Time called on below cost price drinks

What is happening?

While the Government has shelved proposals to introduce minimum per-unit pricing for alcohol, it is pressing ahead with plans to ban the sale of alcoholic drinks at below cost price.

Ministers say this is necessary to reduce the harm caused by excessive alcohol consumption.

What are the plans?

The Government is seeking to outlaw the sale of any alcohol at below the level of duty plus the cost of VAT for any drink.

For example, at current rates this would work out at 41p for a 440ml can of lager of 4% ABV strength, £8.89 for a 70cl bottle of vodka at 37.5% ABV and £2.41 for a 750ml bottle of wine at 12.5% ABV.

Retailers, bar and club operators and restaurateurs will have to make sure they take into account the rates when offering discounts such as ‘buy one, get one free’ offers or when putting together food offers which include alcoholic drinks in the price.

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 do the rules come into force?

Draft legislation to bring these rules into force is being put before Parliament and the legislation will come into force in April 2014, providing the legislation is approved.

What happens if the rules are broken?

The ban on selling alcohol below cost price 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.

Premises which break the ban may be committing an offence under the 2003 Licensing Act. This could result in a prosecution which may lead to a fine and potentially a licence review, which could result that licence being revoked.

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.

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.

Since licence holders who regularly run drinks promotions are more likely to face checking visits by enforcement authorities, they would also do well to 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.