June bug: A turn around the floor with George and Vince

On 22 June, George Osborne introduced his Emergency Budget. With all the hype about belt-tightening, one wondered what draconian measures were in store.

The Chancellor could have taken a leaf from the history books. Between the Great Depression and World War II, for example, the US Government needed money so desperately they created a ‘Cabaret Tax’. Ballroom dancing and big bands were multi-million dollar businesses in the 1940s, and this tax targeted all establishments which contained dance floors, served alcohol and/or provided musical entertainment. With the tax being levied at up to 30% of turnover, it was a case of more swinge, less swing.

So, think outside the box, George. It might not go down too well with Vince Cable, though.

I apologise, George has done just that!  On reading the small print of the Budget Notices, I discovered that the Chancellor has increased the tax charge on the extra-long cigarette. Budget Notice 34 ‘Tobacco Products Duty: Long Cigarettes’ states that from 1 January 2011 long cigarettes –-defined as those exceeding 8cm in length, excluding filter – will count as more than one cigarette for tobacco duty purposes. Each additional 3cm (or part thereof) over 8cm will be classified as one further cigarette.  ‘The measure will ensure UK legislation remains aligned with European Directive 95/59, which has been amended to prevent tax avoidance,’ says the Notice.

Until the change takes effect, any cigarette more than 9 cm long (excluding filter) is treated as if each 9 cm or part thereof were a separate cigarette.

So where does this leave the mighty cigar? Quite unscathed, as it turns out, because of the all-important difference in the way duty is charged on cigarettes and cigars. Duty on cigars is calculated on weight, whereas for cigarettes duty is fixed as a percentage of the retail price plus a fixed amount per thousand cigarettes.

That extra centimetre must make all the difference.

Tax lawyer specialising in business tax, SDLT and VAT