Soft Drinks Industry Levy – consultation launched | KPMG | UK
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Soft Drinks Industry Levy – consultation launched

Soft Drinks Industry Levy – consultation launched

The consultation looks at the design and implementation of the levy on soft drinks with added sugar.


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At Budget 2016 the Government announced the introduction of a new Soft Drinks Industry Levy, designed to combat childhood obesity, which is currently intended to take effect from April 2018. HMRC will implement and administer the levy, which will apply to UK producers and importers of added sugar soft drinks with a total sugar content of five grams or more per 100 millilitres (ml), with a higher rate for drinks with a sugar content of eight grams or more per 100ml. A consultation has now been launched, setting out proposals for how the levy will be designed and implemented.

The consultation contains a number of specific questions on the following:

The definitions of the products in scope of the levy
The levy is intended to apply to ready-to-drink non-alcoholic beverages that contain added sugar, including cordials and ‘bag in box’ type drinks (but excluding milk-based drinks and fruit juices). Added sugar will be defined as sugar that is added during the manufacturing process, excluding certain fruit-derived sugars. The levy will not apply to drinks with a sugar content of over five grams per 100ml where these sugars have not been added during the manufacturing process.

The appropriate taxing point, and who will be liable to pay the levy
Liability for the levy is proposed to arise at the point of production or importation, where the product is not intended for further manufacturing use. For UK-based production, the packager or bottler would be liable to pay the levy. However, the consultation document acknowledges that this may not be the best solution and requests views on other options.

Keeping the smallest operators out of scope of the levy charge
The Government intends for the smallest producers to be excluded from the levy, although the threshold for this has not yet been decided. Two methods have been proposed:

  • Excluding producers below a certain threshold from the levy entirely; or
  • Allowing all producers a certain level of production on which the levy will not be charged.  

How to account for imports and exports
The levy will arise at the point of importation of added sugar soft drinks. An exemption for drinks imported into the UK for use on international travel is proposed. Where drinks which have had the levy paid are exported outside the UK, the Government proposes to allow an export credit, to be adjusted on the levy return.

The approach to compliance and how to minimise any avoidance or evasion risks
Producers and importers will need to register with HMRC and file a quarterly return, with any tax due a month after the return filing date. The return will contain information on drinks produced or imported liable for the levy at the main rate or the higher rate, drinks exported that had levy paid at the main rate, information on the dilution ratios of cordials and ‘bag in box’ mixes, and information on changes in production. HMRC will also be given various compliance powers to enforce the levy, including compulsory registration, penalties, and anti-fragmentation rules.

Responses to the consultation have been requested by 13 October 2016, which will be followed by consultation on the draft legislation to be included in Finance Bill 2017. If you have any comments that you would like KPMG in the UK to consider as part of our response, then please get in touch with your usual contact or one of the named contacts.


For further information please contact :

Prashant Karuthasen

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