Government confirms plan to ban below cost price alcohol sales
27th May, 2014
The Government has confirmed plans to outlaw the sale of alcohol at below cost price.
What is happening?
Last July, the Government abandoned plans to introduce a minimum price of 45p per unit for the sale of all alcoholic drinks.
However, it is pressing ahead with plans to ban the sale of alcoholic drinks at below cost price and has now confirmed that this ban will be a new condition of the Mandatory Code of Practice which applies to all licensed premises in England and Wales.
What will happen?
The ban will make it against the law for any outlet to sell alcohol at less than the level of duty plus the cost of VAT for any drink.
The Government says this effectively means a can of ordinary strength lager cannot be sold for less than 40p.
The minimum price for other drinks at current rates would be around £8.89 for a 70cl bottle of vodka at 37.5% Alcohol By Volume (ABV) and £2.41 for a 750ml bottle of wine at 12.5% ABV.
Who will the rules apply to?
The rules will apply to all licensed premises and any online operations selling alcohol within England and Wales.
The only exceptions are in alcohol sales on board aircraft, boats engaged on international journeys and at airside bars in airports and seaside at international ferry terminals.
The premises licence holder, designated premises supervisor or personal licence holder – depending on the nature of the premises – will be the person deemed responsible for ensuring the rules are complied with.
When does the ban come into force and what happens if it is broken?
The ban comes into force on May 28 and will be enforced by local authorities including licensing authorities, Trading Standards and the police.
While the Government says it does not expect authorities to inspect the price of all alcohol at all premises, enforcement officers may request a copy of a premise’s pricing lists and take away for analysis to compare against the duty plus VAT permitted prices.
Non-compliance with the ban will be an offence under the 2003 Licensing Act for the person making the sale and, on conviction, could result in up to six months’ imprisonment and/or a fine of up to £20,000.
What does this mean for me?
Whilst most pubs, clubs and restaurants will be largely unaffected by the proposals, the new rules are likely to lead to greater scrutiny of convenience stores, supermarkets and off-licences which regularly run multi-buy or bulk alcohol sale deals.
According to Government figures, 220.2 million litres of alcohol were sold at below cost price in 2008 with six out of seven major supermarkets selling alcohol below cost price in that year.
As a result, such retailers should familiarise themselves with the current rates of duty and VAT and will need to carefully calculate what prices will and won’t be acceptable.
It is also important to remember that rates of duty are subject to regular change so a one-off check will not be sufficient to ensure you stay within the law.
In addition, rates of duty change according to alcohol content or ABV (Alcohol By Volume) so you cannot work out pricings for different strength beers, wines or spirits using one model.
Licence holders who regularly run drinks promotions are more likely to face checking visits by enforcement authorities so they should ensure that other aspects of their operation are fully compliant in case further investigations are made.
How can Ward Hadaway help?
Our licensing team can provide full advice on cost pricing and on other aspects of licensing law.
For more details on how we can help you, please get in touch.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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