Technical review on small brewers’ relief published • Beer Today

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• This article was updated at 12.20pm on 8th January with the addition of comment from CAMRA.

The Treasury has published a technical consultation on the future of small brewers’ relief, and it’s met a mixed reaction.

Small brewers’ relief (SBR) is a tax relief which gives small brewers reduced rates of beer duty. At the 2018 Budget, the government announced it would review the relief following feedback from brewers that it was limiting growth and distorting the market.

In July last year, the government announced its findings from the first stage of the review. Since this announcement, the Treasury says it has received submissions and engaged with a wide range of brewing groups to understand their views about reforming the relief.

The new technical consultation sets out in further detail how and why the government has reached its conclusions on the first part of the review, and explores key issues associated with reforming SBR. Click here to download a PDF of the document.

A Treasury spokesperson said: “After extensive consultation on small brewers’ relief, we’ve taken the decision to reform the way the relief works to help more businesses in the sector grow. Over 80% of businesses will be unaffected by these changes, and we’re consulting with industry on technical design of the reforms.”

‘There is clear evidence that the scheme design inhibits growth’

The government points out that it invests more than £65m per year in SBR and says its changes will guarantee that a small brewery producing up to 1,000 pints a day will still benefit from the full value of the relief. This means the smallest 80% of brewers are unaffected.

A spokesperson said: “The taper design means brewers lose relief quicker than their scale can compensate. Brewers’ marginal tax rates double as soon as they cross the 880,000 pint threshold.

“For example, if a brewer grows from 880,000 pints to 1 million pints, they lose 12% of the relief’s value. A brewer can need to grow between ten and 20 times larger before their economies of scale offset this disadvantage.

“There is clear evidence that the scheme design, combined with industry costs, inhibits growth as brewers are incentivised to produce between 360,000-880,000, and not grow further.

In a statement, James Calder, chief executive of the Society of Independent Brewers (SIBA), and chairman, Ian Fozard, said: “SBR has been, is, and will continue to be the foundation of the independent craft beer movement in the UK. It has enabled small brewers to compete and grow against the global giants that dominate. SBR has created jobs, new businesses, innovation, new communities, and a ​new cohort of world class brew​ers.  

“The technical consultation published today is complex and comprehensive. SIBA will publish a fuller analysis and our views on the questions it asks in due course, following discussions with our board and with the industry.

“SIBA will continue to engage closely and positively with Treasury. We encourage all independent brewers to read the consultation with care, engage with us as your trade association, and submit your views to your MP and Treasury directly. If you have questions, please ask us. 

“For us, three key areas of concern remain: firstly that Treasury admit there are significant issues in how production cost data was gathered; secondly that around 150 brewers ​producing between 2,100hl and 5,000hl still stand to pay more in duty when reforms are introduced; and finally that the mechanism used to calculate a cash basis of relief (rather than a percentage) still has the potential to, over time, erode the benefit of the relief, making brewers less competitive.

“The consultation is, of course, published at a time where every pub in the country is closed, ​with small brewers losing 80% of their sales and who face having to pour away more unsaleable beer at their own expense. Small brewers have not received the same level of financial support from government ​as other hospitality ​businesses. 

“These ​proposed changes come despite the support of over 100 MPs who have written to the chancellor demanding a rethink, and a recent debate in Parliament where cross-party MPs showed their support for small breweries. The Treasury’s own figures show that 73% of small brewers are content with SBR and 72% do not believe that those over 2,500hl should receive less relief.”

Emma McClarkin, chief executive of the British Beer & Pub Association, said: “Following an extensive review that proposed important changes to small brewers’ relief, we welcome the government’s technical consultation to move this forward and build on the success of the existing scheme. We hope the technical consultation will now provide a platform and a revised small brewers’ relief formula that supports growth for brewers of all sizes.”

A spokesperson for the Small Brewers Duty Reform Coalition, which has often criticised SIBA’s stance, said: “As strong supporters of small brewers’ relief, we welcome the Treasury review, and look forward to reading and participating in the technical consultation on the detail. It is 18 years since SBR was introduced, it has proved to be very successful in reinforcing the craft beer renaissance, but it clearly needed to be adapted as the market changed.

“From the outset we have argued for evidence-based reform to encourage growth, fair competition, exports and the continued diversity of brewing in the UK. We have also argued that reform must preserve a significant level of support for the sector, and that is even more important during these challenging times. We look forward to responding to this technical review and stand ready to assist the Treasury and ministers.”

‘We remain unconvinced that the proposed changes are the best route to improve SBR’

Nik Antona, chairman of the Campaign for Real Ale, said: “As trade associations and brewers will be doing over the coming weeks, CAMRA will also take the time to digest and analyse the complex consultation document, which does include new information on the Treasury’s decision-making process to date, and we look forward to providing a full response to the Treasury as part of the consultation process.  

“The consultation document states that 73% of small brewers surveyed said that they are content with the current structure of small brewers’ relief, so we remain unconvinced that the proposed changes — resulting in around 150 small brewers paying more tax — are the best route to improve SBR.  

“While we recognise that any changes to SBR will not come into force until next year, this has been a devastating year for small brewers, who have been unable to benefit from the same level of financial support as other hospitality businesses during the covid crisis. 

“These changes are due to come in at a time at when the government should be providing more support to our vibrant small brewing sector to aid its recovery, rather than planning on withdrawing tax relief from some of the smallest brewers, who are vital to maintaining consumer choice in the beer market.”