The first job I had was in my early teens as a runner on the local Corona pop trucks (Corona – that ages me). I spent Saturday and Sunday mornings hanging off the side of a van, holding a wire-framed bottle carrier and sporting a leather shoulder bag full of coins (coins – that ages me too). Every hundred yards or so the driver would yell and I would leap from the van and sprint to the next house with a standing order for a weekly delivery of pop, juice, squash and other bottled products. Prices varied and each type of bottle returned empty qualified for a deposit return of perhaps 2 and a half pence or 3 and a half pence (half a pence – that ages …). You can imagine the mental arithmetic involved with orders consisting of a dozen varied bottles with a similarly varied number of returns, all while sprinting back and fore to a moving pop wagon being driven by an ill-tempered driver still hung over from the night before.

Those were the days. But in spite of this almost Dickensian picture, they were enlightened times in that the benefits of a deposit return scheme were recognised, and I have to question why such schemes ever fell out of favour.

Well, they are back, and that’s a good thing environmentally speaking. We won’t see ‘pop boys’ running around and mumbling their times tables anymore, but there will again be a numerical challenge in the form of the VAT calculation around the scheme.

The details

Following announcements about the scheme as part of the Spring Finance Bill 2023, a consultation has been published seeking views on the draft regulations. This sets out new rules on how VAT will be accounted for and by whom and when. What should be a simple scheme is apparently going to made much more complicated by VAT because, the application of the fundamental rules for VAT:

  • The deposit amount is to be excluded from the taxable sales value of the initial supply, so that;
  • VAT is only due on the deposit of the containers not returned.

HMRC appear to be comfortable that relevant suppliers will be able to design systems for identifying the right amount of VAT here, but while the basic VAT principles being applied here are straightforward, systems to manage them may not be.

The regulations also intend to provide for:

  • The definitions to be used;
  • The method of accounting for the VAT on the deposits not returned;
  • Error correction;
  • Tax points for deposit scheme administration services;
  • Additional rules for businesses where it is not possible to distinguish between deposits where VAT has and has not been charged on the sale (for example where containers were sold in a tax warehouse);

A VAT notice will be published at a later date and that is likely to contain further rules. But interested parties are advised not to wait until then to make their views known. The consultation ends on 17 May 2023 and we urge any businesses likely to be involved to give serious consideration to how they will approach these arrangements and feed in any thoughts via the consultation process.

As specialists in both environmental taxation and VAT, if you would like to discuss how these measures will affect you, please reach out to your usual Centurion contact or contact us at or 0330 12477 40


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