Pubs, Beer Duty and VAT (March 2023)

Thank you for contacting me about support for pubs.

I agree with you, UK pubs play a vital role in supporting not only the national economy but also our local communities in Hastings and Rye. This is why I have consistently campaigned for support for pubs and hospitality businesses. After nearly two difficult post-pandemic years, the Government is maintaining its commitment to supporting them.

Through the Energy Bill Relief Scheme (EBRS), the Government sets a Supported Wholesale Price for all non-domestic/business customers whose current gas and electricity prices have been significantly inflated in light of global energy prices. This is equivalent to the Energy Price Guarantee put in place for households. For all non-domestic energy users in Great Britain and Northern Ireland this government supported price has been set at £211 per megawatt hour (MWh) / 21.1p per kilowatt hour (KWh) for electricity and £75 per MWh / 7.5p per KWh for gas.

It applies to fixed contracts agreed on or after 1 December 2021, as well as to deemed, variable and flexible tariffs and contracts. It will be applied until 31 March 2023, running for an initial six-month period for all non-domestic energy users. The savings will be first seen in October bills, typically received in November.

In April 2023, the EBRS will be replaced by the Energy Bill Discount Scheme (EBDS) will run until March 2024. Eligible businesses and other non-domestic customers will receive a per-unit discount to energy bills during the 12-month period from April 2023 to March 2024. The relative discount will be applied if wholesale prices are above a certain price threshold. For most non-domestic energy users in Great Britain and Northern Ireland, these maximum discounts have been set at:

  • electricity - £19.61 per megawatt hour (MWh) with a price threshold of £302 per MWh.
  • gas - £6.97 per MWh with a price threshold of £107 per MWh.

The Government's long-term strategy for the hospitality sector includes an extension to pavement licences, making it easier and cheaper for pubs, restaurants and cafes to make outdoor dining a reality. This will be implemented through the Levelling Up and Regeneration Bill. Additionally, the £150 million Community Ownership Fund allows community groups to buy assets so that they can continue to serve their local area. I am aware that rural pubs were among the local assets allocated funding in the scheme's first round, giving them a new lease of life for generations to come.

Moreover, small businesses will be shielded from most tax rises and will be protected from increases through the Small Profits Rate and Employment Allowance. This means only the largest ten per cent of companies will pay the top rate of Corporation Tax and 40 per cent of all businesses will be unaffected by the freeze in National Insurance thresholds. Finally, there is also a £13.6 billion package of support. To protect businesses from rising inflation the multiplier will be frozen in 2023-24 while relief for 230,000 businesses in retail, hospitality and leisure sectors was also increased from 50 per cent to 75 per cent this year.

To protect small businesses the Government will keep the Small Profits Rate, maintained at the current 19 per cent rate, for companies with profits less than £50,000 – meaning nearly 70 per cent of companies will be completely unaffected. There will also be a taper above £50,000, so businesses only start paying the full rate of 25 per cent on profits from £250,000. This means that 1 in 10 companies will pay the full 25 per cent rate.

Further, a systematic review into taxes paid by smaller businesses and a consultation to expand the ‘cash basis’ will be conducted – a simplified way for four million sole traders to calculate and pay their Income Tax. The Government has also announced a range of measures to simplify customs import and export processes for small businesses.

For small businesses not applying the cash basis, the Annual Investment Allowance provides 100 per cent first-year relief for plant and machinery investments. From April 2023, this will be permanently set at £1 million, simplifying the tax treatment of capital expenditure for 99 per cent of businesses. Larger businesses will benefit from full expensing for the next three years, simplifying claims and investment decisions.

From 1 April 2023, business rate bills in England will be updated to reflect changes in property values since the last revaluation in 2017. A package of targeted support worth £13.6 billion over the next five years will support businesses as they transition to their new bills, protect businesses from the full impact of inflation, and support our high streets. English Local Authorities will be fully compensated for the loss of income as a result of these business rates measures and will receive new burdens funding for administrative and IT costs. The Government is publishing a summary of responses to the Business Rates Review technical consultation, which closed in February 2022. This reconfirms the Government’s commitment to the Non-Domestic Rating reform package and sets out further detail on how this will be delivered in response to stakeholder feedback.

Duty rates of all alcoholic products produced in, or imported into, the UK will increase in line with RPI. Draught Relief will increase from 5 per cent to 9.2 per cent for beer and cider draught products and from 20 per cent to 23 per cent for wine, spirits based and other fermented draught products. These changes will take effect from 1 August 2023.

HMRC will also take forward plans to harmonise the approval, return and payment processes for domestic producers of alcoholic products. These changes are scheduled to take effect from late 2024 with the introduction of the new digital system.

Finally, thank you for sharing your suggestions on VAT for food and beverages sold in pubs with a view to making this permanent. I understand that the Government keeps all taxes under review and careful consideration will be given to any proposed amendments to our tax regime. 

Thank you again for writing to me.

 

Yours sincerely,

 

Sally-Ann Hart MP