The government says the responses to the consultation on the so-called ‘sugar tax’ will be used to refine the scheme’s design. There will be a technical consultation on draft legislation and legislation in Finance Bill 2017.

HMRC estimates suggest the tax will raise £520m in the first year, although this is expected to fall over time as producers and consumers shift their behaviour. Across England the government will invest the revenue in programmes reduce obesity and encourage physical activity and balanced diets in giving school-aged children.

The soft drinks industry levy will be charged to producers and importers of soft drinks with added sugar. It will apply to volumes of added sugar drinks with total sugar content of 5 grams or more per 100 millilitres, with a higher rate for drinks with 8 grams or more per 100 millilitres. It will not apply to any drink where no sugar is added, or to alcoholic beverages with alcohol content above 0.5% ABV, which cannot lawfully be sold in a shop to under-18s.

The two-year delay before the levy’s introduction is intended to give manufacturers time to re-formulate their products and cut the sugar content.

Liability for the levy will arise at the point of production or importation, where the product is not intended for use in further manufacturing processes. In the case of UK-based production this is likely to be at the point at which the company packages the product, so in the case of syrups intended for dilution in bars and restaurants the product becomes liable for the levy when the syrup is packaged rather than when it is diluted. In the case of imports, the levy will become due when liable products are imported into the UK.

HMRC says its intention for UK-based production is that the packager or bottler of the liable product should be the person liable to register and pay the levy, whether they are the legal owner of the product or not.

There will be an exemption small producers, although the limit for the exclusion or relief has not yet been set. One option is to exclude both small importers and small producers from the levy provided the volume they import or produce is below a set level.

 An alternative would be to provide a universal relief on the first portion of liable products. This model would disregard either a set volume of liable products each year on a rolling 12 month (backward looking) basis, or a given annual levy liability in pounds sterling, similar to the income tax personal allowance.

From 2018, producers and importers who are liable for the tax will have to register with HMRC. Once registered, businesses will need to submit a quarterly tax return online. This will include information about the soft drinks produced in the period and the tax to be paid. Businesses will be required to make an electronic payment of the tax due. Payment will be required within a month of filing the tax return.

As this is a self-declared tax, businesses may also be required to report their overall liability, depending on the final design of the digital solution.

HMRC says it will be looking for additional compliance powers. This is likely to include the power to require producers of dilutable cordials to pay the levy at a standard dilution ratio where the tax authority believes their dilution ratio has been set to avoid the levy but in reality is greater.

Businesses will be required to test the sugar content of liable products on at least a yearly basis to ensure that sugar content of the product reflects the levels declared on the product packaging, and keep the results in their business records.

HMRC proposes to introduce new penalties and sanctions for failure to comply with the scheme, including a specific new offence for importers and producers who are liable for the levy and who have failed to register or pay the levy on their production or imports. Additional penalties and sanctions may include criminal prosecution, civil penalties and seizure of goods.

The closing date for comments is 13 October 2016.

The consultation on the Soft Drinks Industry Levy is here.