Pubs, restaurants and hotels found guilty of substituting branded alcohol with cheap and bootlegged varieties risk losing their licences when the Licensing Bill comes into force later this year.
The Government has tabled an amendment to the bill to add "tipping" - or spirit substitution - to the list of offences. The measure should become law from the end of July.
New penalties could see transgressors' licences suspended for up to six months or permanently revoked - and that will be on top of the current fines that typically range between £50 and £2,500.
At present, offenders' licences come under scrutiny only when they come up for renewal.
"This important deterrent will reduce the amount of this illegal "rip off" in pubs and restaurants by up to £10m every year, a major achievement at the stroke of a pen," said Philip Scratchard of the International Federation of Spirits Producers UK (IFSP).
The offence of spirit substitution covers: tipping cheaper liquor into branded bottles of spirits; attaching a branded label on to a cheap bottle of alcohol; selling cheap lager in place of high-quality draught beer; and passing off sparkling wine as Champagne.
Although the problem has halved since 1999, the IFSP estimates that tipping still occurs in 4% of on-licensed premises, costs consumers some £20-£22m a year, and nets unscrupulous traders as much as £15 in extra profits per bottle.
It can also kill in cases where industrial alcohol has also been substituted.
Although most prevalent in pubs, tipping also occurs in hotels and restaurants and is a particular problem in ethnic restaurants, the IFSP said.
"It's absolutely fantastic. It's about time the Government got to grips with this problem," commented Matt Jackson, owner of real ale pub the Water Witch in Lancaster. However, he cast doubt over whether the Government had the resources to enforce the law - Jackson has had only one visit from Trading Standards officers in two years.
However he believed tipping was rife throughout the trade, as was illegal distribution. Illegal distributors could supply almost anything - from bootleg Pepsi or Coke from the Czech Republic to malt whisky, all with the correct labels, he said.
By Angela Frewin
Source: Caterer & Hotelkeeper magazine, 3 - 9 July 2003