Brewers at war over tax reform

Changes announced by the Treasury on 22 July to the way in which beer duty is charged has created a deep schism in the brewing industry, pitting medium-sized brewers against smaller producers. Some small brewers have accused bigger producers of ignoring their precarious finances and some fear they will be forced to close down.

The proposed changes affect Small Brewers Relief, a scheme devised under the last Labour government by Chancellor Gordon Brown. It gives tax breaks to small brewers as high as 50 per cent but decreasing as production grows.

Under the Treasury proposals, more than 150 brewers that produce between 2,100 hectolitres and 5,000hl a year will see their duty increase.

James Calder, chief executive of the Society of Independent Brewers – SIBA – says he is “hugely disappointed that the government is reducing the threshold at which duty relief starts to taper from 5,000 hectolitres.”

He adds that the small brewers section of the industry has not received support from the government during the coronavirus pandemic, with no cash grants or Business Rates “holiday”.

Calder is echoed by Christian Townsley of North Brewing in Leeds, who told the Guardian: “This is a big blow to the industry and we will see breweries go under and job losses occur.”

The changes have been welcomed by a group of brewers who have formed the Small Brewers Duty Relief Coalition. They include Hogs Back in Surrey, Theakston in North Yorkshire and Timothy Taylor in West Yorkshire. They say the changes announced by the Treasury were a “very important step in saving the British pint”.

This is not a view shared by all bigger brewers. Black Sheep, Theakston’s neighbour in Masham and which has an almost identical level of annual production, says the planned reform is an “opportunity missed to help small brewers. No small brewer should pay more duty as a result of the reform.”

Black Sheep will not benefit from the changes and its stance is supported by Oakham Ales in Peterborough and Signature Brew in Walthamstow, East London.

Tom Bott, head brewer at Signature Brew, opposes the notion that the existing system acts as a disincentive to growth. He says he has grown his production above the 5,000hl level but is against the Treasury’s proposals.

The Duty Relief Coalition argues that the current structure of Small Brewers Relief acts as a disincentive to increase production above 5,000 hl.

But Christian Townsley says the problem of the current threshold at which duty relief falls away should be addressed by tapering the relief more gradually above the threshold rather than cutting it for small brewers.

The proposals are not set in stone and the Treasury will begin a period of consultation in the autumn. Black Sheep is urging beer drinkers to write to their MPs to oppose the Treasury’s plans.

CAMRA, the Campaign for Real Ale, has come out in support of SIBA and small brewers. Chairman Nik Antona says: “While removing the cliff edge in Small Brewers Relief will benefit many brewers and help successful businesses to grow, it should not be achieved at the expense of small brewers.”

He says the Treasury proposals would lead to a “robbing Peter to pay Paul” situation and would remove help from brewers who most need it.

“We will urge the government to make sure that any changes to SBR help maintain existing help for small brewers and make sure consumers can continue to enjoy the widest of possible choice of local and independent cask ales.”

If the changes were to go ahead as presently suggested, the outcome could be dramatic for small brewers. Trevor Harris of Derby Brewing Company says he would have to cut his weekly output from 54 barrels to 25 or lay off staff and close a couple of his pubs.

Feelings are running high and it is difficult to imagine that small businesses struggling in the current circumstances should be told they face higher taxation by the Treasury.