Finance (No. 2) Act 2023

Main provisions

54 Small producer relief: discounted rates

(1) Alcohol duty is charged at the discounted rate on small producer alcoholic products produced in a particular production year (the “current year”).

(2) The discounted rate, in relation to small producer alcoholic products, is equal to—

(a) the standard rate, less

(b) the duty discount for those products (determined in accordance with section 59 and Schedule 9).

(3) In subsection (2)(a), the “standard rate”, in relation to alcoholic products, means—

(a) the rate shown for products of that kind in Schedule 7, or

(b) if Schedule 8 applies (and no election has been made under section 50(2)) in relation to the products) the rate shown for products of that kind in that Schedule.

(4) For the purposes of this Chapter—

(a) a “production year” is a period of 12 months beginning with 1 February;

(b) the “previous year”, in relation to alcoholic products, is the production year immediately preceding the current year in relation to those products.

55 Small producer alcoholic products

(1) “Small producer alcoholic products” are alcoholic products that—

(a) are of an alcoholic strength of less than 8.5%,

(b) are produced on premises that are small production premises,

(c) are not produced under licence, and

(d) meet such other conditions (if any) as are specified by regulations made by the Commissioners.

(2) Subsection (1) is subject to section 58 (exclusions).

56 Small production premises

(1) Production premises are “small production premises” in the current year in relation to alcoholic products if—

(a) the production limit condition is met, and

(b) the unlicensed product condition is met.

(2) The “production limit condition” is met in relation to non-group premises if, in relation to those premises, neither of the following amounts exceeds the small production limit—

(a) the alcohol production amount for the previous year;

(b) the estimated alcohol production amount for the current year,

(3) The “production limit condition” is met in relation to group premises if neither of the following amounts exceeds the small production limit—

(a) the aggregate of the alcohol production amount, in relation to every set of premises in the production group, for the previous year;

(b) the aggregate of the estimated alcohol production amount, in relation to every set of premises in the production group, for the current year.

(4) The “small production limit” is 4500 hectolitres.

(5) The “unlicensed product condition” is met—

(a) in relation to non-group premises if the condition in subsection (6) is met in relation to those premises;

(b) in relation to group premises if the condition in subsection (6) is met in relation to every set of premises in the production group.

(6) The condition is that—

(a) less than half of the alcohol production amount (if any), in relation to the premises, for the previous year was contained in alcoholic products produced under licence, and

(b) the producer reasonably estimates that less than half of the alcohol production amount, in relation to the premises, for the current year will be contained in alcoholic products produced under licence.

57 “Alcohol production amount” etc

(1) In relation to production premises—

(a) the “alcohol production amount” for a production year is the total amount of alcohol contained in alcoholic products produced on those premises in that year, and

(b) the “estimated alcohol production amount” for a production year is the producer’s reasonable estimate of the alcohol production amount for those premises in that year.

(2) Subsection (1) is subject to subsections (3) to (6).

(3) The reference in subsection (1) to the alcoholic products produced on a set of premises does not include a reference to any alcoholic products that are—

(a) spoilt or destroyed before the excise duty point, or

(b) produced in the course of producing a different alcoholic product on those premises or on any set of connected premises.

(4) Subsection (5) applies where premises are in use for the purposes of the production of alcoholic products for part only (the “relevant part”) of a production year (including where premises begin to be used for those purposes part-way through a production year).

(5) The alcohol production amount or (as the case may be) the estimated alcohol production amount is treated, for the purposes of this Part, as being the amount given by—

(a) dividing the actual alcohol production amount, or (as the case may be) the estimate of that amount, by the number of days in the relevant part of the production year, and

(b) multiplying the amount given by paragraph (a) by the number of days in the production year.

(6) The Commissioners may, if satisfied that the circumstances are exceptional, agree with a producer that certain alcoholic products, or a certain quantity of alcoholic products, may be disregarded for the purposes of determining—

(a) the alcohol production amount, or

(b) the estimated alcohol production amount,

in relation to production premises for any production year.

58 Exclusions

Alcoholic products produced on any premises are not “small producer alcoholic products” if—

(a) they are exempt from duty under any of sections 72, 76 or 77,

(b) they are produced in the United Kingdom by a person otherwise than in accordance with an approval under section 82,

(c) at the time they are produced, the alcohol production amount attributable to the premises (in the case of non-group premises) or the production group (in the case of group premises) for the current year has exceeded the small production limit, or

(d) they are produced—

(i) in the case of non-group premises, before the producer has estimated (for the purposes of section 57) the alcohol production amount attributable to the premises for the current year, or

(ii) in the case of group premises, before the producer in relation to those premises or any connected premises has estimated (for the purposes of section 57) the alcohol production amount attributable to those premises or any connected premises for that year.

59 Duty discount for small producer alcoholic products

(1) The duty discount, in relation to small producer alcoholic products in a discount band, is the amount (in £ per litre of alcohol) given by the formula in subsection (2) and rounded up to the nearest penny.

(2) The formula is—

where—

• C is the cumulative discount for the discount band (in £);

• M is the marginal discount for the discount band (in £);

• A is the relevant production amount (in hectolitres);

• S is the start threshold for the discount band (in hectolitres).

(3) Where the alcoholic products are produced on non-group premises, the “relevant production amount” is—

(a) the alcohol production amount, in relation to those premises, for the previous year, or

(b) if that amount would be nil, the estimated alcohol production amount in relation to those premises for the current year.

(4) Where the alcoholic products are produced on group premises, the “relevant production amount” is —

(a) the aggregate of the alcohol production amount for the previous year, in relation to every set of premises in the production group on which alcoholic products were produced in that year, or

(b) if there are no premises in the production group on which alcoholic products were produced in the previous year, the aggregate of the estimated alcoholic production amount, in relation to every set of premises in the production group, for the current year.

(5) Small producer alcoholic products are in a particular discount band if the relevant production amount in relation to those products—

(a) exceeds the start threshold for that band, but

(b) does not exceed the end threshold for that band.

(6) The start and end thresholds, cumulative discount and marginal discount for a discount band are the figures shown—

(a) in relation to alcoholic products (other than qualifying draught products referred to in paragraph (b)) of a particular description, in the tables in Part 1 of Schedule 9, and

(b) in relation to qualifying draught products (in respect of which no election has been made under section 50(2)) of a particular description, in the tables in Part 2 of Schedule 9.

60 Assessments where incorrectly low rate of alcohol duty applied

(1) This section applies if—

(a) alcohol duty is charged on alcoholic products,

(b) it appears at the excise duty point that the alcoholic products are small producer alcoholic products, and

(c) it turns out that the alcoholic products were not small producer alcoholic products (including where circumstances were not as they appeared at the excise duty point or where circumstances subsequently changed).

(2) This section also applies if—

(a) alcohol duty is charged on small producer alcoholic products, and

(b) the discounted rate that at the excise duty point appeared to be the correct rate turns out to be lower than the correct rate (including where circumstances were not as they appeared at the excise duty point or where circumstances subsequently changed).

(3) The Commissioners—

(a) may assess as being alcohol duty due from the liable person an amount equal to the duty shortfall, and

(b) must notify that person or that person’s representative of any assessment under paragraph (a).

(4) In this section “duty shortfall” means the difference between—

(a) the actual amount of alcohol duty chargeable on the alcoholic products, and

(b) the lower amount that, at the excise duty point, appeared to be the amount chargeable.

(5) The reference in subsection (3) to the “liable person” is a reference to the person liable to pay the alcohol duty on the alcoholic products.