A sting in the ale

Cornish brewer Foodswild is facing a backdated excise duty bill after HMRC concluded that its Cornish Stingers nettle beer was not, in fact, a beer.

The stumbling block for this niche product, which is presumably more palatable than its name suggests, was the absence of malted barley or wheat in the brewing process.  (The alcoholic sting in this particular ale comes from sugar that is added to the mix of nettles and yeast, and allowed to ferment).  As such, (according to the party poopers at HMRC) it must be charged to duty at the rate for a ‘made wine’, falling in the same category as alcopops (as they’re known to teenagers) or RTDs (as they are known to the cognoscenti).

An HMRC spokesman told the Daily Mail (don’t worry – I only hide behind it when I go to visit the Aged Parent):

‘The rules concerning the taxation of alcoholic drinks are set out in European legislation. To qualify as a beer, and be taxed as a beer, a product must be made from malt.

Alcoholic products that cannot be defined as either beer, wines of fresh grape, spirits, cider or perry are charged with the duty rate for ‘made wine’.’

This explanation, while factually correct, is misleading in its attempt to blame the high rates of UK excise duty on Brussels (the EU Commission, not the veg).

True, alcohol and alcoholic drinks are subject to the EU’s harmonised system of excise duties.  The categories are defined in directive 92/83/EEC and are beer, wine, fermented beverages other than wine and beer, intermediate products and ethyl alcohol. The only prescribed rates of duty are minimum rates laid down in directive 92/84/EEC.

True, the qualifying criterion for the EU beer category is that the product must be based on a liquor fermented from malted barley or wheat. Wine must be made from fresh grapes.  A fermented alcoholic drink (other than spirits or fortified wine) that is neither beer nor wine goes into the ‘fermented beverage other than wine and beer’ category. According to the EU Commission, this category covers cider, perry, mead, ‘herb beers’, and a miscellaneous range of fermented beverages made from fruit other than grapes.

But here’s the misleading part.  So long as Member States don’t implement taxation policies that would effectively discriminate in favour of domestic products, they are free to determine their own rates of excise duty for each category, subject only to the following minimum rates:

  • for beer, €1.87 per hectolitre/ degree of alcohol of finished product, with reduced rates allowed for low strength beers and certain micro-breweries’ production
  • for ‘other fermented beverages’, zero

Let’s see how the UK rates stack up against the EU minima:

  • €21.45 per hectolitre/degree of alcohol on beer
  • €278.59 on other still fermented beverages
  • €326.94 on other sparkling fermented beverages

So it really is scraping the barrel for HMRC to demonise the EU with the suggestion that ‘the Commission made us do it’.

(The term ‘made wine’ is not an EU term but is used by HMRC to cover alcoholic drinks that do not fall in the UK’s duty categories of spirits, wine, beer or cider but are made from the alcoholic fermentation of any substance or the mixing of wine with another substance. So, not wine then).

Tax lawyer specialising in business tax, SDLT and VAT

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