Taxation in the Cannabis Industry – What You Need to Know
Jul 22, 2024
As the cannabis industry continues to grow, understanding the complexities of its taxation is crucial for business owners. This blog aims to provide a complete guide on cannabis-specific tax regulations, helping marijuana businesses and weed dispensaries stay compliant and avoid pitfalls.
Summary of the UK's Legal Marijuana Industry
Global Market Value: USD 13.2 billion in 2021
UK Market Value: Expected to reach USD 1.2 billion by 2024
Legal Since: 2018 for medicinal use
Cultivation: UK is a major exporter but imports 100% of its medicinal cannabis for domestic use
The UK's medicinal cannabis industry is growing rapidly but still faces significant challenges.
Despite being one of the largest cultivators of medicinal cannabis globally, all products prescribed and used within the UK are imported. This results in high costs and delays for patients.
History of Legal Marijuana in the UK
Cannabis has been illegal for recreational use in the UK since 1928 and is currently classified as a Class B drug. Although it was downgraded to Class C in 2001, making penalties less severe, it was reclassified to Class B in 2007.
Since the legalisation of medicinal cannabis in 2018, access remains limited due to stringent regulations and lack of guidance for doctors. Medicinal cannabis can only be prescribed for severe conditions like epilepsy, chemotherapy-induced nausea, and multiple sclerosis-related muscle spasms.
Current Cannabis Market
The UK’s medicinal cannabis market is expanding quickly. Revenue grew from less than USD 200,000 in 2019 to USD 87 million in 2021, and it's projected to hit USD 1.2 billion by 2024. However, the market is constrained by a complex and restrictive system, pushing many patients to the illicit market.
Cannabis Products in the UK
High-THC Products: 67%
Balanced Products: 30%
CBD Products: 4%
All medicinal cannabis products in the UK are imported, despite the country being a top exporter globally. The strict regulatory framework means that new NHS prescriptions for medicinal cannabis have not been issued in the last two years.
Cannabis Opportunities and Challenges
Opportunities:
Legalising cannabis could generate GBP 3.5 billion in tax revenue.
Easing regulations could make medicinal cannabis more affordable and accessible, stimulating market growth.
UK companies could leverage their cultivation expertise to enhance export performance.
Challenges:
The protracted process for obtaining prescriptions hampers market competitiveness.
Brexit has introduced new customs regulations, complicating the import and export of cannabis products.Marketing-Based Cannabis Education
The Future of Cannabis in the UK
Public opinion and political support for cannabis legalisation are growing, with 48% of the population and 79% of MPs supporting policy updates. While full legalisation may take years, incremental changes in medicinal cannabis regulations are expected, potentially paving the way for broader market opportunities.
Conclusion
The UK's legal marijuana industry is still in its early stages but shows significant potential for growth. Key opportunities lie in improving access to medicinal cannabis and developing CBD food products.
However, businesses must navigate a challenging regulatory landscape and stay updated on customs regulations post-Brexit.
As societal attitudes and policies evolve, the industry is likely to become more competitive, benefiting both domestic and international markets.
