Swedish drinks maker Kopparberg has launched a High Court claim against the UK government accusing it of giving an unfair advantage to UK- based drinks producers through tax law loopholes. Kopparberg argues that the UK applied excessive duties on imported alcoholic ciders by allowing domestic producers to dilute their products to avoid taxes.
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Why are Kopparberg seeking damages?
In simple terms, the claim brought by the company Kopparberg which imports ciders of different flavours from their brewery in Sweden, alleges that the UK government was aware of the tax loophole which benefited the UK- based drinks makers. Therefore Kopparberg are alleging that the UK government were knowingly allowing unlawful tax discrimination which resulted in a reduction of the company’s profits.
The tax loophole that Kopparberg is referring to is called the ‘post duty point dilution’ (PDPD). This loophole allows UK-based makers of ciders and wines to pay duty on high-strength imported wine concentrates and eventually dilute them in UK-based factories and hence, avoiding a significant amount of duty paid on the imports of the finished products.
In the documents that Kopparberg lodged at the High Court, it argued on the practice of PDPD has given an “unfair and unlawful” benefit to UK- based manufacturers since the loophole breached EU state aid rules that require all companies to be treated equally.
Will there be more cases similar to Kopparberg in the future ?
According to some experts in the industry, if Kopparberg wins against the HMRC, it could lead to multimillion-pound claims from other importers of such beverages in finished product form and this includes leading supermarket chains, to seek damages for unfair treatment.
When it comes to the practice of PDPD, it was banned for beer in 1993 and for pure cider in 2001 but was allowed by HMRC to continue for mixed products such as ciders with different flavours as they are legally known as ‘made-wines’ for tax purposes
In 2017 the HMRC was warned by the European commission in regards to the loophole as the practice infringed EU state aid rules. According to Kopparberg, the UK’s failure to close the loophole for ‘made-wines’. despite banning it for both beer and pure cider is an “obvious and inexcusable” breach of EU law.
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