British consumers have been told that the price of some of their favourite red wines could increase by more than 40p next year after the government ignored pleas from the wine industry to abandon complex post-Brexit tax changes.
The chief executive of Majestic Wine, John Colley, said the new alcohol duty system, which comes 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.
The chief executive of the Wine Society, Steve Finlan, said the plan was “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 rises by 2p for every 0.1% increase in strength.
The government acknowledged the new administrative burden for businesses and put an 18-month “easement” period in place. 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 Gareth Davies, the exchequer secretary to the Treasury, confirmed earlier this month that it would press ahead.
This has prompted businesses such as Majestic Wine, which has more than 200 shops around the country, to speak out, saying it will spell higher prices and 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 that when easement ends prices on about 43% of wines will increase. 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 most affected given their higher alcohol content, with prices on 75% expected to rise 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 shops can sell hundreds of different wines.
The co-founder of Cambridge Wine Merchants, Hal Wilson, said the new rules would require checking and recording the alcohol content of nearly 90% of the bottles it bought. This would lead to a seven-fold increase in workload for staff, something that would be “unviable” for the business, he said.
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.
At a Westminster Hall debate brought by the former health minister Will Quince last week, some Brexit-backing MPs, including Priti Patel and Julian Sturdy, supported the industry’s calls for a continuation of the status quo.
The latest 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.
The chief executive of the WSTA, Miles Beale, 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.”
A 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 them as still wines of the same ABV. The duty on many lower-strength drinks, such as beer, has been cut.
