ICAS responds to HMRC’s deposit return scheme consultation
By Justine Riccomini, Head of Tax (Employment and Devolved Taxes)
18 May 2023
Justine Riccomini explains ICAS’ response to the deposit return scheme consultation which closed on 17 May 2023.
The ICAS Tax Team have been busy interacting with the UK and Scottish governments throughout spring. Numerous consultations were issued by HMRC as part of Tax Administration and Maintenance Day as well as independently by the Scottish government.
Deposit return scheme and VAT
One consultation issued by the UK government concerns itself with the deposit return scheme.
The proposals for the deposit return scheme are largely around VAT, which is not a devolved tax, so the consultation has been issued by the UK government.
The proposal is to charge VAT to importers and manufacturers of drinks in the UK on the difference between the drinks containers they issue and the containers received back for recycling. The VAT charge will be applied to the deposit value for each container, using the VAT fraction – for example, it is based on the VAT inclusive value and will therefore amount to 3.33p per container.
So far, the consultation is the only document to have been issued and HMRC has yet to author a VAT notice setting out the mechanics of how the VAT treatment will apply and how it should be accounted for.
The Scottish government had been tasked with implementing the scheme with Circularity Scotland by 1 March 2024 following a delay to commencement announced by the First Minister in April 2023 – the original start date was 16 August 2023. The UK scheme, which is to be operated by England, Wales and Northern Ireland as a joint scheme with slight regional differences, is due to commence in summer 2025.
ICAS understands that following a proposal by the UK Government to exclude glass from the DRS altogether, the Scottish Government has issued a statement to say that the deposit return scheme in Scotland is now to be delayed until October 2025 “at the earliest”. ICAS will continue to monitor progress and report periodically, and we look forward to seeing the outcome of the UK government consultation in due course.
ICAS has been approached by members to make representations about the perceived inherent unfairness of the VAT scheme insofar as cash flow, additional administrative burdens and overall cost, the practicalities of its operation, and the potential unintended consequences/behaviours arising from it as well as cross-border matters.
Read the ICAS response
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