Today (6 April 2018) sees the introduction of the Soft Drinks Industry Levy (SDIL), otherwise known as ‘sugar tax’ and two leading drinks manufacturers have arrived at very different strategies in their response to SDIL.
Coca Cola’s approach 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 ½ – therefore making it exempt from the levy.
Either of the above is of course an option, although Coca Cola is 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 healthier, lower sugar options is the best way to keep sales bolstered, whilst avoiding the levy altogether. Although, as we have seen with Irn-Bru in Scotland, there may be revolt amongst consumers if the taste of the product is perceived to have changed.
The other thing to bear in mind is that, with pressure on the NHS being an ever present news-item, this may be the precursor to further levies the government may wish to introduce to fight obesity. Perhaps by lowering the level of sugar allowed further, expanding the levy to include smaller manufacturers or indeed by moving onto other products such as cakes and confectionery. The push for less sugar in our diet is here to stay and this is likely to be the first item on a menu of tax/levy rises (so to speak).
So, what are the parameters of the levy?
A drink is liable to the levy 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 (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 do one, or more, of the following:
- 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 any other jurisdiction
If you produce less than one million litres of liable drink
You’re a small producer and don’t need to register if all of the following apply:
- you only package your own liable drinks
- you 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
Click here to work out if you should be registered.
How and when to register
Click here for further information as to how and when you have to register. You can follow the same link in order to register now.
Please note that from the 6 April 2018 you must register within 30 days of the end of the month in which you fall into the levy’s parameters. Again, details can be found following the link above.
Report and pay
When a drink becomes liable for the levy, you’ll 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 will be due for the June 2018 period and payment must be made within the period of 30 days beginning with the last day of the accounting period.
You must keep copies of invoices and other sales documents.
How much you will 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
PKF Francis Clark can assist if you think your business may be liable to register for SDIL or if you have any queries on the levy. Contact a member of our VAT team or your normal PKF Francis Clark contact.