Budget Notes


Who is likely to be affected?

1. Businesses that pay excise duty on alcoholic drinks (e.g. drinks manufacturers and importers, and excise warehouse keepers).

General description of the measure

2. Legislation will be introduced in Finance Bill 2008 to repeal the current legal provision that allows HM Revenue & Customs (HMRC) to disregard fractions of a penny in any amount of duty due. This is because, since the half penny is no longer legal tender, this provision is superfluous.

3. In addition, HMRC will introduce a common method of calculating the excise duty due on all categories of alcoholic drinks. The introduction of a common method of calculation will remove the present inconsistencies in the way excise duty is calculated on alcoholic drinks, which arise from the different treatment of fractions within the calculation process. This measure will clarify that, under the common method, any fractions of amounts of volume or duty must not be disregarded during the duty calculation.

4. The relevant HMRC notices will be updated accordingly.

Operative date

5. The repeal of the fraction disregard will have effect on and after the date that Finance Bill 2008 receives Royal Assent. The common calculation method will be introduced later in the year after further discussions with the alcohol industry on timing.

Current law and proposed revisions

6. Section 137(2) of the Customs and Excise Management Act 1979 (CEMA) requires that where duty is chargeable on a volume of goods, the duty must be calculated proportionately on any fraction of that volume of goods. Section 137(3) of CEMA allows HMRC to determine the fraction to be taken into account. This applies equally to calculating any amount of duty due from or to a person and is not limited to excise duty on alcohol. No changes are proposed to these provisions.

7. Section 137(4) of CEMA allows fractions of a penny in any amount due to be disregarded. This is superfluous since the half penny ceased to be legal tender. This section is therefore being repealed.

Further advice

8. If you have any questions about this change, please contact the National Advice Service on 0845 101 9000. Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk