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UK freezes spirits duty in 2020 budget

New chancellor Rishi Sunak cancelled the planned duty increase for spirits in the UK budget today (11 March), and pledged £10 million (US$12.9m) to help distilleries go green.

Rishi Sunak became UK chancellor last month (February)

The 2020 budget also delivered a duty freeze on wine, beer and cider in the UK.

Sunak became chancellor of the exchequer on 13 February following the resignation of his predecessor, Sajid Javid. The 2020 budget is the first to be held in spring since March 2017 and the first since the UK departed the European Union at the end of January.

The budget unveiled a number of measures totalling a £30 billion (US$38.7bn) stimulus to mitigate the impact of coronavirus.

Sunak said the “planned increase in spirits duty will be cancelled”, while duty on beer, wine and cider will also be frozen.

Trade body the Wine and Spirit Trade Association (WSTA) welcomed the government’s move to “address the UK’s excessively high duty rates”.

Miles Beale, chief executive of WSTA, said: “The decision to freeze wine and spirits duty is welcome for British business, pubs and the wider hospitality trade. While he has not cut duty, it is reassuring to see that in his first budget as chancellor, Rishi Sunak MP, has taken steps to address the UK’s excessively high duty rates.

“He has shown he is in touch with British consumers – from all walks of life – who want to enjoy a drink without getting stung by further tax hikes.

“Today’s freeze is a victory for the WSTA’s hard fought campaign, which called on government to help cash-strapped consumers by keeping prices down, and to support British businesses entering a new trading landscape.”

US tariffs

Addressing the US tariffs, Sunak said the Scotch whisky industry was “crucial” as it was the UK’s largest food and drink export. He said: “We will continue to lobby the US government to remove these harmful tariffs.”

On 2 October, the US government revealed its intentions to impose a 25% import tariff on EU goods, including single malt Scotch whisky, single malt whiskey from Northern Ireland, liqueurs and cordials from Germany, Italy, Spain, Ireland and the UK, and wine. The tariffs came into force on 18 October.

Exports of Scotch whisky to the US fell by 25% during the fourth quarter of 2019 following the implementation of tariffs on single malts.

The UK government has also pledged £1 million (US$1.3m) to support the promotion of Scottish food and drinks overseas, and a £10m (US$12.9m) research and development investment “to help distilleries go green”.

Support for pubs

Sunak added that the government “needs to do more” for UK pubs, especially considering the impact of coronavirus. As a result, the business rate discount for pubs has been increased to £5,000 (US$6,462), up from £1,000 (US$1,292), Sunak noted.

In addition, the UK government has abolished business rates for leisure and hospitality businesses this year in the wake of the coronavirus outbreak.

The last budget, held in October 2018, delivered by former chancellor Philip Hammond, also brought a freeze on spirits, beer and cider duty.

The UK has the fourth highest spirits duty rate in the EU, with only Sweden, Finland and Ireland having higher rates. The WSTA’s budget submission to the treasury noted that the duty freeze delivered in the last budget for beer and spirits resulted in a revenue increase for the exchequer of 2.4% for beer and 1.7% for spirits.

According to the WSTA, the cost of an average priced bottle of spirits consists of 73% tax, meaning UK drinkers pay £8.05 (US$10.50) in tax for every bottle of spirit they buy that has an ABV of 40%.

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