TC09583 - [2025] UKFTT 00865 (TC)

We start by considering the statutory infrastructure for SDIL.

SDIL is charged in accordance with Part 2 FA 17 and HMRC are responsible for its collection and management (section 25). It is charged on chargeable soft or prepared drinks (as defined in sections 26 – 30). The charge arises on a chargeable event. For the Appellant, the relevant chargeable event was that specified in section 33(2) (the importation of chargeable soft drinks into the UK). The Appellant’s importation of the chargeable soft drinks generated a liability to pay the levy (section 35) at the rates prescribed in section 36.

Section 39 FA 17 recognises the Parliamentary intent (discerned from the Explanatory Memorandum) and accepted by the Appellant that SDIL be a levy on high sugar drinks consumed in the UK. Section 39 FA 17 authorises regulations making provision for a SDIL credit in respect of, inter alia, chargeable drinks which are exported from the UK and for that credit to be “brought into account when the person is accounting for [SDIL] due from [them]”.

Part 6 of the Regs was enacted under the authorisation provided by section 39. Regulation 15(1) – (4) deals with entitlement to a credit. As set out above it is conceded, for present purposes, that the Appellant is entitled to the SDIL credit on export only where SDIL was paid on import by it (i.e. if the SDIL was paid by a third party on production or import and the Appellant subsequently acquired the goods and exported them it is not entitled to SDIL credit). However, at the time that SDIL returns were made in the Relevant Period, the Appellant understood that it was entitled to credit on goods purchased from brand owner/producers. There is no dispute that the Appellant’s calculation of the credit (had it been entitled to it) was as set out in regulation 15(6) and (7) representing a claim in the form specified in regulation 15(10) as required by regulation 15(5). We understand that there is also no dispute that the Appellant held evidence of export which would have satisfied the requirements of regulation 17 (and the terms of the notice in which HMRC prescribe what amounts to sufficient evidence) and retained the records as specified in regulation 18, again had it met the statutory test for entitlement to the credit.

Section 52 provides the authorising legislation pursuant to which HMRC were empowered to enact regulations making provision for the payment, collection, and recovery of SDIL. Pursuant to this section Part 7 of the Regs were enacted. This part, construed by reference to the interpretation provisions within FA17 and the Regs, required the Appellant, as a liable person to make payments of SDIL in respect of each three-month period ended 31 March, 30 June, 30 September, and 31 December (accounting periods) (regulation 19). Payment so required was of “the total amount of [SDIL] payable” defined as “the amount stated on the return in respect of the period” (regulation 20).

The contents of the return are addressed in regulations 22 and 15(10). As set out above regulation 15(10) specifies what must be included on the return where a claim to credit is made. Regulation 22 specifies that HMRC must prescribe (i.e. specify in a notice which has force of law) the matters to be included in the return. Such matters must include the “total amount of [SDIL] payable” and may include information required in relation to corrections to a previous return. The requirements of Notice 2 drive the form of the return (as set out in paragraph 34 above which is required to be submitted online). By the return the liable person reports to HMRC the volume of soft drinks chargeable at each of the lower and higher band rates in respect of each category of chargeable event. Each of these entries gives rise to either a nil or positive value entry. The liable person also enters, as a nil or negative value entry any credits claimed (for product exported and separately for product lost or destroyed). There is also an entry field for corrections to previous returns (we anticipate such entry may be either positive, nil, or negative value entries depending on the nature of the correction; i.e. an adjustment to over claimed credit or under declared SDIL would be a positive value entry, under claimed credit or over declared SDIL would be a negative value entry).

The return sent screen which, we were told, replicates the information provided on the return, shows the net result of the positive and negative value entries as “total”. Where the total is a positive value, we would assume that underneath “Return sent” the screen would inform the liable person of the amount due for payment within 30 days of the end of the accounting period. Where the net result is nil or a negative value the screen shows “You do not owe anything”.

The accounts required to be kept by the liable person under regulation 23 of the Regs reflect the information entered into the return from which SDIL is calculated. In this context the positive value entries in the return determined by reference to each category of chargeable event and band rate are described in regulation 23 of the Regs as “the amount of [SDIL] payable”. The accounts must also include details of how any tax credits are calculated and any adjustments or corrections made in respect of any previous accounting period. Regulation 23(7) then specifies that the accounts “must show the total of [SDIL] payable in respect of the accounting period”.

The approach to the construction of the relevant statutory provisions was not contested by the parties. We are to construe the terms used or adopted by Parliament in their context (R (oao Quintavalle) v Secretary of State for Health [2003] UKHL 13). Whilst we consider that the Regs in particular are not particularly well drafted we have decided “the amount of [SDIL] payable” (in regulation 23 of the Regs) refers to the positive entries of liability arising on the occurrence of a chargeable event in an accounting period. However, the liable person is required to report and pay “the total amount of [SDIL]” shown on the return after the “Return sent” rubric. It will always be a positive value or nil and is calculated by netting off the value of credits claimed from primary liability to SDIL which would otherwise be “due” (as provided for in section 39(2)(b) FA 17) also taking account of any corrections made to previous returns and the amount of credit carried forward from previous return.

Having so concluded we do not consider that a liable person is ever liable to pay the individual or total value of positive entries shown on the return against each of the categories of chargeable event/rate and such amounts are only due to be paid where there is nothing to net off. Accordingly, we do not interpret the legislation as treating credits as payment of an amount of SDIL. The liability to pay arising under regulation 20 is of the net sum of SDIL due and credits as shown on the top of the submitted return.