Should alcohol duty be included in or excluded from margin calculations?

Whether to include duty depends on your purpose, but there are two distinct approaches:

**For internal analysis and strategy:** Exclude duty from margin calculations. This approach is cleaner and more useful because: - It allows meaningful comparison across different channels (duty-free/export vs. UK domestic sales) - It keeps margins consistent when duty rates change—important because you typically can't pass duty rate increases directly to customers without them accepting the cost increase separately - It gives you a true picture of what's fundamentally changing in your business

**For retail/wholesale customer discussions:** Include duty so your customer's margin calculations reflect their actual landed costs.

**Key principle:** Members note that duty is not reclaimable like VAT, so it cannot be treated the same way. The standard approach among strategic-minded producers is to exclude duty when benchmarking gross margins, especially since duty rates vary hugely internationally. This avoids the problem where a duty rate change on 1 February (for example) would artificially depress your reported margin percentage despite nothing fundamentally changing in your operation.

One member flagged that duty-suspended calculations are more complex and less commonly used.