Policy paper

Soft Drinks Industry Levy: concentrates mixed with sugar when dispensed

Published 20 July 2022

Who is likely to be affected

UK producers and importers of soft drink concentrates used in fountain machines that contain separate packaged concentrates and sugar which are mixed when dispensed. It will also affect retailers using these machines.

General description of the measure

Consultation with industry members has identified an opportunity to close a minor loophole within the Soft Drinks Industry Levy (SDIL) and improve the consistency of its application.

This measure would extend the definition of a soft drink liable to the Soft Drinks Industry Levy to include packaged concentrates which are mixed with sugar when dispensed from a soft drink fountain machine.

The measure will apply the levy to concentrates which are mixed with sugar and diluted by a fountain machine to dispense a drink containing a total sugar content of 5 grams or more per 100 millilitres.

By clarifying the definition of a liable soft drink to include these concentrates, existing Soft Drinks Industry Levy rules — including registration, rates, accounting, and payment — will apply to producers and importers of concentrates manufactured for this purpose.

Policy objective

The measure will bring fairness and consistency to the application of Soft Drinks Industry Levy.

Background to the measure

HMRC and HM Treasury launched a consultation on the design and implementation of the Soft Drinks Industry Levy in August 2016 and set out a response confirming the broad policy approach. The levy came into effect in April 2018.

The Soft Drinks Industry Levy applies to packaged soft drinks containing at least 5g of sugar per 100ml of drink. Producers, manufacturers, and importers of liable soft drinks must register, report, and pay the levy on the volume of liable soft drinks packaged in, and imported into, the UK.

This measure will bring consistency across the soft drinks industry by making all packaged concentrates used in fountain machines, regardless of which stage sugar is added, fall within the scope of the Soft Drinks Industry Levy. Research indicates that the supply of these fountain machines is limited to a small number of producers in the UK, indicating the impact to be minimal.

Detailed proposal

Operative date

This measure will take effect from 1 April 2023.

Current law

Current law is contained in Part 2 of Finance Act 2017.

Proposed revisions

Legislation will be introduced in Finance Bill 2022-23 to amend Part 2 of Finance Act 2017. These amendments will bring into scope liquid flavour concentrates that are manufactured in or imported into the UK to be used in fountain (dispensing) machines that combine added sugar with the concentrate(s) when the beverage is dispensed.

Summary of impacts

Exchequer impact (£million)

2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028
Empty	Empty	Empty	Empty	Empty	Empty

The table has been left empty as the final costing will be subject to scrutiny by the Office for Budget Responsibility and will be set out at the next fiscal event.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure is expected to have a positive impact on the health of individuals in the UK. Excess sugar consumption is associated with obesity and excess weight, which increases the likelihood of individuals developing a wide range of serious health problems, such as type 2 diabetes, heart disease and a number of cancers. These health conditions can have major costs for individuals and families and can reduce individuals’ quality of life and ability to work.

The financial impact of this measure on individuals and households will depend on whether the charge is passed onto the consumer.

This change is not expected to directly impact on family formation, stability, or breakdown.

Equalities impacts

Overall, this measure is expected to have a positive impact on the health of individuals in the UK. The measure may have an impact on people with Type 1 or Type 2 diabetes or with Phenylketonuria (a condition where people are unable to metabolise certain artificial sweeteners). Alternative Soft Drinks Industry Levy free options are available so it is anticipated that any impact will be minimal. It is also not anticipated that this change will affect the range of products available on the market. HM Treasury and HMRC will continue to monitor the impacts of the Soft Drinks Industry Levy through stakeholder feedback.

Impact on business including civil society organisations

This measure is expected to have a negligible impact on businesses who produce and import concentrates used in fountain machines where the concentrate is mixed with sugar when dispensed. One-off costs could include familiarisation with this change. Continuing costs include completing Soft Drinks Industry Levy returns for liable concentrates that are mixed with sugar in fountain machines when dispensed, alongside any existing Soft Drinks Industry Levy return declarations. This measure is not expected to impact on civil society organisations.

Customer experience is expected to remain broadly the same as this measure does not change how businesses interact with HMRC.

Operational impact (£million) (HMRC or other)

This measure does not have any operational and delivery impact.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

This measure will be monitored through information collected from returns and receipts and feedback from stakeholders.

Further advice

Find out more information about the Soft Drinks Industry Levy.

If you have any questions about this change or wish to comment on the draft legislation, please email: vatispolicydesign@hmrc.gov.uk.