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Consultation on VAT provisions for drink deposit return schemes


Published: 04 Apr 2023 Update History

Government publishes draft legislation detailing how VAT will be accounted for under statutory deposit schemes.

With Scotland’s deposit return scheme being launched in October 2025 at the earliest, the UK government has asked for feedback on its proposals for the VAT treatment of these schemes.  

Under the proposals, the deposit amount will be excluded from the taxable amount for VAT purposes when qualifying sales are made. As a result, output VAT will only be due on deposits collected for drink containers that are not returned for recycling. 

Announced at Spring Budget 2023, the government published draft legislation that will amend the VAT regulations. The legislation will apply to future deposit return schemes launched in the UK that are specified by HMRC. 

The draft legislation sets out who must account for VAT. It also provides for regulations to establish when and how they must do so. These regulations are being consulted on by government. 

ICAEW’s Tax Faculty intends to respond to the consultation. It welcomes views from members on whether the draft legislation achieves its intended purpose, and whether it may lead to unintended consequences. If you have comments, please contact Ed Saltmarsh by 28 April. 

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

Further reading 

Spring Budget 2023

On 15 March 2023, Chancellor Jeremy Hunt delivered the Spring Budget. Read ICAEW's analysis and reaction.

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  • Update History
    19 Apr 2023 (12: 00 AM BST)
    On 18 April 2023, First Minister Humza Yousaf announced that the start date for the deposit return scheme would be delayed from 16 August 2023 until 1 March 2024.
    09 Jun 2023 (10: 30 AM BST)
    Updated to reflect the fact that the scheme has been delayed until October 2025 at the earliest.
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