UK: “Sugar tax” proposed for soft drink producers, importers

UK: Sugar tax proposed for soft drink producers

The 2016 budget, presented this week in the UK, announces that the government will introduce a new tax or levy to be paid by producers and importers of soft drinks that contain high levels of added sugar. The levy will have an effective date in April 2018, and the revenue raised will be used to fund physical education and sport in primary schools.

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The so-called “sugar tax” will be applied on soft drinks (excluding fruit juices and milk-based drinks) based on total sugar content. There will be:

  • A main rate charge for drinks with between five and eight grams of sugar per 100 millilitres, and
  • A higher rate for drinks with more than eight grams of sugar per 100 millilitres.“

"Small operators” will be excluded from the measure.

KPMG observation

There is limited information regarding the sugar tax measure; however, the UK government will consult on the details over the summer with legislation expected to be introduced in Finance Bill 2017 for implementation from April 2018 onwards. 

While this levy may be referred to as a “sugar tax,” it is not the same as a previously suggested tax to be imposed at the final point of sale. Instead, it is a levy on the producers and importers—thus, this levy would be imposed higher up the supply chain. As well as this sugar levy itself, it may also increase value added tax (VAT) revenue to the extent that retailers choose to increase their retail prices in response.

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