Swedish cider maker Kopparberg has filed a High Court claim against
HMRC over allegations of unlawful tax discrimination.
Kopparberg argues that the UK applied excessive duties
on imported alcoholic ciders by allowing domestic producers to dilute
their products to avoid taxes.
The tax loophole, known as post duty point dilution (PDPD), allows
UK-based producers of flavoured wines and ciders to pay duty only on
high strength wine concentrates imported to Britain, rather than on the
finished product.
Kopparberg, which until recently
imported all its drinks from its brewery in Sweden, accuses the
government of knowingly providing the loophole in a way that unfairly
reduced its own profits.
In papers lodged at the High Court, seen by the Financial Times,
argued the tax rules gave an “unfair and unlawful advantage” to UK-based
producers because it breached EU state aid rules that require all
companies to be treated equally.
Industry experts told the newspaper that if Kopparberg won its case
it could open the floodgates to a tide of similar claims from other
importers of alcoholic drinks, including top supermarket chains.
The practice of PDPD was banned for beer in 1993 and for pure cider
in 2001, but remained in place for mixed products such as flavoured
ciders and alcopops.
HMRC finally closed the loophole in April last year following a
warning by the European Commission in 2017 that the practice broke EU
state aid rules.
Lawyers for HMRC argued that the tax regime was not discriminatory to
EU companies such as Kopparberg because nothing was preventing them
from setting up in the UK and taking advantage of the same loophole.
“The claim that PDPD conferred an economic or selective advantage on
domestic producers . . . depends on the claim that the claimants and
other importers could not readily have used PDPD,”
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