Finance (No. 2) Act 2023

Section 321

Schedule 21 U.K. Soft drinks industry levy: flavour concentrates

Introduction U.K.

1 Part 2 of FA 2017 (soft drinks industry levy) is amended as follows.

Meaning of “soft drink” and “package” U.K.

2 (1) Section 26 (“soft drink” and “package”) is amended as follows.

(2) At the end of subsection (1) insert “;

“(c) a liquid flavouring (a “flavour concentrate”) which, when processed in a specified manner in a dispensing machine, constitutes a beverage within that paragraph.”

(3) After subsection (2) insert—

“(2A) A flavour concentrate is processed in a specified manner if—

(a) it is combined with added sugar ingredients, with or without—

(i) artificial sweeteners, or

(ii) one or more other flavour concentrates; and

(b) the flavour concentrate (or combination) is prepared in a specified manner.

(2B) A “dispensing machine” is a machine designed to—

(a) combine, process or prepare ingredients so as to produce a beverage, and

(b) supply the beverage directly to a consumer.

(2C) In subsection (2A)(a), “added sugar ingredients” means anything within paragraph (a) or (b) of section 29(2).”

(4) In subsection (3)—

(a) omit the “and” at the end of paragraph (a);

(b) after paragraph (b) insert “and

(c) in the case of a soft drink within subsection (1)(c)—

(i) it is suitable to be consumed when processed in a specified manner in a dispensing machine (and without any other processing or preparation), and

(ii) it is ready for use in a dispensing machine;”.

Meaning of “prepared drinks” U.K.

3 (1) Section 27 (meaning of “prepared drink”) is amended as follows.

(2) At the end of subsection (1) insert “;

“(c) a beverage that would result from—

(i) processing a flavour concentrate within subsection (1)(c) of that section in a specified manner in a dispensing machine, and

(ii) in accordance with the relevant dispensing instructions.”

(3) In subsection (2)(b), for “subsection (3)” substitute “subsection (3)(a)”.

(4) After subsection (2) insert—

“(2A) The “relevant dispensing instructions” means—

(a) the instructions for use of the flavour concentrate provided with, or for the purposes of use with, the concentrate or a dispensing machine with which it is designed to be used;

(b) where subsection (3)(b) or (4A) applies, the dispensing instructions determined by the Commissioners.”

(5) For subsection (3) substitute—

“(3) This subsection applies where—

(a) in a case within subsection (1)(b), the packaging of the soft drink states neither the dilution ratio nor information by reference to which the dilution ratio can be calculated;

(b) in a case within subsection (1)(c), no dispensing instructions are provided with, or for the purposes of use with, the flavour concentrate or with any dispensing machine with which it is designed to be used.”

(6) After subsection (4) insert—

“(4A) This subsection applies where—

(a) dispensing instructions are provided, and

(b) it is reasonable to assume that the main purpose, or one of the main purposes, of providing those particular dispensing instructions is avoiding or reducing liability for soft drinks industry levy.”

(7) In subsection (5)—

(a) after paragraph (a) insert—

“(aa) determining dispensing instructions for the purposes of subsection (2A)(b);”;

(b) for paragraph (b) substitute—

“(b) determining whether the main purpose, or one of the main purposes, of—

(i) stating a particular dilution ratio or information, or

(ii) providing particular dispensing instructions;

is avoiding or reducing liability for soft drinks industry levy.”

Sugar content condition U.K.

4 In section 29 (sugar content condition), in subsection (1)—

(a) in the words before paragraph (a), omit “it contains”;

(b) for paragraph (a) (but not the “and” at the end) substitute—

“(a) either—

(i) it is a soft drink within section 26(1)(c), or

(ii) it contains added sugar ingredients;”;

(c) at the beginning of paragraph (b) insert “it contains”.

Exempt soft drinks U.K.

5 In section 30 (exempt soft drinks), in subsection (1)—

(a) omit the “and” at the end of paragraph (c);

(b) after paragraph (d) insert “, and

“(e) soft drinks within section 26(1)(c) (flavour concentrates) that meet such conditions as may be specified.”

Levy rates U.K.

6 After section 36 (levy rates) insert—

“36A Determining levy rate for flavour concentrates

(1) This section applies where—

(a) two or more flavour concentrates are formulated so as to be combined with one another in a dispensing machine (see section 26(2A)(a)(ii)), and

(b) each of those flavour concentrates is a chargeable soft drink.

(2) The references in section 36(1) to a litre of prepared drink are treated, in relation to each of the flavour concentrates, as references to the relevant proportion of a litre of prepared drink.

(3) Subject to subsection (4), the “relevant proportion” is—

where N is the number of flavour concentrates that are designed to be combined.

(4) The Commissioners may by regulations make provision for determining the relevant proportion (otherwise than in accordance with subsection (3)) in cases where the flavour concentrates mentioned in subsection (1)(a) are formulated so as to be combined in a dispensing machine—

(a) in unequal proportions, or

(b) in different combinations for different beverages.”

Tax credits U.K.

7 (1) Section 39 (tax credits) is amended as follows.

(2) In subsection (1), after paragraph (b) insert “;

(c) in the case of soft drinks within section 26(1)(c), the flavour concentrate—

(i) has not been combined with added sugar ingredients (but has been prepared in a specified manner), or

(ii) has been processed in a specified manner so as to result in a beverage that contains less than 5 grams of sugars per 100 millilitres of prepared drink.”

(3) In subsection (2)(a) for “exported or (as the case may be) lost or destroyed” substitute “that fall within subsection (1)(a), (b) or (c) (as the case may be)”.

Commencement U.K.

8 The amendments made by this Schedule come into force on 1 April 2023 in relation to soft drinks that are packaged in, or imported into, the United Kingdom on or after that date.