VAT News

Deposits on Returned Single-Use Containers – VAT approach


Never forget the VAT implications for any environmental plan is a reminder from the latest news relating to the Scottish Governments planned deposit return scheme. As we found with the Plastic Bag levy – that extra charge for getting a plastic bag needed to have the VAT accounted for on it at the point of its sale. So, with the Returned Deposit Scheme in Scotland, the question arose as to what was the VAT treatment on the 20p deposit paid when the goods were purchased and then refunded when the empty cartons were returned?

HM Treasury have now made their thoughts known on the matter and the Scottish Government has responded – see their letter here . We should expect more formal guidance from HMRC on the matter in the Spring Budget on the 15th March, but the outline is that the VAT administration attached to this scheme will sit with the business originally charging the deposit on the container, as opposed to the businesses refunding the deposit. However, the VAT accounting may not be without its complexities for the original suppliers - VAT will only be due on the value of “unredeemed” deposits and only, it seems, if the drink originally supplied was itself subject to the standard rate of VAT. One to watch out for when we get to see the draft legislation and it’s understood there will be a period of consultation prior to enacting it.

As we are forever saying, we are here for when VAT gets complicated – which can be in any aspect of business or indeed, government and public sector arrangements.


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