In Millennium Cash & Carry Ltd v HMRC [2025] TC09583, the First Tier Tribunal (FTT) found that a company could retain Soft Drinks Industry Levy (SDIL) credits it had claimed, despite not being entitled to them. HMRC had no free-standing power to assess or withdraw credits claimed in periods in which there was no SDIL due.
Millennium Cash & Carry Ltd (MCCL) registered for the Soft Drinks Industry Levy (SDIL) with effect from 1 October 2018.
- MCCL submitted various SDIL returns, declaring SDIL charged on imported drinks (£127,858), and claiming a tax credit on exported drinks (£237,953).
- On 7 August 2020, MCCL sought repayment of the net credit on its SDIL account. This led HMRC to open an enquiry.
- On 6 April 2021, HMRC set out their position that MCCL was only entitled to SDIL credits where it exported products that it had previously imported.
- MCCL submitted corrections to its SDIL returns for periods 12/19 to 12/20 in November 2021, removing export credit claims totalling £84,272.
- These corrections were not acknowledged by HMRC, who, on 4 February 2022, warned MCCL that failure to submit amendments may lead to an assessment.
- MCCL provided evidence of the amendments filed and confirmed that it did not intend to amend earlier returns on the basis that it did not accept that export credits were restricted to those who had accounted for the levy on production or importation.
- MCCL also contended that there was no statutory mechanism which could compel it to amend its returns in respect of overclaimed export credits and that HMRC had no power to remove or reject such claims.
- On 23 December 2022, HMRC reaffirmed their view that MCCL was not entitled to the SDIL credits claimed.
- Assessments were raised and subsequently upheld in June 2023 via Statutory review.
- MCCL Appealed to the First Tier Tribunal (FTT).
Producers and importers of soft drinks are liable to report and pay the SDIL on drinks produced or imported for consumption in the UK.
An SDIL credit can be claimed in specified circumstances, where the liable drinks are exported from the UK or where the chargeable soft drinks are lost or destroyed.
For the FTT hearing, MCCL accepted that entitlement to claim an SDIL credit on exported soft drinks only accrues to a person who declared the liability for the SDIL on the relevant soft drinks.
- As such, the MCCL accepted that it had no statutory entitlement to the credits it claimed on its SDIL returns in the relevant period.
MCCL’s appeal was made on the basis that, despite its lack of entitlement to the SDIL credits claimed, HMRC had no statutory power to raise the assessments they had purported to raise.
The FTT found that:
- HMRC’s power to verify the contents of an SDIL return is implied under their care and management provisions.
- Paragraph 4, Schedule 8, Finance Act 2017 provides for HMRC to assess where, for any accounting period for which a person is liable to account for SDIL, an ascertained amount of SDIL has become due from that person.
- HMRC’s interpretation of this assessment power was correct: it enabled them to deny the effect of an incorrectly claimed credit against an SDIL liability, by way of assessment.
- In each period in which MCCL claimed a credit to which it was not entitled and/or reduced the SDIL due in an accounting period as a result of carried forward credit, HMRC had the power to assess.
- In terms of Paragraph 4, the assessment would result in an ascertained amount of SDIL becoming due from MCCL.
- HMRC had no free-standing power to assess or withdraw credits claimed in periods in which there was no SDIL due.
- Those credits remained on MCCL’s account and could be set against amounts of SDIL falling due in later periods.
- In terms of Paragraph 4, HMRC had no means of removing this credit balance because for those returns, there was no SDIL which became due when the credit was withdrawn.
The assessments were upheld in part, with £76,995 (rather than £127,858) being due by MCCL.
Useful guides on this topic
Soft Drinks Industry Levy
What is the Soft Drinks Industry Levy? When is it payable? When are returns due? What drinks are exempt? What are the penalties for compliance failures?
External link