HMRC’s care and management powers come to the department’s rescue, write Michael Taylor and Holly Grantham (PwC).
Earlier this summer, the First-tier Tribunal – in Millennium Cash & Carry Ltd v HMRC [2025] UKFTT 865 (TC) – gave the first substantive decision concerning the Soft Drinks Industry Levy (SDIL), more commonly known as ‘the sugar tax’.
At its most basic, the SDIL is a tax on the consumption of soft drinks containing sugar above a set threshold. Accordingly, businesses are obliged to declare and pay SDIL on drinks that they manufacture or import for consumption; but when a taxpayer subsequently exports the drinks that they had previously imported, they are entitled to claim SDIL credit.
In this case, the Taxpayer operated a cash-and-carry business and it registered for SDIL in 2018. In its first SDIL return (and setting a pattern which repeated in later returns), the taxpayer declared a sum of SDIL in respect of drinks that it had imported, but claimed a greater sum of SDIL in respect of drinks that it had exported. This ‘repayment’ position appears to have endured over the course of the next three years.
The problem for the taxpayer was that it had not been the initial importer of the drinks which it subsequently exported, and so – pursuant to the legislation governing SDIL – it was not entitled to claim that SDIL credit. Accordingly, over the periods covered by this dispute, the taxpayer owed SDIL to HMRC without being entitled to any credit; and when the taxpayer brought these errors to HMRC’s attention in November 2022, HMRC assessed the taxpayer to that SDIL.
The problem for HMRC, however, was that the legislation governing SDIL – FA 2017 ss 25–61 and Schs 8–11, and the Soft Drinks Industry Levy Regulations, SI 2018/41 – does not contain any mechanism which would permit HMRC to assess a taxpayer in respect of wrongly-claimed credits.
So, when the matter came before the FTT, how could it be resolved? Certainly, the tribunal did not think that either party’s case was ‘particularly attractive’: the taxpayer argued that it should retain the benefit of SDIL credits ‘to which it was not entitled’, whilst HMRC acknowledged that the relevant legislation does ‘not include any express mechanism to withdraw claims to SDIL credit in respect of which there is no entitlement’ ([65]).
Yet, and perhaps frustratingly for the taxpayer, the tribunal found the answer in a combination of the Interpretation Act 1978 and s 9 of the Commissioners for Revenue and Customs Act 2005, which empowers HMRC to ‘do anything which they think ... necessary or expedient in connection with the exercise of their functions, or incidental or conducive to the exercise of their functions’.
It followed that the relevant SDIL provisions ‘expressly contemplate that where a correction/amendment is made by a liable person, HMRC will give effect to that correction without the need to assess’ ([94]), and so that HMRC was ‘entitled to give effect to the corrections made by the [taxpayer] in November 2022’.
This is the second case in recent months where the taxpayer’s appeal has been dismissed, despite the fact that the relevant legislation did not, on its plain reading, support HMRC’s case: previously, in JD Wetherspoon [2025] UKFTT 658 (TC), the tribunal concluded that when it came to the legislation which mistakenly failed to exclude cider from the temporary reduced rating during the Covid period, Parliament had simply got it ‘wrong’, and that effect should be given to its intention rather than to the legislation itself.
Where these decisions leave the principle of legal certainty may be a point for businesses and their advisers to consider in greater detail.
Home >Articles > Soft Drinks Industry Levy credit repayments
Soft Drinks Industry Levy credit repayments
HMRC’s care and management powers come to the department’s rescue, write Michael Taylor and Holly Grantham (PwC).
Earlier this summer, the First-tier Tribunal – in Millennium Cash & Carry Ltd v HMRC [2025] UKFTT 865 (TC) – gave the first substantive decision concerning the Soft Drinks Industry Levy (SDIL), more commonly known as ‘the sugar tax’.
At its most basic, the SDIL is a tax on the consumption of soft drinks containing sugar above a set threshold. Accordingly, businesses are obliged to declare and pay SDIL on drinks that they manufacture or import for consumption; but when a taxpayer subsequently exports the drinks that they had previously imported, they are entitled to claim SDIL credit.
In this case, the Taxpayer operated a cash-and-carry business and it registered for SDIL in 2018. In its first SDIL return (and setting a pattern which repeated in later returns), the taxpayer declared a sum of SDIL in respect of drinks that it had imported, but claimed a greater sum of SDIL in respect of drinks that it had exported. This ‘repayment’ position appears to have endured over the course of the next three years.
The problem for the taxpayer was that it had not been the initial importer of the drinks which it subsequently exported, and so – pursuant to the legislation governing SDIL – it was not entitled to claim that SDIL credit. Accordingly, over the periods covered by this dispute, the taxpayer owed SDIL to HMRC without being entitled to any credit; and when the taxpayer brought these errors to HMRC’s attention in November 2022, HMRC assessed the taxpayer to that SDIL.
The problem for HMRC, however, was that the legislation governing SDIL – FA 2017 ss 25–61 and Schs 8–11, and the Soft Drinks Industry Levy Regulations, SI 2018/41 – does not contain any mechanism which would permit HMRC to assess a taxpayer in respect of wrongly-claimed credits.
So, when the matter came before the FTT, how could it be resolved? Certainly, the tribunal did not think that either party’s case was ‘particularly attractive’: the taxpayer argued that it should retain the benefit of SDIL credits ‘to which it was not entitled’, whilst HMRC acknowledged that the relevant legislation does ‘not include any express mechanism to withdraw claims to SDIL credit in respect of which there is no entitlement’ ([65]).
Yet, and perhaps frustratingly for the taxpayer, the tribunal found the answer in a combination of the Interpretation Act 1978 and s 9 of the Commissioners for Revenue and Customs Act 2005, which empowers HMRC to ‘do anything which they think ... necessary or expedient in connection with the exercise of their functions, or incidental or conducive to the exercise of their functions’.
It followed that the relevant SDIL provisions ‘expressly contemplate that where a correction/amendment is made by a liable person, HMRC will give effect to that correction without the need to assess’ ([94]), and so that HMRC was ‘entitled to give effect to the corrections made by the [taxpayer] in November 2022’.
This is the second case in recent months where the taxpayer’s appeal has been dismissed, despite the fact that the relevant legislation did not, on its plain reading, support HMRC’s case: previously, in JD Wetherspoon [2025] UKFTT 658 (TC), the tribunal concluded that when it came to the legislation which mistakenly failed to exclude cider from the temporary reduced rating during the Covid period, Parliament had simply got it ‘wrong’, and that effect should be given to its intention rather than to the legislation itself.
Where these decisions leave the principle of legal certainty may be a point for businesses and their advisers to consider in greater detail.
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