British consumers have been warned that the price of some of their favourite red wines could increase by more than 40p next year after the government ignored pleas from within the wine industry to abandon complex post-Brexit tax changes.
John Colley, the chief executive of high street retailer Majestic Wine, said the new alcohol duty system that is due to come into effect in February 2025, would increase the number of tax bands for wine from one to 30, and cost businesses “huge sums of money” to administer.
Steve Finlan, the chief executive of the Wine Society, added that the plan is “ludicrous, expensive and probably unworkable”.
The post-Brexit overhaul of alcohol taxation, which would tax drinks on alcohol by volume (ABV) rather than the type of alcohol, was brought in officially last August after being put forward by the Treasury when Rishi Sunak was chancellor. Under the plan the amount of duty paid ratchets up by 2p for every 0.1% increase in strength.
However, the government acknowledged the new administrative burden for businesses and put in place an 18-month “easement” period. During this period all wines between 11.5% and 14.5% would have to pay £2.67 in tax, the 12.5% ABV duty rate.
The wine sector has been lobbying the government to keep the easement rules in place permanently but earlier this month Gareth Davies, the exchequer secretary to the Treasury, confirmed it would press ahead.
This has prompted businesses such as Majestic Wine, which has more than 200 stores around the country, to speak out, warning it will spell higher prices and put a huge administrative burden on sellers.
“The minister demonstrated in this debate a worrying lack of understanding of our sector, suggesting that the alcohol duty system has become simpler and easier since Brexit,” said Colley. “That is simply not the case – in fact, the system in place pre-Brexit was much simpler to administer.”
Analysis by the Wine and Spirits Trade Association (WSTA) has found when easement ends about 43% of wines will see price increases. The tax on a bottle of wine with an ABV of 14.5%, the highest percentage to come under the rules, will increase by the maximum 42p to £3.09.
Red wines will be the worst affected due to their higher alcohol content, with 75% of red wines expected to see price rises from next February.
The changes will lead to huge administrative costs for businesses which will have to work out the tax due on each wine. Even small stores can sell hundreds of different wines.
Hal Wilson, the co-founder of Cambridge Wine Merchants, said the new rules would require checking and recording the alcohol content of nearly 90% of bottles it bought. This would lead to a seven-fold increase in workload for staff, something that would be “unviable” for the business, he added.
Finlan said that for the Wine Society, which stores tens of thousands of wines, the changes were “close to unworkable”, and would result in higher prices for consumers.
after newsletter promotion
Last week, a Westminster Hall debate brought forward by former health minister Will Quince involved some Brexit-backing MPs support the industry’s calls for a continuation of the status quo, including Priti Patel and Julian Sturdy.
The new tax changes come after wine sellers were hit with a 20% rise in excise duty on 85% of wines last year, the highest rise in 50 years.
Miles Beale, chief executive of the WSTA, said: “Cutting red tape should surely be a priority for the Tories, who often cite it as a ‘Brexit benefit’.
“We are not asking for further reform, we are merely calling on the government to retain the existing, simplified procedure for taxing wine to avoid what is going to be a very costly mistake.”
An HM Treasury spokesperson said: “We engaged closely with the wine industry throughout the consultation for historical reforms to alcohol duty. The industry has benefitted from freezes at six out of the last 12 fiscal events.”
The changes will also result in the sparkling wine premium being removed, so that sellers pay the same amount of duty on these as still wines of the same ABV. The duty on many lower-strength drinks, such as beer, has been cut.
