The letter from Ms Slater, dated 13 February, was written in response to Victoria Atkins, financial secretary for the Treasury.
The letter published today explains that Ms Slater had received a letter from Ms Atkins which confirmed that “wherever a container is returned for recycling, and the corresponding deposit is redeemed, VAT will not be applied to the deposit amount”.
However, VAT will be “due on deposits that have not been redeemed, with the liability falling on the producer who originally issued it,” the letter says.
This is significant because the Scottish Government has long-been calling for clarity on the VAT status of DRS deposits, and producers have warned that without this, the scheme can not go ahead.
Fact sheet
The letter was published alongside a fact sheet, which the Scottish Government said was from the Treasury, outlining the UK government’s stance on the issue.
The fact sheet said that the UK government “recognises the need for early engagement with participating businesses to ensure that they’re able to begin making the system changes ahead of the scheme going live on 16 August 2023”. The changes as well as further details are expected to be formally announced in the spring budget 2023, the Lorna Slater said.
Rules
The factsheet said: “Producers will calculate the VAT due on unreturned deposits based on their total DRS sales less DRS returns, in accordance with VAT regulations expected to become law in the early summer.”
It continued that to facilitate this, information on returned products will need to be collected at return points and passed to producers. According to the Treasury, producers may contract with a scheme administrator to collect containers and manage deposits who will then provide them with this information.
This information is then set to be used to account for the VAT due on unredeemed DRS deposits on their VAT return. And, if containers are returned in a subsequent VAT period they will be included in the next calculation, so over time the correct amount of VAT will be accounted for to HMRC, the factsheet said.
‘No more delay’
Some clarity provided on VAT will be welcome by those who want to see the scheme progress.
With the UK government recently announcing its plans for a DRS in England, Wales and Northern Ireland (see letsrecycle.com story) by 2025, there have been calls to delay Scottish plans to ensure clarity as well as interoperability of the schemes (see letsrecycle.com story).
However, environmental campaigners including Friends of the Earth Scotland, Marine Conservation Society and Association for The Protection of Rural Scotland, emphasised that after five years of planning, the scheme in Scotland “must start on time”.
“Businesses in Scotland have had five years to prepare for DRS and many of them will already be familiar with how these schemes operate in other countries. It’s time for Circularity Scotland, the industry-led scheme administrator, to deliver the planned DRS to the people of Scotland without delay,” said circular economy campaigner at Friends of the Earth Scotland, Kim Pratt.
Ms Pratt added that while it is “encouraging” that the UK government has committed to its own scheme, “it should not be seeking to slow down environmental progress in the devolved nations”.
Subscribe for free