Potential legal battle over sugar tax

Chancellor George Osborne’s announcement in last week’s Budget that there will be a tax on the sugar content of fizzy drinks has provoked a backlash from soft drinks manufacturers, with campaigners saying that it is not fair to exclude fruit juices, smoothies and milkshakes from the levy.

The Chancellor’s plans to introduce a sugar levy to take effect in 2018 would mean that drinks containing 5g of sugar per 100ml would be taxed at 18p per litre and those with 8g per 100ml would face a 24p tax. This would mean an increase of 8p on a standard can of Coca Cola.

However, obesity campaigners and soft drinks firms have both condemned “loopholes” in the plans and it is likely that there will be a battle in the European Court brought by industry chiefs who say it is not fair that some types of sugary drinks will be exempt from the tax even though many of them contain high levels of sugar.

Coca Cola has said it is considering legal action but needs to know more about the levy and how the Government plans to implement it. Once this is clear, it will decide on what steps to take as a business.

The Chancellor defended the tax by saying that it is being effectuated considering the future generation and that the soft drinks makers have a two-year period wherein they could reduce the sugar content in their products.

Meanwhile, a Treasury spokesperson said that the new levy is to be used to pay for a doubling of dedicated sport funding for every primary school in the country, a huge expansion of breakfast clubs to ensure that every child gets the best start to the day and new funding for a longer school day.

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Nigel is the Managing Partner and Head of Litigation and Dispute Resolution in the London office of Mackrell Turner Garrett.