A recent first tier-tribunal case has given new meaning to victory beers.
Molson Coors, who brew the lager Carling, defeated HMRC in a case where the tax authority claimed the brewer had underpaid its taxes.
The case specifically related to the excise duties on beer. HMRC's claim hinged entirely on the difference between Carling’s marketed and actual ABV. Since 2012, the lager has been brewed at 3.7% ABV. But the beer is advertised as having an alcohol content of 4%.
Molson Coors has calculated its excise duty using the actual ABV of each batch of beer at that point in time.
That 0.3% difference was the £50m question, literally: HMRC contends that the brewer should have calculated its liability by reference to the higher ABV shown on its packaging. In that case, the company should have paid £50m more in tax from September 2012 to January 2015, based on rates that would have been applicable to a 4% ABV lager.
Luckily for Molson Coors, the FTT disagreed with the tax authority’s analysis.
The brewer, it ruled, should be taxed on the basis of the actual measured alcohol proof of the beverage, rather than its advertised potency.
The tribunal predicated its ruling on a specific, catchily named piece of EU legislation: Article 3(1) of Directive 92/83/EEC [on the harmonization of the structures of excise duties on alcohol and alcoholic beverages].
The tribunal’s concluding statement emphasised the word ‘actual’ as used in this legislation. The legislation provides that: excise duty levied by member states on beer “shall be fixed by reference the number of hectolitre/degrees of ‘actual alcoholic strength by volume’ of finished product”.
Therefore, the tribunal concluded, Molson Coors's judgment of its tax affairs was indeed sober.
About Francois Badenhorst
I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter.