Adnams: reform tax breaks for small brewers

Adnams has called for major reform of progressive beer duty (PBD), the tax relief for small brewers.

Reducing the rate of relief from the current level of £55 per barrel or having a "sunset clause", whereby no brewer gets PBD for more than say three years, are the two proposals from Adnams finance director Stephen Pugh.

Writing in the winter 2010 edition of SIBA's journal, Pugh also said a "case can be made" for extending PBD's upper limit to turn the "cliff edge" - where brewers of a certain size miss out entirely - into a gradual decline.

PBD is an issue that divides brewers. Its supports see it as a vital catalyst for growth among small brewers, while medium sized producers in particular say it distorts the market and gives unfair advantages to micros.

PBD sees 50% duty relief for brewers producing up to 5,000hl per year. At 5,000hl, relief is capped at about £160,000, and it's phased out between 30,000 and 60,000hl.

Pugh stressed that he wasn't being critical of brewers that receive PBD but has concerns about how the Government implemented it.

But he argued that PBD rate is currently set "too high" and is "too focused" on brewers producing less than 5,000hl. The incentive for brewers is therefore "fragmented".

He said there "cannot be an indefinite growth" in brewery numbers and "a continuing flood of entrants will increase competition for all".

"My question to the cask industry is: are we happy with a PBD structure that creates such strong incentives to remain small?

"I suspect that some at least will feel that they should not be penalised if they grow or merge and that a different structure of PBD would create better and fairer incentives than today's."

Pugh said the Campaign for Real Ale's plans to reforming PBD — extending the upper limit for relief to the EU maximum of 200,000hl or giving all brewers PBD on their first tranche of production — would do "very little to level the playing field".

Pugh also called for the Treasury to initiate a "formal and public appraisal of the structure of PBD".