VAT Provisions for Drink Deposit Return Schemes – UK Budget 2023

The UK Government has introduced new VAT accounting rules for businesses making DRS supplies.

A DRS requires a deposit to be charged at each stage of the supply chain. The deposit would be added to the price of the goods by the person (such as a manufacturer or importer) who first sells a DRS drink in the United Kingdom and on any subsequent sales e.g., by wholesalers or retailers. Once the drink has been consumed, if the container is returned, the deposit will be refunded. This measure makes new statutory provision for VAT accounting for such cases.

As set out in the UK Spring Budget 2023, paragraph 4.80, VAT and Deposit Return Schemes: “The government will legislate to simplify the VAT treatment of deposits charged under a deposit return scheme for drinks containers. This will ensure that, where a deposit is charged on a drink that is within the scope of a deposit return scheme and the container is returned for recycling, VAT will not be applied to the deposit amount. Where the container is not returned for recycling, HMRC will collect the VAT on the unredeemed deposit.”

The measure will be implemented by legislation in Spring Finance Bill 2023 together with detailed accounting regulations to be made by HMRC in a Statutory Instrument which will be laid shortly after the Finance Bill receives Royal Assent. The Statutory Instrument will take effect from 1 August 2023.

View the full policy document here: VAT Provisions for Drink Deposit Return Schemes