In the 2016 Budget the Government announced the introduction of the Loan Charge - a major initiative to tackle the mass marketing of tax avoidance ‘loan schemes’. Since the legislation establishing the Loan Charge was introduced, there have been many concerns as to its design and the financial difficulties facing taxpayers who used these schemes to either settle with HMRC or pay the Charge. In the 2020 Budget the Government confirmed it would implement a series of reforms to the Loan Charge, following the recommendations of an independent review, chaired by Sir Amyas Morse.
Alcohol taxes and the pub sector
Excise duties are levied on three major categories of goods – alcoholic drinks, tobacco and road fuels. Generally excise duties are charged a flat rate: a certain number of pence per pint, per litre, per packet – though tobacco is subject to an additional ad valorem tax. Duty rates across these categories, and the share of the selling price taken in duty, and tax, as of April 2016, are illustrated below:
Duties on alcoholic drinks are forecast to raise £11.0 billion in 2016/17 – split between beer & cider, £3.6bn; wine duties, £4.1bn, and spirits duties, £3.3bn. In this year fuel duties and tobacco duties are forecast to raise £27.9 billion and £8.7 billion respectively.
As flat-rate duties are expressed in cash terms, they must be revalorised (ie, increased in line with inflation) each year in order to maintain their real value. In its 2008 Budget the Labour Government increased the rates of duty on alcoholic drinks by 6% in real terms, and proposed that rates would rise each year by 2% above the rate of inflation for another four years. A commitment to raise duty rates by a specified percentage each year is called a duty ‘escalator’, and in his March 2010 Budget the then Chancellor Alistair Darling proposed that the escalator would remain in place at least until 2014/15.
In its first Budget in June 2010, the Coalition Government launched a review of the taxing and pricing of alcohol “to ensure it tackles binge drinking without unfairly penalising responsible drinkers, pubs and important local industries.” Subsequently two changes were made to the structure of beer duty: an additional tax on high strength beers and a reduced rate of duty on low strength beers. The review did not offer a view on the level of duty rates, though it noted there was little consensus on the right level of tax as “the debate about the absolute level of alcohol duty rates is often polarised.” That said, many commentators attributed the difficulties being faced in the pub trade at this time to the impact of the duty escalator on the price of beer. In his 2013 Budget the then Chancellor, George Osborne, announced that the rate of beer duty would be cut by 1p, and the escalator removed from this drink category, at a cost of £170m in 2013/14, rising to £215m in 2014/15.
In Budgets over the next three years the rate of beer duty was cut by 1p on two occasions, and then frozen.
In his 2014 Budget Mr Osborne announced the first of these rate cuts, as well as confirming that the duty escalator would be scrapped on all alcoholic drinks, and that for the coming year, duty rates on spirits and ordinary cider for the coming year would be frozen. It was estimated that cutting beer duty and freezing cider duty would cost £110m in 2014/15, while freezing spirits duty and abolishing the escalator on wine duty would cost £175m in the same year. Mr Osborne announced a second 1p rate cut in his 2015 Budget, just prior to the 2015 General Election – as well as cuts in duty on both cider & spirits duties, while wine duties were frozen. The annual cost of these changes was forecast to be £80-85m a year (beer and cider), and £95-105m a year (spirits and wine duties). Finally in his 2016 Budget Mr Osborne announced that duty rates on beer, cider and spirits would be frozen though duty rates on other drink categories would be increased in line with inflation, at an overall cost of £85m a year.
However, in his Budget statement to the House on 8 March 2017, the Chancellor, Philip Hammond, announced that excise duty rates for both alcohol and tobacco would be increased in line with inflation, with effect from 13 March. The Exchequer impact of this measure is neutral. Provision to set duty rates was made by the Finance Act 2017, passed before the General Election. In addition the Government has launched a consultation on options for reform to ensure that “duty rates better correspond to alcoholic strength”; specifically, a new duty rate band to target cheap, high strength ‘white’ ciders, and a new lower strength still wine band, to encourage the production and consumption of lower strength wines.
For more details see, Alcohol taxation and the pub trade, Commons Library Briefing CBP1373, 26 October 2017, and the Hansard record of the Westminster Hall debate on 31 October.
 For example, Society of Independent Brewers press notice, BPA, SIBA and CAMRA publish ‘The Story of Beer Duty’ setting out damage caused by Beer Duty Escalator, 11 November 2016
 HMRC, Alcohol duty: rate changes – tax information & impact note (TIIN), March 2017
 Specifically s21 of FA2017. See also, “Clause 65: Alcoholic liquor – duty rates”, Bill 156 EN 2016/17
In addition to alcohol taxes, many in the industry have also raised concerns about the impact of business rates. The 2017 Spring Budget announced measures to address disquiet caused by the 2017 revaluation of business rates. These included a new business rate relief scheme for pubs. It was proposed that all pubs with a rateable value of under £100,000 will receive a flat-rate £1,000 discount from their business rate bills to apply in 2017-18 only. Billing authorities will be reimbursed by the Government for revenue foregone. The DCLG’s Business Rates Information Letter 2017/4 provides details on how to define eligible pubs. All of the business rates information letters from DCLG can be found here.
Following reports of delays in granting reliefs, DCLG published a list of authorities that had begun rebilling on the 13 October. This has been regularly updated and the most recent version can be found here. The British Beer and Pub association have welcomed this move from DCLG. There have been calls to extend and increase the pub-specific rates relief beyond this year in the upcoming budget.
Two other issues are often discussed in relation to the concerns of the trade: minimum pricing, and the regulation of pub companies.
First, in March 2012 the Coalition Government had announced proposals to discourage the sale of cheap alcohol by setting a minimum unit price – rather than, as initially planned, banning its sale if priced below the rate of excise duty and VAT. Following a consultation exercise, in July 2013 the Government announced that it would revert to initial plans, and in May 2014 legislation came into force to ban sales if priced this low.
Second, many have argued that another factor that has encouraged the decline in the number of pubs in recent years is the behaviour of pub companies – pubcos – to their tenants. Following several attempts to improve pubco-tenant relations through voluntary arrangements, in 2014 the Coalition Government introduced legislation to establish a code of practice to be enforced by an independent Adjudicator. The Pubs Code came into effect on 21 July 2016.
Further details on both these issues are in two Library briefings: Alcohol – minimum pricing, CBP5021, 24 April 2017 and, Statutory Pubs Code and the Pubs Code Adjudicator, CDP2017-0027, 23 January 2017.
This paper discusses the way that Parliament scrutinises the Government's proposals for taxation, set out in the annual Budget statement. It looks at how this procedure may be affected by the timing of a General Election, and the decision in 2017 to move the Budget from the Spring to the Autumn. It also provides some suggestions for further reading.
This note lists a series of key documents on taxation.