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UK Consults On 'Soft Drinks Industry Levy'

by Robert Lee,, London

18 August 2016

The UK Government has launched a consultation on its proposal for a Soft Drinks Industry Levy, which will be charged to producers and importers of soft drinks with added sugar.

The consultation forms part of the Government's broader strategy for tackling obesity. It is estimated that nearly two-thirds of adults in England are now overweight or obese. The indirect cost to the UK economy from obesity is put at between GBP27bn (USD35.5bn) and GBP46bn. The direct cost to the National Health Service includes GBP6.1bn for overweight- and obesity-related ill heath, and GBP8.8bn for type 2 diabetes.

As the consultation document explained, the SDIL will apply to volumes of added sugar drinks with total sugar content of five grams or more per 100 milliliters, with a higher rate for drinks with eight grams or more. It will not apply to drinks where no sugar is added, or to alcoholic beverages with alcohol content above 0.5 percent ABV, which cannot lawfully be sold to under-18s. The rates have not yet been set.

Legislation will be introduced to define "added sugars" for the purposes of applying the levy. The definition will exclude fruit juice, fruit puree, and fruit juice concentrate. It will also exclude milk-based drinks, but the Government is seeking feedback on the most appropriate approach to these products.

Liability for the levy will arise at the point of production or importation, where the product is not intended for use in further manufacturing processes. In the case of UK-based production, the Government intends that the packager or bottler of the liable product should be liable to register and pay the levy, whether they are the legal owner of the product or not.

The smallest operators will be excluded from the levy. The limit for the proposed exclusion has not yet been set.

In the case of imports, the levy will become due when soft drinks liable to the levy are imported into the UK. The importer will be considered to be the entity who receives those goods into the UK, and will be liable to register for and pay the SDIL. The Government will explore options for addressing any non-compliance risks associated with importers.

From 2018, liable producers and importers will be required to register with HM Revenue and Customs (HMRC), report information regarding their taxable products, and pay their tax liability on a quarterly basis.

The levy is expected to raise GBP520m in 2018-19, falling to GBP500 in 2019-20, and GBP455 in 2020-21, as companies reduce the sugar content of their drinks.

The Government stressed that the SDIL is not the same thing as a "sugar tax," as it "directly targets the producers and importers of sugary soft drinks to encourage them to remove added sugar, promote diet drinks, and reduce portion sizes for high sugar drinks."

In her foreword to the consultation document, Jane Ellison, the Financial Secretary to the Treasury, said: "Some companies have started to reduce the sugar content of their drinks, move consumers towards diet and sugar-free variants, and reduce portion sizes for high sugar beverages. We welcome these actions, but is clear that we need to go further and faster."

"The new Soft Drinks Industry Levy, announced at Budget 2016, creates strong incentives for further soft drinks reformulation. The levy is designed so that, by taking reasonable steps to reduce sugar content, UK producers and importers of soft drinks can pay less or escape the charge altogether."

Responding to the consultation's launch, Gavin Partington, Director General of British Soft Drinks Association (BSDA), said: "Given the economic uncertainty our country now faces we're disappointed the Government wishes to proceed with a measure which analysis suggests will cause thousands of job losses and yet fail to have a meaningful impact on levels of obesity."

"As an industry we recognize we have a role to play in tackling obesity, so it's a sad irony that the one category that has led the way in reducing consumers' sugar intake – down 16 percent from soft drinks since 2012 – is being targeted for a punitive tax. Our action on reformulation and smaller pack sizes is clearly working and in 2015 we became the only category to set a voluntary calorie reduction target of 20 percent by 2020. We also voluntarily extended the advertising rules regarding under 16s to all online media."

Earlier this month, forecasters Oxford Economics published a report that warned that the introduction of a SDIL could result in 4,000 job losses and a GBP132m reduction in the GDP contribution of the industry.

TAGS: compliance | tax | value added tax (VAT) | public health | law | United Kingdom | Health tax | manufacturing | HM Revenue and Customs (HMRC) | HM Revenue and Customs (HMRC)

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