Finance Bill 2002: EXPLANATORY NOTE
CLAUSE 4: REDUCED RATES OF DUTY ON BEER FROM SMALL BREWERIES
SUMMARY
1. Clause 4 and Schedule 1 make provision for the introduction from 1 June 2002 of reduced rates of duty for the beer produced by independent small breweries.
DETAILS OF THE CLAUSE
2. Subsection (1) of the clause provides that Schedule 1, which provides for reduced rates of duty on beer produced in small breweries, shall have effect.
3. Subsection (2) of the clause provides that, subject to subsection (3), Schedule 1 has effect from 1 June 2002.
4. Subsection (3) of the clause for new sections 36H and 49(1)(k) of the Alcoholic Liquor Duties Act 1979, inserted by paragraphs 2 and 3 of Schedule 1, will have effect from the day the Act is passed.
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DETAILS OF SCHEDULE 1
5. Paragraph 1(1) of the Schedule provides for the amendments to section 36 of the Alcoholic Liquor Duties Act 1979 described in paragraphs 7 and 8 below.
6. Paragraph 1 (2) amends section 36(1) of the Alcoholic Liquor Duties Act 1979 by removing from that section the rate of duty per hectolitre per cent of alcohol in the beer and substituting with the rates specified in new subsection (1AA).
7. Paragraph 1(3) inserts new subsection (1AA) which;
a) prescribes the rate of duty for beer that is not 'small brewery beer?.
b) provides for the rate of duty for 'small brewery beer? produced in a singleton brewery to be determined by new section 36D.
c) provides for the rate of duty for 'small brewery beer? produced in a cooperated brewery to be determined by new section 36F.
8. Paragraph 2 inserts new sections 36A to 36H (Reduced rates of excise duty) after section 36. The extent of the new sections is described from 9 to 58 below.
9. Section 36A(1) provides that subject to subsection (2), whether beer produced in a singleton brewery is 'small brewery beer? is determined by section 36C, and whether beer produced in a cooperated brewery is 'small brewery beer? is determined by 36E.
10. Section 36A(2) provides that where beer is produced by a person who is required to be registered but is not, the beer he produces is not 'small brewery beer?.
11. Section 36B(1) specifies the scope of effect of section 36B.
12. Section 36B(2) defines a singleton brewery.
13. Section 36B(3) defines a cooperated brewery.
14. Section 36B(4) defines the term ?brewery? for the purposes of the scheme.
15. Section 36B(5) defines the term ?the standard beer duty rate?.
16. Section 36B(6) defines references to a ?grossed-up amount? of an estimate of a brewery's production in a calendar year.
17. Section 36B(7) defines what references to a brewery in the UK being used as beer-production premises mean.
18. Section 36B(8) provides that whether a person is connected with another will be determined in accordance with section 839 of the Income and Corporation Taxes Act 1988.
19. Section 36C(1) provides for the application of section 36C.
20. Section 36C(2) defines 'small brewery beer? from a singleton brewery as beer that meets the conditions set out in the section.
21. Section 36C(3) prescribes the first condition, concerning the production of beer in the previous year, for beer to be 'small brewery beer?.
22. Section 36C(4) provides for the calculation of annual production where a brewery was only in use for part of the previous year.
23. Section 36C(5) to (8) prescribe the other conditions for beer to be small brewery beer.
24. Section 36C(9) provides that, until such a time as a reasonable estimate is made of the amount of beer that will be produced in a brewery in the current calendar year by the person who first produces beer in that brewery in that year, no beer produced there is 'small brewery beer?.
25. Section 36C(10) provides that once beer production in the brewery exceeds 30,000 hectolitres no more beer is 'small brewery beer?.
26. Section 36C(11) provides for the effect of subsection (10) not to prejudice the recovery of duty that is unpaid by reason of an untrue document or statement.
27. Section 36D(1) provides for section 36D to apply to 'small brewery beer? produced in a brewery at a time when it is a singleton brewery. Section 36D(2) provides for the rate of duty for such beer to be determined in accordance with section 36D.
28. Section 36D(3) specifies the circumstances in which the duty rate prescribed in subsection (4) will apply.
29. Section 36D(4) prescribes a ?brewery rate? of 50% of the standard rate, subject to rounding.
30. Section 36D(5) specifies the circumstances in which the duty rate prescribed in subsection (6) will apply.
31. Section 36D(6) prescribes a ?brewery rate? based on an arithmetical formula, subject to the rounding.
32. Section 36D(7) requires brewery rates to be rounded up to the nearest penny.
33. Section 36D(8) provides, for the purpose of determining the brewery rate, for the calculation of annual production where a brewery was only in use for part of the previous year.
34. Section 36E(1) provides for the application of section 36E.
35. Section 36E(2) defines 'small brewery beer? from a co-operated brewery as beer that meets the conditions set out in the section.
36. Section 36E(3) defines various terms used in 36E.
37. Section 36E(4) prescribes the first condition, concerning the production of beer in the previous year, for beer to be 'small brewery beer?.
38. Section 36E(5) provides for the calculation of annual production where a brewery was only in use for part of the previous year.
39. Section 36E(6) to (9) prescribe the other conditions for beer to be small brewery beer.
40. Section 36E(10) provides that at any time during the year where a reasonable estimate of production does not exist for any brewery within a group (which is made by the person who first produces beer in that brewery in that year), none of the beer produced in the group is 'small brewery beer?.
41. Section 36E(11) provides that once beer production in the group exceeds 30,000 hectolitres no more beer is 'small brewery beer?.
42. Section 36E(12) provides for the effect of subsection (11) not to prejudice the recovery of duty that is unpaid by reason of an untrue document or statement.
43. Section 36F(1) provides for section 36F to apply to 'small brewery beer? produced in a brewery at a time when it is a cooperated brewery. Section 36F(2) provides for the rate of duty for such beer to be determined in accordance with section 36D.
44. Section 36F(3) defines various terms used in 36F.
45. Section 36F(4) defines ?the notional previous year's production?.
46. Section 36F(5) provides, for the purpose of determining the brewery rate, for the calculation of annual production where a brewery was only in use for part of the previous year.
47. Section 36F(6) specifies the circumstances in which the duty rate prescribed in subsection (7) applies.
48. Section 36F(7) prescribes a ?brewery rate? of 50% of the standard rate, subject to rounding.
49. Section 36F(8) specifies the circumstances in which the duty rate prescribed in subsection (9) will apply.
50. Section 36F(9) prescribes a ?brewery rate? based on an arithmetical formula, subject to the rounding.
51. Section 36F(10) requires brewery rates to be rounded up to the nearest penny.
52. Section 36G(1) and (2) specify the circumstances in which subsection 36G(3) (assessments where reduced rates of duty are applied incorrectly) applies.
53. Section 36G(3) prescribes the circumstances in which Customs may assess excise duty where reduced rates of duty were applied incorrectly and notify that assessment.
54. Section 36G(4) prescribes the persons who may be notified of an assessment in circumstances where two or more persons are liable to pay the duty.
55. Section 36H(1) provides that the Treasury may, by order made by statutory instrument, amend the Alcoholic Liquor Duties Act 1979 for the purposes of varying the reduced rate provisions.
56. Section 36H(2) defines the terms ?reduced rate? and 'standard rate? for the purposes of this section.
57. Section 36H(3) provides for such an Order to make such different provision for different cases, consequential amendments and other consequential provision.
58. Section 36H(4) prescribes the procedure for making an order.
59. Paragraph 3 inserts a new paragraph (k) into section 49(1) of the Alcoholic Liquor Duties Act 1979 providing Customs with the power to make regulations requiring the production of certificates on matters relating to beer imported into the United Kingdom for the purposes of the reduced rate provisions.
60. Paragraphs 4(1) to (5) provide for consequential amendments to sections 12A, 12B, 14, and 16 of the Finance Act 1994 dealing with rights of review and appeal arising out of the foregoing provisions.
BACKGROUND
1. Beer is currently liable to a single rate of excise duty per hectolitre per cent of alcohol in the beer.
2. However, the Government believes that the UK's traditional small brewing industry make a key contribution to employment and community life, particularly in rural areas, and help to provide the UK with an innovative and diverse brewing industry. In order to help them compete more effectively, the Government is introducing reduced rates of duty for the beer they produce.
3. Independent breweries producing lesson more than 5,000 hectolitres (hl) per year will pay duty at 50 per cent of the standard rate. Independent breweries producing more than 5,000hl but lesson more than 30,000hl per year will pay duty at rates calculated using the following formula:
% of duty payable = annual production (hl) - 2,500
annual production
4. The rate payable by independent breweries producing more than 5,000hl but no more than 30,000hl per year will be equivalent to a cut of 50% on their first 5,000hl of production.
5. The reduced rate scheme will be introduced from 1 June of this year. At current duty rates, the scheme will cost an estimated £15 million per annum.
6. Reduced rates are allowed for under Article 4 of European Council Directive 92/83.