Ask the Collective
The questions independent drinks founders ask most — answered. Distilled from years of community knowledge so the good stuff never disappears in the feed again.
What pricing strategy should we use when alcohol excise duty increases?
When excise duty increases, members strongly recommend passing the full increase directly onto customers rather than absorbing it into margin. **Key points:** - **Pass on the full increase** — Members emphasise this is "the only cost increase where the buyer cannot argue about the level or source of it." In the current cost climate, absorbing any part "would be madness" and the cost would simply get lost among other rising expenses. - **Customers expect it** — Buyers will always pass duty increases onto shelf price, so you should too; they understand duty is a fixed, transparent cost. - **Example calculation** — For a 37.5% ABV spirit in 70cl, a duty increase from £28.74 to £32.82 per pure litre equates to approximately 33p per bottle, which should be passed through directly. - **Stock timing opportunity** — If advance notice of the increase is available (members mentioned February 2023 as a possible implementation date), consider moving stock out of bond ahead of the increase or negotiating bulk pre-increase purchases with customers at a slightly elevated price—they will be trying to beat the increase anyway, creating a brief window to capture additional margin. - **Price-marked packs complexity** — One member flagged that adjusting price-marked packs post-duty increase is complex and worth planning for. - **Confirm through industry bodies** — The WSTA (Wine and Spirit Trade Association) receives HMT confirmation on duty decisions; membership is recommended to stay informed on timing and implementation.
What should I expect during an HMRC fit and proper test for alcohol trading compliance, and how should I prepare?
An HMRC fit and proper test typically involves one or more officers visiting your premises to assess whether you understand your licence, excise duty obligations, and can demonstrate proper due diligence to prevent duty fraud. **What to expect:** - Officers will ask detailed questions about how your spirits business operates — expect to explain the same concepts multiple times - The focus is heavily on **security and due diligence processes** to ensure no duty fraud can occur - They will assess your understanding of the specific **licence you've applied for and excise duty** requirements - Be prepared for questions that may seem basic or repetitive; the officers may not be deeply familiar with how the spirits industry works **How to prepare:** - **Treat it like a detailed production tour for complete newcomers** — don't skip anything, and mention every number and figure you can - Have clear documentation ready demonstrating your due diligence procedures - Be ready to walk through your security and compliance processes in depth - **Expect a visit to your office/premises**, not just a phone call — at least one case involved two officers attending in person **Overall outcome:** Members who have completed the process report it was "scary but worked out well" — the test is designed to verify competence and fraud prevention capability rather than to trap businesses.
How should VAT be calculated when excise duty on alcohol released from bonded warehouse exceeds 20% of the total value?
VAT on goods released from bonded warehouse is charged on the cost price plus duty, not on the selling price or final wholesale price. **However, when duty represents more than 20% of the total value, you must alert HMRC to the discrepancy**, otherwise they will initiate a review process—which members report is tedious and time-consuming. The calculation itself should be: cost price + duty = VATable base, then VAT at 20% on that sum. Failure to notify HMRC when duty exceeds the standard 20% threshold can trigger compliance reviews.