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The Spring Budget 2023 – Consumer Sector Highlights

13 April 2023

The Chancellor, Jeremy Hunt, delivered his first full Budget on 15 March 2023. As expected, there was little change to headline tax rates but it was not short of announcements. The Tax team has reviewed some of the key measures in the consumer sector. 

Alcohol Duty

On 1 August 2023, after being frozen since 2020, alcohol duty rates will rise in line with RPI. Consumers, retailers and producers alike will feel the hit. The hike in rates is coupled with an overhaul to the alcohol duty system, which will also apply from 1 August, which shifts taxation to a system where duty is paid by reference to the product's final alcohol by volume (ABV", harmonizing rates for different types of beverages and reducing the overall number of rates. As a tax on tax, VAT will then be added to the duty-inclusive price.

The Chancellor keenly announced an increase to the Government's new draught relief, saying this would lower the cost of draught beer and cider in pubs, restaurants and other venues. From 1 August 2023, the relief for draught beer and cider will increase from 5% to 9.2% (with draught relief increasing from 20% to 23% for limited wine, spirits based and other fermented draught products).

Away from the headline announcement, there are many in the industry who will feel aggrieved and concerned at the double impact of soaring rates of inflation on the rates at the same time as the change in the duty regime, with no comparable relief.

Those affected will be assessing how the forthcoming changes will impact their profitability and business models. Draft legislation for the new regime is being published on 23 March 2023.


Customs simplification

The government announced a package of measures intended to simplify customs import and export processes for traders, following EU exit and renegotiation of the Northern Ireland protocol.

The current regime is extremely complex, and many traders fall foul of the policies and procedure inadvertently. Since Christmas alone there has been a noticeable increase in seizures activity by UKBF and HMRC. This includes seizures for incorrect tariff declarations, duty and VAT. Any simplification of the customs' regime will no doubt be welcomed by traders importing and exporting.

Changes will be brought in gradually, taking into account changes that will need to be made to current systems, and to ensure that there is sufficient lead time for traders to implement the changes.

1. Review to simplify and streamline customs declarations.

The Government is keen to take advantage of Brexit and will be working with stakeholders to review customs declarations requirements later this year to make them more streamlined. There will be a particular focus on export declarations, as well as on ensuring that customs declarations do not impose disproportionate burdens on small and less experienced UK businesses.

2.  Simplified Customs Declaration Process improvements (SCDP)

As a result of an earlier review that was carried out in 2022, improvements to the SCDP are to include increasing the amount of time traders have to submit supplementary returns and allowing traders to submit one supplementary declaration for goods imported over the course of a month (known as aggregation), reducing the total number of declarations that have to be submitted. No timeframe has been announced for these changes to take place, and the Government will work with stakeholders to set timeframes for delivery. 

3. Introducing voluntary standards for customs intermediaries.

Customs intermediaries offer a vital service to importers and exporters of goods, often by completing customs declarations and collecting and paying tariffs, duties and import VAT. However, this industry varies significantly in the quality of the service provided. Mistakes made by the intermediaries can lead to seizures as well as duty/VAT assessments against the owner or holder of goods. The Government will consult in summer 2023 on introducing a voluntary standard for customs intermediaries, with the aim of improving the overall quality of service provided across the sector.

4. Transit policy simplifications

.Transit is currently a customs special procedure which is governed by the Common Transit Convention (CTC). The CTC allows goods to move under duty suspense across multiple customs territories until the goods arrive at their final destination, at which point customs duties and VAT become applicable. New measures are to be introduced to simplify and improve processes for both outbound and inbound movements as well as procedures for in response to feedback consignee/consignors.

5. Modernising Authorisations

The Government will engage with stakeholders on plans to streamline and digitise HMRC’s customs and excise authorisation processes through with the aim of simplifying authorisations for customs facilitations and delivering a new digital self-serve portal for traders. These improvements will lead to traders being able to manage, view and amend their movements in real time.

6. Changes to Customs Guarantees for Special Procedures, Temporary Storage and Duty Deferment

The Government removed the guarantee requirement for most traders in January 2021, taking advantage of the flexibility of being outside the EU, and is now considering further changes to enable more traders to use these customs facilitations without a guarantee and benefit from the associated cost saving.

Spring Budget 2023 customs package - GOV.UK (www.gov.uk)

Plastic packaging tax rate and late payment penalties

The Plastic Packaging Tax, which came into force on 1 April 2022 will be uprated in line with CPI from 1 April 2023. The tax, which is charged on the manufacture or import of plastic packaging, is currently charged at £200 per tonne and will increase to £210.82 per tonne from 1 April 2023.  In addition, the late payment penalty regime will be amended from 1 April 2023 to treat those primarily liable consistently with those who are joint and severally or secondarily liable to make a payment of plastic packaging tax.

VAT on the deposit return scheme

With the Deposit Return Scheme due to go-live in Scotland on 16 August 2023 and the rest of the UK in 2025, retailers, consumers and producers alike have recently pressed for further information on the VAT treatment of the 20p deposit per scheme article that retailers will be tasked with collecting. 

Details have been confirmed in today's Budget that the Government intends to legislate so that where the scheme article is returned for recycling at a deposit return point, VAT will not be applied to the deposit amount.  Conversely, where the scheme article is not returned for recycling appropriately, VAT will be charged on the unredeemed deposit.

In theory, this means that producers of scheme articles will ultimately bear the actual cost of VAT on unredeemed articles. However, the economic reality is that the cost of irrecoverable VAT will be passed on to consumers.

If you do require any further information on implications of implementing and complying with the Deposit Return Scheme do not hesitate to contact Caroline Colliston your usual DWF contact. 

Fuel Duty

Prices for petrol and diesel remain volatile following Russia's invasion of Ukraine and the general inflationary environment, as such, the Government have decided to extend the temporary 5p fuel duty cut for a further 12 months. Fuel duty is currently levied at a headline rate of 52.95p per litre for both petrol and diesel, whilst VAT at 20% is then charged on both the product price and the duty. Fuel duty has been frozen since 2011-12 and the 5p cut was introduced in 2022-23.

Business rates

Business rates are already a matter devolved to the Scottish, Welsh and Northern Irish Governments. In today's Budget, the Chancellor, Jeremey Hunt, set out further steps to allow two mayoral regions of England (West Midlands Combined Authority and Greater Manchester Combined Authority) to retain 100% of the business rates they collect. This will in turn allow these areas further capability to manage their own local transport, employment, housing and net zero priorities.

In another boost to local leadership, the Government has indicated that in the next Parliament, it would expand local retention of business rates to more geographical areas. However, there is currently little detail on how Government will engage with interested councils to achieve this.

In addition, the Government has published the summary of responses to a business rates technical consultation launched in November 2021. It constitutes the final part of the business rates review (originally commenced in March 2020) before the introduction of the Non-Domestic Rating Bill in Parliament. Amendments prompted by stakeholder participation in the consultation include:

  • the extension of a proposed 30-calendar day reporting window on changes to occupier and property characteristics affecting business rates to a 60-day window;
  • the extension of the three-month window to challenge 2026 rateable values to a six-month window, with the three-month window not now expected to be introduced until 2029; and
  • the removal of the constraint in section 47(7) of the Local Government Finance Act 1988 on the retrospective award of business rates relief, allowing local authorities to apply relief retrospectively and set their own rules for notification of reliefs in their areas from 1 April 2024.

These moves towards devolving further powers for local areas to fully control the revenues they collect from business rates, in addition to funding announced for investment zones and levelling up projects, suggest that there will be opportunities for the regions of England (outside of London and the South East) to develop their economic landscapes to attract business and investment.

Capital allowances

A key announcement in the Budget was the introduction of "full expensing" for certain capital expenditure by companies subject to corporation tax on qualifying plant and machinery between 1 April 2023 and 31 March 2026.

More particularly, this will mean 100% corporation tax relief on new qualifying "main pool" expenditure (which accounts for most plant and machinery), and 50% initial relief for "special rate pool" expenditure (which includes certain types of long life assets (with expected economic lives of over 25 years) and integral features such as lifts and air conditioning systems), with the balance of the special rate pool expenditure written off in future accounting periods currently at a rate of 6%.

This announcement is designed to fill in the gap left behind by the end of the "super-deduction" (which only applies to capital expenditure from 1 April 2021 to 31 March 2023) and to stimulate UK investment.

Labour market

Multiple measures were announced to support the challenges of the labour market from 'returnships' to childcare support and a detailed review of support required to deal with labour shortages in hospitality.

If you would like to discuss any of the above measures please contact any member of the Tax team.

Further Reading