326 soft drinks manufacturers hit by ‘Sugar Tax’

HMRC has confirmed that 326 soft drinks manufacturers have been hit by the so-called ‘sugar tax’, research by accountancy firm UHY Hacker Young has revealed.

The Soft Drinks Industry Levy was introduced on April 6, and taxes manufacturers 18p per litre produced if the drink contains five grams of sugar per 100ml, and 24p per litre for more than eight grams of sugar.

The measure was expected to raise £520m per year, which was to be used to pay for school sports. However, the government has recently revised down its expected income form the Levy to just £240m, as many soft drinks manufacturers reformulated their products to avoid paying the tax.

AG Barr, producers of Irn Bru, recently reformulated the drink 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 tax.

James Simmonds, partner of the AG Barr’s Nottingham office and head of the firm’s drinks industry team, said: “Targeted taxes like the ‘sugar tax’ might have very noble aims, but they do run counter to the aim of simplifying the tax system. 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 £280m shortfall in money for school sports, however.”