A drink is liable for the tax if it meets five specified conditions. It must have a content of 1.2% alcohol by volume or less, be packed ready for sale, and contain at least 5g of sugar per 100ml in its ready to drink or diluted form.

It must also be 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. In addition, it must have 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.

The list of exemptions includes drinks which contain at least 75% milk; a milk-substitute which contains at least 120 milligrams of calcium per 100ml, for example soya or almond milk; an alcohol replacement drink, for example de-alcoholised beer or wine; infant formula, follow-on formula, baby foods, formulated food intended as a total diet replacement or dietary food used for special medical purposes.

HMRC says businesses are able to reformulate drinks to reduce the sugar content, which may either reduce or remove the drinks’ liability to the levy.

The amount of levy paid depends on the total sugar content of the drink. Current rates are 18p per litre if the drink has 5g of sugar or more per 100ml and 24p per litre if the drink has 8g of sugar or more per 100ml.

Businesses must register for the new levy scheme if they have produced more than one million litres of liable drink in the last 12 calendar months for their own brand or brands they have the rights to manufacture.

Businesses which bottle, can or otherwise package liable drinks for someone else also need to register, as do those that bring liable drinks into the UK from anywhere else, including the Isle of Man and Channel Islands.

Businesses that produce less than one million litres of liable drink are classed as a small producer and do not need to register if they meet three conditions.

These are that they only package their own liable drinks; they produced less than one million litres of liable drink in the last 12 calendar months; and they will not produce more than one million litres in the next 30 days.

Businesses can register voluntarily if any of their liable drinks are packaged by a third party in the UK. They will get a registration number. If they give this number to your third party packager, the drinks they package will not be liable.

It will be possible to register online from January 2018. From 6 April 2018 businesses need to register within 30 days of the end of the month in which they first need to report drinks that they have packaged or brought into the UK, and produce more than one million litres of liable drinks in the previous 12 calendar months.

Businesses also need to register within 30 days of the date that they know they will need to report liable drinks that they will package or bring into the UK in the next 30 days, or that they will produce more than one million litres in the next 30 days.

When a drink becomes liable for the levy businesses will need to report it to HMRC in a quarterly return and pay the levy due. These will be fixed quarterly returns ending June, September, December and March. The first returns are due in July 2018.

The guidance explains the rules for business that package in the UK, including those that package drinks for a small producer. Liable drinks need to be reported when they leave the place where they were packaged, except when they go to registered warehouse or made available for sale or free of charge before leaving where they were packaged.

Businesses that buy liable drinks from a supplier outside the UK before they are brought into the UK, will report them and pay the levy when they are first received at the business premises.

Businesses that have paid the levy on liable drinks which are then lost or destroyed can claim a credit for those drinks. They can also claim credits for liable drinks lost or destroyed by someone else, but must have documentation to prove that the event took place.

There are similar rules for claiming credits for paying the levy on liable drinks that have been exported.

Guidance Soft Drinks Industry Levy is here.

Report by Pat Sweet