record this transfer within Breww.

However, I should mention that if these products haven’t passed the duty point and are actually still duty-suspended, I’m afraid we can’t advise on whether you’re allowed to simply declare that you’d like to pay the duty on your existing high-strength beer stock whilst it is still in duty-suspense. You would need to check whether that’s possible with HMRC.

Hi Max,

Ah ok, I will take a look at the stock take option.

You can move beer out of duty suspension early as long as it is recorded. Section 7.5 of Ex Notice 226 covers that for anyone looking.

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I was under the Impression that the calculation for the new duty rate was based on your previous 12 months production. If you are saying that they also need your estimate for the next 12 months and this is over 4,500hl of pure alcohol, which figure are they then using to calculate your duty rate?

Good question!

Yes, that’s correct.

To qualify for Small Producer Relief, you must meet the “production limit condition”, which specifies that neither “the alcohol production amount for the previous year” nor the “the estimated alcohol production amount for the current year” exceeds the “small production limit” (which is 4,500 hL of alcohol). I’ve copied over part of the relevant part of Section 56 of the draft bill below:

If that’s been satisfied (and you satisfy the other requirements for Small Producer Relief), it’s then the actual alcohol production amount for the previous year that is used for calculating your discount in the current year, not the estimated alcohol production amount. So it’s just an extra condition that they place on qualifying for Small Producer Relief.

Hi Joe - good news :tada:

We’ve introduced a new Duty rate change difference by product report in Beer dutyView, which shows you what you currently pay in duty at the moment and what you will pay under the new regime. Hopefully, that should help plan any required price changes, as well as just being able to see the effect of the changes for your own products!

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This is super useful - thanks Max!

Would be brilliant to output this data as an Excel/.csv so we can run some comparisons?

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For those looking to pay duty this month on higher abv products before the new system kicks in, this is how I did it.

Go to Settings > Sites & Locations > then click view on your main bonded warehouse site where you currently store your bonded stock. Within this site you can then create a new ‘Location’ with ‘non bonded status’ (I called mine ‘Duty Paid Stock’). From here you can now change the location of all of your products you want to pay duty on this month by going to the product page e.g. Pale Ale - 30l Keg > click the ‘Locations’ tab near the bottom of the page > then click ‘edit location’ and change the location to your non bonded location. This will then trigger the product passing the duty point and include it in this months return.

Doing it this way shouldn’t mess with any integrations you have set up for your stock levels either i.e. Sellar, Shopify etc as you’re not moving stock to different sites, merely different “locations” within your main site.

@adam-henderson

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Hi Russ - sure, we should be able to do that! We’ll look to get that sorted for you shortly and let you know once you can.