Mr Stephen Timms (Financial Secretary, HM Treasury; East Ham, Labour)

I, too, welcome you to the Chair, Mr. Hood.

Clause 5 provides for an amendment to the Alcohol Liquor Duties Act 1979, which will give Customs and Excise the power to tackle tax avoidance practices in the production of cider and perry. I want to give a careful account of that, because the position is a little different from the one that we have been informed of so far.

The measure provides power to make regulations regarding operations and processes performed on cider and perry. In addition to regulating those activities, it will enable Customs and Excise to prohibit operations after the duty point that would, if they had been carried out before it, have resulted in greater duty being payable on the finished product. The most common example is the dilution of cider after duty has been paid. As we have heard, cider is dutied in bands according to strength. Dilution is a straightforward tax avoidance practice whereby cider is produced at the top end of a band and duty paid on that volume, and then diluted to decrease its strength but increase its volume, effectively reducing the duty liability of the finished product.

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