Industry reacts to profit fears over 'undrinkable beer'

20-Jan-2016 - Last updated on 21-Jan-2016 at 13:30 GMT

The BBPA says it has 'reminded' its brewing members of the HMRC requirement to tell publicans how much duty has been paid on beer

Related tags Beer Cask ale Hmrc

The British Beer and Pub Association has said it will investigate 'ways to promote awareness and best practice', including pre-entry industry training, in the wake of serious concerns from tenants about how much drinkable beer is in a barrel.

The move comes after licensee Chris Lindesay, who runs the Sun Inn in Dunsfold, Surrey, launched a campaign arguing information about the amount of undrinkable sediment in cask-conditioned beer is not being passed on to licensees, leaving many to believe a firkin contains 72 pints of saleable beer when it could contain as little as 68.

HMRC passed a concession stating that duty doesn't need to be paid on the undrinkable sediment in cask-conditioned beer - as long as customers of the brewer including publicans, wholesalers and pub-companies are made fully aware of the quantity of beer on which duty has been charged.

The British Beer and Pub Association (BBPA) said it had also 'reminded' its brewing members of the HMRC requirement. However Lindesay, who also heads up the Punch Tenant Network, said the BPPA had not gone far enough.

Pub campaigner and Liberal Democrat MP Greg Mulholland said the issue raised questions that pubcos must answer and is calling for two separate inquiries from the HMRC and trading standards.

"Pubco price lists, gross profit calculators and training materials clearly and repeatedly mis-state the drinkable volume of the cask as 100% when, in actual fact, because of the undrinkable sediment, this is not the case.

"This raises serious questions that now need answering. How much have licensees been charged for undrinkable beer over the past decade?"

The Pubs Advisory Service's Chris Wright added: "It’s a real kick in the teeth for pubs to realise, at the end of the year, you are thousands of pounds short in the till. Publicans had feared their staff or cleaners had been dishonest when, in fact, the beer wasn't there to sell in the first place.

"As a trade body, we have approached the Minister for Small Business to come up with a permanent solution to this long-standing problem that hits pubs in their pockets."

Worried tenants have also claimed the issue could impact on how tied rents are calculated - which has been disputed by pub companies.

The BBPA said: "HMRC's 'Excise Notice 226: Beer Duty' allows breweries to exclude an agreed quantity of beer from paying duty as, due to the cask conditioning process, it will not be drinkable because it will contain sediment. The amounts agreed with HMRC varies from brewery to brewery.

"While, as a trade body, we have no involvement in the terms by which companies supply beers to their customers, at the pub level, all publicans, as a key part of running their business, should be aware of the sediment issues around beer in casks, and this will no doubt influence their discussions with their beer suppliers or pub companies. This is normal in the pub business and has always been the case, so no new issues arise.

"Tied rents are calculated according to RICS (Royal Institute of Chartered Surveyors) guidelines. Rent is calculated, based on a variety of factors relevant to that individual pub, in effect, being an overall picture of wet and dry sales, profitability and costs as achieved by a 'reasonably efficient operator' on that specific agreement. The valuation assumes they will get more yield on certain products such as lager, and lower yields on other products, including food, due to waste."

The Publican's Morning Advertiser has contacted HMRC and is waiting for a response.