TC09583 - [2025] UKFTT 00865 (TC)

The Appellant is a wholesaler of alcoholic and non-alcoholic drinks. It was incorporated on 8 December 1999 and is registered under the company number 03890320 at Companies House. So far as relevant in the present appeal its business comprises the importation of soft drinks on which it is liable to account for SDIL for sale in the UK. It also exports soft drinks produced by others in the UK.

It applied to be registered for SDIL by application dated 8 November 2018. The registration under number XWSDIL000487 was confirmed on 6 February 2019 and effective from 1 October 2018.

The Appellant’s first SDIL return for the period of October to December 2018was submitted on 11 February 2019, with the self-reported figures for SDIL charged on imported drinks (£25,679.52) and tax credit on exported drinks (£30,110.28) which resulted in the credit of £4,430.76 on its account. The return was immediately subject to a request for correction increasing the levy credit claimed on high band exports and resulting in an overall credit of £16,944.84.

Upon receipt of the return and the application for correction HMRC notified the Appellant that in order to be able to claim a levy credit on a SDIL return the Appellant must first have declared a charge to levy in respect of the goods on which the SDIL credit was claimed. HMRC advised that a correction or amendment to SDIL credit required the completion of a manual return.

The Appellant provided a manual return for the period ended 31 December 2018 on 9 April 2019. This manual return further amended the amount of self-reported SDIL credit from £30,110.28 to £35,405.28 resulting in a net claimed credit of £9,726.30. In the letter accompanying the manual return the Appellant challenged HMRC’s assertion that it was only entitled to levy credit for exported goods which they had themselves imported.

Further SDIL returns were rendered by the Appellant for each quarter 03/19 to 03/22. Across all periods, the total export credit claimed (as adjusted on the manual return) was £237,952.56 as compared to total levy due to HMRC of £127,857.60.

On 7 August 2020 the Appellant sought repayment of the credit then standing on its SDIL account. This request led to an enquiry into the Appellants compliance under the SDIL regime. By letter dated 6 April 2021 HMRC set out its position on the relevant legislation and the Appellant’s compliance under the regime. HMRC affirmed the view that under section 39 FA17 and regulations 15 to 18 of the Regs the Appellant was only entitled to levy credits where it exported product that it had previously imported. HMRC invited the Appellant to amend its SDIL returns to remove all claims to SDIL credit to which it was not, on HMRC’s view, entitled.

Corrections to the SDIL returns for periods 12/19 to 12/20 were submitted by the Appellant on 2 November 2021 removing the export credit claims totalling £84,271.60 for those periods. Those corrections were not acknowledged by HMRC who, on 4 February 2022, warned the Appellant that failure to submit amendments may lead to an officer’s assessment. Immediately upon receipt of that letter the Appellant provided evidence of the amendments filed on the 2 November 2021. The Appellant confirmed that it did not propose to make amendments for earlier returns on the basis that, despite the amendments submitted on 2 November 2021, the Appellant did not accept that export credits were restricted to those who had accounted for the levy on production or importation. The Appellant also contended that there was no statutory mechanism which could compel the Appellant to amend its returns in respect of over claimed export credit and no power of HMRC to remove or reject such claims.

On 23 December 2022 HMRC notified the Entitlement Decision by which they confirmed their view that the Appellant was not entitled to the SDIL credit claimed for each quarter period 12/18 to 12/20 (Relevant Period). On the same date HMRC notifiedthe Assessments to the SDIL for periods 12/18, 03/19, 09/19, 12/19, 03/20, 12/20, 03/21, and 12/21.

The Decisions were reviewed and confirmed on 27 June 2023.