Finance (No. 2) Act 2023

Chapter 3 U.K. Small producer relief

Main provisions U.K.

54 Small producer relief: discounted rates U.K.

(1) Alcohol duty is charged at the discounted rate on small producer alcoholic products produced in a particular production year (the “current year”).

(2) The discounted rate, in relation to small producer alcoholic products, is equal to—

(a) the standard rate, less

(b) the duty discount for those products (determined in accordance with section 59 and Schedule 9).

(3) In subsection (2)(a), the “standard rate”, in relation to alcoholic products, means—

(a) the rate shown for products of that kind in Schedule 7, or

(b) if Schedule 8 applies (and no election has been made under section 50(2)) in relation to the products) the rate shown for products of that kind in that Schedule.

(4) For the purposes of this Chapter—

(a) a “production year” is a period of 12 months beginning with 1 February;

(b) the “previous year”, in relation to alcoholic products, is the production year immediately preceding the current year in relation to those products.

Commencement Information

I1 S. 54 not in force at Royal Assent, see s. 120(2)

I2 S. 54 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

55 Small producer alcoholic products U.K.

(1) “Small producer alcoholic products” are alcoholic products that—

(a) are of an alcoholic strength of less than 8.5%,

(b) are produced on premises that are small production premises,

(c) are not produced under licence, and

(d) meet such other conditions (if any) as are specified by regulations made by the Commissioners.

(2) Subsection (1) is subject to section 58 (exclusions).

Commencement Information

I3 S. 55 in force at Royal Assent for specified purposes, see s. 120(1)(b)

I4 S. 55 in force at 1.8.2023 in so far as not already in force by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

56 Small production premises U.K.

(1) Production premises are “small production premises” in the current year in relation to alcoholic products if—

(a) the production limit condition is met, and

(b) the unlicensed product condition is met.

(2) The “production limit condition” is met in relation to non-group premises if, in relation to those premises, neither of the following amounts exceeds the small production limit—

(a) the alcohol production amount for the previous year;

(b) the estimated alcohol production amount for the current year,

(3) The “production limit condition” is met in relation to group premises if neither of the following amounts exceeds the small production limit—

(a) the aggregate of the alcohol production amount, in relation to every set of premises in the production group, for the previous year;

(b) the aggregate of the estimated alcohol production amount, in relation to every set of premises in the production group, for the current year.

(4) The “small production limit” is 4500 hectolitres.

(5) The “unlicensed product condition” is met—

(a) in relation to non-group premises if the condition in subsection (6) is met in relation to those premises;

(b) in relation to group premises if the condition in subsection (6) is met in relation to every set of premises in the production group.

(6) The condition is that—

(a) less than half of the alcohol production amount (if any), in relation to the premises, for the previous year was contained in alcoholic products produced under licence, and

(b) the producer reasonably estimates that less than half of the alcohol production amount, in relation to the premises, for the current year will be contained in alcoholic products produced under licence.

Commencement Information

I5 S. 56 not in force at Royal Assent, see s. 120(2)

I6 S. 56 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

57 “Alcohol production amount” etc U.K.

(1) In relation to production premises—

(a) the “alcohol production amount” for a production year is the total amount of alcohol contained in alcoholic products produced on those premises in that year, and

(b) the “estimated alcohol production amount” for a production year is the producer’s reasonable estimate of the alcohol production amount for those premises in that year.

(2) Subsection (1) is subject to subsections (3) to (6).

(3) The reference in subsection (1) to the alcoholic products produced on a set of premises does not include a reference to any alcoholic products that are—

(a) spoilt or destroyed before the excise duty point, or

(b) produced in the course of producing a different alcoholic product on those premises or on any set of connected premises.

(4) Subsection (5) applies where premises are in use for the purposes of the production of alcoholic products for part only (the “relevant part”) of a production year (including where premises begin to be used for those purposes part-way through a production year).

(5) The alcohol production amount or (as the case may be) the estimated alcohol production amount is treated, for the purposes of this Part, as being the amount given by—

(a) dividing the actual alcohol production amount, or (as the case may be) the estimate of that amount, by the number of days in the relevant part of the production year, and

(b) multiplying the amount given by paragraph (a) by the number of days in the production year.

(6) The Commissioners may, if satisfied that the circumstances are exceptional, agree with a producer that certain alcoholic products, or a certain quantity of alcoholic products, may be disregarded for the purposes of determining—

(a) the alcohol production amount, or

(b) the estimated alcohol production amount,

in relation to production premises for any production year.

Commencement Information

I7 S. 57 not in force at Royal Assent, see s. 120(2)

I8 S. 57 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

58 Exclusions U.K.

Alcoholic products produced on any premises are not “small producer alcoholic products” if—

(a) they are exempt from duty under any of sections 72, 76 or 77,

(b) they are produced in the United Kingdom by a person otherwise than in accordance with an approval under section 82,

(c) at the time they are produced, the alcohol production amount attributable to the premises (in the case of non-group premises) or the production group (in the case of group premises) for the current year has exceeded the small production limit, or

(d) they are produced—

(i) in the case of non-group premises, before the producer has estimated (for the purposes of section 57) the alcohol production amount attributable to the premises for the current year, or

(ii) in the case of group premises, before the producer in relation to those premises or any connected premises has estimated (for the purposes of section 57) the alcohol production amount attributable to those premises or any connected premises for that year.

Modifications etc. (not altering text)

C1 S. 58(b) modified (31.7.2023) by The Finance (No. 2) Act 2023, Part 2 (Alcohol Duty) (Appointed Day, Savings, Consequential Amendments and Transitional Provisions) Regulations 2023 (S.I. 2023/884), reg. 6

Commencement Information

I9 S. 58 not in force at Royal Assent, see s. 120(2)

I10 S. 58 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

59 Duty discount for small producer alcoholic products U.K.

(1) The duty discount, in relation to small producer alcoholic products in a discount band, is the amount (in £ per litre of alcohol) given by the formula in subsection (2) and rounded up to the nearest penny.

(2) The formula is—

where—

• C is the cumulative discount for the discount band (in £);

• M is the marginal discount for the discount band (in £);

• A is the relevant production amount (in hectolitres);

• S is the start threshold for the discount band (in hectolitres).

(3) Where the alcoholic products are produced on non-group premises, the “relevant production amount” is—

(a) the alcohol production amount, in relation to those premises, for the previous year, or

(b) if that amount would be nil, the estimated alcohol production amount in relation to those premises for the current year.

(4) Where the alcoholic products are produced on group premises, the “relevant production amount” is —

(a) the aggregate of the alcohol production amount for the previous year, in relation to every set of premises in the production group on which alcoholic products were produced in that year, or

(b) if there are no premises in the production group on which alcoholic products were produced in the previous year, the aggregate of the estimated alcoholic production amount, in relation to every set of premises in the production group, for the current year.

(5) Small producer alcoholic products are in a particular discount band if the relevant production amount in relation to those products—

(a) exceeds the start threshold for that band, but

(b) does not exceed the end threshold for that band.

(6) The start and end thresholds, cumulative discount and marginal discount for a discount band are the figures shown—

(a) in relation to alcoholic products (other than qualifying draught products referred to in paragraph (b)) of a particular description, in the tables in Part 1 of Schedule 9, and

(b) in relation to qualifying draught products (in respect of which no election has been made under section 50(2)) of a particular description, in the tables in Part 2 of Schedule 9.

Commencement Information

I11 S. 59 not in force at Royal Assent, see s. 120(2)

I12 S. 59 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

60 Assessments where incorrectly low rate of alcohol duty applied U.K.

(1) This section applies if—

(a) alcohol duty is charged on alcoholic products,

(b) it appears at the excise duty point that the alcoholic products are small producer alcoholic products, and

(c) it turns out that the alcoholic products were not small producer alcoholic products (including where circumstances were not as they appeared at the excise duty point or where circumstances subsequently changed).

(2) This section also applies if—

(a) alcohol duty is charged on small producer alcoholic products, and

(b) the discounted rate that at the excise duty point appeared to be the correct rate turns out to be lower than the correct rate (including where circumstances were not as they appeared at the excise duty point or where circumstances subsequently changed).

(3) The Commissioners—

(a) may assess as being alcohol duty due from the liable person an amount equal to the duty shortfall, and

(b) must notify that person or that person’s representative of any assessment under paragraph (a).

(4) In this section “duty shortfall” means the difference between—

(a) the actual amount of alcohol duty chargeable on the alcoholic products, and

(b) the lower amount that, at the excise duty point, appeared to be the amount chargeable.

(5) The reference in subsection (3) to the “liable person” is a reference to the person liable to pay the alcohol duty on the alcoholic products.

Commencement Information

I13 S. 60 not in force at Royal Assent, see s. 120(2)

I14 S. 60 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

Mergers and demergers U.K.

61 Mergers: general provisions U.K.

(1) This section and sections 62 to 67 apply where a small producer (“SP1”) becomes connected with another small producer (“SP2”).

(2) “Post-merger production group” means the production group that consists of—

(a) every set of premises on which SP1 or SP2 produces alcoholic products, and

(b) every set of connected premises,

and references to “post-merger production group premises” are to premises within paragraph (a) or (b).

(3) In relation to the post-merger production group—

(a) “Year 1” means the production year in which SP1 and SP2 become connected with one another,

(b) “Year 2” means the production year immediately following Year 1,

(c) “Year 3” means the production year immediately following Year 2, and

(d) the “pre-merger year” means the production year immediately preceding Year 1.

(4) Each of Year 1, Year 2 and Year 3 is a “merger transition year” in relation to the post-merger production group, unless any of the following apply—

(a) section 65 (early termination of merger transition period),

(b) section 66 (subsequent mergers), or

(c) section 68(8) (demergers in a merger transition year).

Commencement Information

I15 S. 61 not in force at Royal Assent, see s. 120(2)

I16 S. 61 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

62 Modified “small production premises” test U.K.

(1) This section (instead of section 56) applies in relation to a post-merger production group in a merger transition year.

(2) Post-merger production group premises are “small production premises” in the current year in relation to alcoholic products if—

(a) the adjusted post-merger amount, determined in accordance with section 64 does not exceed the small production limit (within the meaning of section 56(4)), and

(b) in relation to each set of post-merger production group premises, less than half of the alcohol production amount (if any), in relation to those premises, for the previous year was contained in alcoholic products produced under licence.

Commencement Information

I17 S. 62 not in force at Royal Assent, see s. 120(2)

I18 S. 62 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

63 Modified duty discount U.K.

(1) This section applies in relation to alcoholic products that are produced—

(a) on post-merger production group premises, and

(b) in a merger transition year.

(2) For the purposes of section 59, references to the “relevant production amount” are references to the adjusted post-merger amount (and subsections (3) and (4) of that section do not apply).

(3) Section 58(c) does not apply for the purposes of the application of section 55 or 59 in a merger transition year.

Commencement Information

I19 S. 63 not in force at Royal Assent, see s. 120(2)

I20 S. 63 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

64 Adjusted post-merger amount U.K.

(1) In Year 1, the adjusted post-merger amount is the alcohol production amount in relation to the larger producer’s premises for the pre-merger year, determined in accordance with section 57 (and the alcohol production amount attributable to the smaller producer for the pre-merger year is disregarded).

(2) In Year 2, the adjusted post-merger amount is the total of—

(a) the adjusted post-merger amount in Year 1, and

(b) one-third of the production difference for Year 2.

(3) In Year 3, the adjusted post-merger amount is the total of—

(a) the adjusted post-merger amount in Year 1, and

(b) two-thirds of the production difference for Year 3.

(4) The amount of the “production difference” for a merger transition year is the difference between—

(a) the aggregate of the alcohol production amount, in relation to every set of post-merger production group premises, for the previous year (determined in accordance with section 57), and

(b) the adjusted post-merger amount in Year 1.

(5) If the alcohol production amount attributable to SP1’s premises for the pre-merger year is greater than the alcohol production amount attributable to SP2’s premises for that year—

(a) SP1 is the “larger producer”, and

(b) SP2 is the “smaller producer”,

and vice versa.

(6) If the amount mentioned in subsection (5) is equal in relation to both SP1’s premises and SP2’s premises, either SP1 or SP2 may be treated as the “larger producer” for the purposes of this section.

(7) In subsections (1), (5) and (6), references to a person’s premises are references to—

(a) the premises on which the person produces alcoholic products immediately before becoming connected with the other person mentioned in section 61(1), if those premises are (at that time) non-group premises, or

(b) if those premises are group premises, the production group which, at that time, includes those premises (and the reference in subsection (1) to the alcohol production amount in relation to those premises is a reference to the aggregate of the alcohol production amount in relation to those premises and every set of connected premises).

Commencement Information

I21 S. 64 not in force at Royal Assent, see s. 120(2)

I22 S. 64 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

65 Early termination of merger transition period U.K.

(1) This section applies in relation to a post-merger production group if, in a relevant year, Amount A is less than Amount B.

(2) “Amount A” is the aggregate of the alcohol production amount, in relation to every set of premises in the group, for the production year immediately preceding the relevant year (determined in accordance with section 57).

(3) “Amount B” is the adjusted post-merger amount in the relevant year.

(4) Neither the relevant year, nor any subsequent production year, is a merger transition year in relation to the group.

(5) Each of Year 1, 2 and 3 is a “relevant year” for the purposes of this section.

Commencement Information

I23 S. 65 not in force at Royal Assent, see s. 120(2)

I24 S. 65 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

66 Subsequent mergers U.K.

(1) This section applies if—

(a) a person who produces alcoholic products on group premises which are included in a post-merger production group (the “first post-merger group”) becomes connected with another person who produces alcoholic products (that are not exempt from duty under any of sections 72, 76 or 77), and

(b) the producers mentioned in paragraph (a) become connected with one another in Year 1, 2 or 3 in relation to the first post-merger group.

(2) Neither the production year in which the producers mentioned in subsection (1)(a) become connected with one another, nor any subsequent year, is a merger transition year in relation to the first post-merger group.

(3) But subsection (2) does not prevent the application of sections 61 to 67 in relation to the post-merger production group that includes both of the producers mentioned in subsection (1)(a).

Commencement Information

I25 S. 66 not in force at Royal Assent, see s. 120(2)

I26 S. 66 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

67 Simultaneous mergers U.K.

(1) Subsections (2) to (4) apply if, at the same time as SP1 becomes connected with SP2, SP1 also becomes connected with one or more other small producers (who are not already connected with one another).

(2) References in sections 61 and 64 to SP2 include references to the other small producers becoming connected with SP1.

(3) For the purposes of section 64—

(a) the “larger producer” is the producer with a greater alcohol production amount attributable to the producer’s premises for the pre-merger year than any of the other producers mentioned in subsection (1), and

(b) each of the other producers is a “smaller producer”,

(and this subsection applies instead of section 64(5)).

(4) If the amount mentioned in subsection (3)(a) is equal in relation to any two or more of the producers mentioned in subsection (1), any one of them may be treated as the “larger producer” for the purposes of section 64.

Commencement Information

I27 S. 67 not in force at Royal Assent, see s. 120(2)

I28 S. 67 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

68 Demergers U.K.

(1) This section applies if a demerger event occurs in relation to a production group.

(2) A “demerger event” occurs, in relation to a production group, if a group producer (the “demerging producer”) ceases to be connected with at least one other group producer.

(3) A “group producer” in relation to a production group means a person who produces alcoholic products on premises that are (immediately before the demerger event) included in the production group.

(4) For the purposes of the application of sections 56 and 59 in relation to the demerger year, the alcohol production amount for the immediately preceding production year, in relation to production premises that were (immediately before the demerger event) included in the group, is treated as being nil.

(5) If, before the end of the restricted period, the demerging producer becomes connected again with another group producer, none of sections 61 to 67 apply by reference to that connection.

(6) For the purposes of subsection (5), the “restricted period” is the period of 7 years beginning with the date on which the demerger event occurs.

(7) Subsection (8) applies if the demerger event occurs in Year 1, 2 or 3 in relation to a post-merger production group (the “relevant group”).

(8) Neither the production year in which the event occurs, nor any subsequent year, is a merger transition year in relation to the relevant group.

(9) References in this section to the “demerger year” are references to the production year in which the demerger event occurs.

Commencement Information

I29 S. 68 not in force at Royal Assent, see s. 120(2)

I30 S. 68 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

Interpretation of Chapter 3 U.K.

69 “Producer”, “production premises”, “group premises” etc U.K.

(1) This section applies for the purposes of this Chapter.

(2) “Production premises” means premises (whether or not in the United Kingdom) on which alcoholic products are produced.

(3) Production premises are “group premises” at a time in a production year (the “reference time”) if—

(a) a person (“P”) who produces alcoholic products on the premises at the reference time or at any earlier time in that year, or

(b) a person connected with P,

also produces alcoholic products on any other premises at the reference time or any earlier time in that year.

(4) “Connected premises”, in relation to group premises, means premises on which alcoholic products are produced at the reference time or at any earlier time in the current year, by—

(a) P, or

(b) a person connected with P.

(5) References to “the production group”, in relation to group premises, are references to the group consisting of—

(a) the group premises, and

(b) every set of connected premises.

(6) Production premises are “non-group premises” at a time in a production year if, at that time, they are not group premises.

(7) In this Chapter—

(a) references to the “producer”, in relation to a set of premises, are references to the person who produces alcoholic products on those premises, and

(b) references to a “small producer” are references to a person who produces small producer alcoholic products.

Commencement Information

I31 S. 69 not in force at Royal Assent, see s. 120(2)

I32 S. 69 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

70 Connected persons U.K.

(1) References in this Chapter to a person being or becoming connected with another person are to be construed in accordance with section 1122 of CTA 2010.

(2) But the Commissioners may, if they think it appropriate, treat two connected persons as if they were not connected with one another for the purposes of this Chapter.

Commencement Information

I33 S. 70 not in force at Royal Assent, see s. 120(2)

I34 S. 70 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)

71 Index of defined expressions: Chapter 3 U.K.

The following Table sets out expressions defined or explained for the purposes of this Chapter—

Expression	Provision
adjusted post-merger amount	section 64(1) to (3)
alcohol production amount	section 57(1)(a)
connected premises	section 69(4)
current year	section 54(1)
duty discount	section 59(1)
estimated alcohol production amount	section 57(1)(b)
group premises	section 69(3)
merger transition year	section 61(4)
non-group premises	section 69(6)
post-merger production group	section 61(3)
post-merger production group premises	section 61(2)
previous year	section 54(4)(b)
producer (in Chapter 3)	section 69(7)(a)
production group	section 69(5)
production premises	section 69(2)
production year	section 54(4)(a)
small producer	section 69(7)(b)
small producer alcoholic products	section 55
small production limit	section 56(4)
small production premises	section 56 (for general purposes); section 62 (in relation to a post-merger production group)
SP1 and SP2	section 61(1)
Year 1, Year 2 and Year 3	section 61(3)

Commencement Information

I35 S. 71 not in force at Royal Assent, see s. 120(2)

I36 S. 71 in force at 1.8.2023 by S.I. 2023/884, reg. 2(1)(a) (with reg. 10)