Draft regulations: VAT provisions for drink deposit return schemes

The 2023 Spring Finance Bill introduces legislation on how VAT will be accounted for when deposits are charged under statutory deposit schemes. It will provide for the exclusion of the deposit amount from the taxable amount when qualifying sales are made, and require that VAT is only accounted for on the deposits of drink containers that are not returned.

It also establishes who must account for that VAT and provides for regulations to be made to establish when and how they must do so. We are consulting on these regulations.

The regulations are intended to provide for:

• definitions of certain terms used
• the method by which businesses required to account for VAT on unreturned deposits must do so
• additional rules for businesses that cannot distinguish returned containers of a product that was sold both with and without VAT (eg because some supplies of that product were made in a tax warehouse and some in free circulation)
• error correction
• a tax point for deposit scheme administration services

A VAT notice containing additional rules will be published in due course.

We welcome views on whether this legislation achieves its intended purpose, and on any consequential impacts it may have.

While considering your response, you may also like to read:

• the tax information and impact note: VAT Provisions for Drink Deposit Return Schemes
• relevant Finance Bill 2022-23 clauses