The Soft Drinks Industry Levy, dubbed the “Sugar tax” was introduced in April this years and taxes manufacturers 18p per litre produced if the drink contains 5 grams of sugar per 100ml, and 24p per litre for more than 8 grams of sugar.
The tax was expected to raise £520 million per year, to be used to pay for school sports, however, the Government recently revised down this figure to over half with an anticipated £240 million expected to be collected , since many soft drinks manufacturers have reformulated their products.
For example, AG Barr recently reformulated Irn-Bru to reduce sugar content from 10.3g/100ml to just 4.7g/100ml. AG Barr says that 99% of its products are now not subject to the sugar tax.
The Government says, however, that it will take money from other Government budgets to ensure the full £520 million is made available for school sports.
Accountancy group UHY Hacker Young says that while the reaction of soft drinks manufacturers to the Levy has been a positive one, targeted taxes of this type run the risk of gradually adding to red tape and complexity in the tax system.
“Targeted taxes like the ‘Sugar Tax’ might have very noble aims, but they do run counter to the aim of simplifying the tax system,” said James Simmonds, partner at UHY Hacker Young and head of the firm’s drinks industry team.
“The evidence of health benefits from these taxes is relatively limited, but the Sugar Tax certainly adds to the burden of cost and red tape for businesses.”
“It’s good to see the soft drinks manufacturers responding so positively to the new tax – reducing sugar levels in drinks makes sense financially, given the potential cost of the Levy.”
“It does remain to be seen how the Government will make up the £280 million shortfall in money for school sports, however.”