The sugar tax legislation has been approved through the Finance Bill 2017.

Two draft statutory instruments have been released for consultation and are now undergoing final amendments;

  • The Soft Drinks Industry Levy Regulations 2017 set out, in detail, the scope and operation of the levy
  • The Soft Drinks Industry Levy (Enforcement) Regulations 2017 will provide HMRC with specific enforcement and compliance powers

Liable drinks

A drink is liable if it meets all the following conditions:

  • It has a content of 1.2% alcohol by volume or less
  • It’s either ready to drink, or to be drunk it must be diluted with water, mixed with crushed ice or processed to make crushed ice, mixed with carbon dioxide or a combination of these
  • It’s packaged ready for sale
  • It has had sugar added during production, including pure cane sugars like sucrose and glucose as well as substances (other than fruit juice, vegetable juice and milk) that contain sugar, such as honey
  • It contains at least 5 grams (g) of sugar per 100 millilitres (ml) in its ready to drink or diluted form

Who has to register?

Your business must register if you:

  • Have produced more than one million litres of liable drink in the last 12 calendar months for your own brand or brands you have the rights to manufacture
  • Bottle, can or otherwise package liable drinks for someone else
  • Bring liable drinks into the UK from anywhere else, including the Isle of Man and Channel Islands

You must keep copies of invoices and other sales documents.

If you produce less than one million litres of liable drink…

You are a small producer and don’t need to register if all the following apply:

  • You only package your own liable drinks
  • You have produced less than one million litres of liable drink in the last 12 calendar months
  • You won’t produce more than one million litres in the next 30 days

Report and pay

Affected businesses will be able to register online from January 2018.

When a drink becomes liable for the levy, you will need to report it to HM Revenue and Customs (HMRC) in a quarterly return and pay the levy due. These will be fixed quarterly returns ending June, September, December and March. First returns are due in July 2018.

How much will you pay?

The amount you pay depends on the total sugar content of the drink. You will pay:

  • 18p per litre if the drink has 5g of sugar or more per 100ml
  • 24p per litre if the drink has 8g of sugar or more per 100ml

Coca-Cola and Irn-Bru – taking the fizz out of pop!

Two leading drinks manufacturers have gone down different paths regarding to how they plan to deal with the levy. Coca-Cola is to use smaller bottles and sell at higher prices rather than alter its famous sugar-laden secret recipe, while Irn-Bru will bring in a new lower sugar version of their drink with 4 teaspoons of sugar instead of 8 and a half – making it exempt from the tax!

Either of the above is an option of course, although Coca-Cola are likely to be able to absorb the cost of the levy by re-negotiating prices with retailers – unfortunately not all drinks manufacturers will have this kind of clout. It may be, that in these health-conscious times, re-branding drinks as ‘healthy low sugar’ options is the best way to keep sales bolstered whilst avoiding the levy altogether.

The other thing to bear in mind is that this may be the precursor to further levies the government may wish to introduce to fight obesity, perhaps moving onto cakes and confectionery! The push for less sugar in our diet is here to stay and this is likely to be the first course of tax rises (so to speak).

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