Posted: Wednesday, 5 March 2014 @ 12:48
The Government has surprised us all with the announcement last month that there will after all be minimum pricing for alcohol intended to take effect on 6 April this year.. We all thought this was a dead duck when they dropped the proposals for a minimum price per unit last year. But the new regulations are based on “cost” price.
The full implications are set out in the Home Office Guidance issued in February. “Cost” means the amount of duty for a product plus VAT on the duty element of the product price. It will be implemented through a new Mandatory Code of Practice, a new condition applicable to all Premises Licences and Club Premises Certificates.
As duty rates differ according to the type of product and the alcoholic strength, it will be necessary to undertake the calculations for each particular product. The starting point is to understand that there are 3 categories, namely (1) beer, (2) spirits, spirit-based ready-to-drinks, wine and made-wine (exceeding 22% ABV), and (3) wine, made-wine and cider (not exceeding 22% ABV).
In the first 2 categories the calculation of duty (in pence) is volume (litres) x strength (% ABV) x duty rate. In the third category it is, again in pence, volume (litres) x duty rate.
The alcohol duty rates (2013) are set out in Annex A of the Guidance. Annex B sets out the duty plus VAT permitted prices based on 2013 duty rates so that you can easily see the likely minimum prices which will apply this year, assuming there is no hike in the duty rate.
So, on the current rates examples of minimum pricing are:
Beer: a 440ml can with an ABV of 5% will be 51p
Cider: a 500ml bottle of 4.5% will be 24p
Vodka: a 70cl bottle with am ABV of 37.5% will be £8.89
Wine: a 750ml bottle with an ABV of 11.5% will be £2.41
It will be necessary to ensure that all multi-pack sales do not exceed the aggregate of permitted prices for each product. For example, a 12 can case of 440ml cans of 5% ABV beer will have a minimum price of £6.07. The calculation is 5.288 litres x 5% x 19.12 x 1.2
It will be possible to accept discount vouchers for alcohol or for a mixed sale of alcohol and other products, provided that the price paid exceeds the minimum price. Promotions will also still be in order, again as long as the price paid for everything exceeds the minimum price for the alcohol included.
There are exceptions to minimum pricing. For example it does not apply to prizes in an incidental non-commercial lottery. Nor does it apply to low strength drinks of 1.2% ABV or less. Sales at bars in international airports and ferry terminal are also exempt.
The penalties for breach on conviction are upon to 6 months imprisonment and/or up to a £20,000 fine. However, as a condition on the relevant licence it is likely to be enforced through a Review of the Premises Licence or Club Premises Certificate, with only the most serious cases likely to end up in court. But the dangers are very clear. Also note that the Police could serve a Closure Notice under section 19 of the Criminal Justice and Police Act 2001 where they find evidence of sale below the minimum cost.
It is difficult to see how the low threshold will have a significant impact on sales of cheap alcohol, but I veryy much suggest that this is the thin edge of the wedge.
Licensing Law Specialist
Tel: 0845 003 5639
Blog by Nigel Musgrove
Nigel has been providing dispute resolution advice as a solicitor for over 35 years. As well as advising SMEs and business owners on disputes he also offers a specialist licensing law service. View profile
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