Soft drinks industry levy: the UK’s tax on sugar
13 February 2018
What is the Sugar Levy?
The Soft Drinks Industry Levy (also known as the “Sugar Levy”), was announced by Chancellor Philip Hammond in his budget statement in 2017 in an attempt to curb rising levels of obesity in the UK.
The Sugar Levy is due to come into effect on 6 April 2018. It affects UK producers, importers, retailers of soft drinks and consumers who buy soft drinks in the UK.
How will the new Sugar Levy work?
Producers and importers of soft drinks will pay a flat levy based on the total sugar content of the drink:
- 18 pence per litre for drinks with more than 5g/100ml of added sugar; or
- 24 pence per litre for drinks with more than 8g/100ml of added sugar.
A drink is liable if it meets all of the following conditions:
- it has a content of 1.2% alcohol by volume or less;
- it is 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 is packaged ready for sale;
- it has had sugar added during production, including pure cane sugars like sucrose and glucose as well as substances that contain sugar, such as honey; and
- it contains at least 5g of sugar per 100 ml in its ready to drink or diluted form.
On the other hand, the Sugar Levy will not apply to a drink that meets one of the following conditions:
- it is a pure fruit juice or any other drink with no added sugar;
- it contains at least 75% milk;
- it is a milk-substitute which contains at least 120 mg of calcium per 100ml, for example soya or almond milk;
- it is an alcohol replacement drink, for example de-alcoholised beer or wine; or
- it is infant formula, follow-on formula, baby foods, formulated food intended as a total diet replacement or dietary food used for special medical purposes.
Chocolate and sweets are not included in the Sugar Levy. Furthermore, there will be an exemption for the smallest producers (producing less than 1 million litres of liable drinks in the last 12 calendar months) and operators importing soft drinks from such producers abroad.
What businesses need to do before April 2018
If your business has produced more than 1 million litres of liable drink in the last 12 calendar months for your own brand or brands you have the rights to manufacture, or if your business packages or imports liable drinks, then from 6 April 2018 onwards, your business will need to register within 30 days of the end of the month in which you:
- first need to report drinks that you have packaged or brought into the UK; or
- produce more than one million litres of liable drinks in the previous 12 calendar months.
At the moment, online registration is open and businesses can sign-up here.
From April 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.
Challenges faced by the industry
The government has given the industry the freedom to pass on the levy to consumers, and expects consumers to react and consume fewer sugary drinks. However, the industry will experience foreseeable impact from the Sugar Levy and many businesses are already preparing for the change, notably by reducing the sugar content in their products in order to avoid or reduce the levy.
Once the Sugar Levy takes effect in April 2018, businesses will be expected to incur one-off costs of familiarisation with the new rules including training for staff, and for registration with the UK tax authority. Further down the road, on-going expenses will be required for completing, filing and paying quarterly returns and keeping appropriate records.
It is also anticipated that the Sugar Levy will make it easier for emerging brands (particularly those offering low sugar options) to enter the market.
For more information or to discuss the levy and how it will impact you please contact Chloe Gastrell or Andrew Terry.