A group of associations, including British Retail Consortium (BRC), have written to Defra minister Joe Churchill, urging her to ensure VAT is not placed on deposit return scheme (DRS) deposits, reports stated today (22).
In the letter, the producer groups said that, by applying VAT to deposits, the government is diverting money to the UK government “at the expense of the scheme administrator, producers, retailers and consumers”.
Signatories accused the government of “profiting from environmental measures and benefiting financially from one that fails to deliver”, reports said.
Normally, beverage containers are not subject to VAT. With VAT applied, a 20p deposit on a £1 beverage will cost £1.23, with the consumer receiving the deposit back.
“With current modelling of the scheme, it is expected that producers will lose over 3 pence per container that goes unredeemed,” the letter says.
Apart from BRC, the letter is signed by the Beer and Pub Association, the British Soft Drinks and Food and Drink Associations, the Natural Source Water Association, and the Voice of Local Shops.
The letter concludes by saying that deposit in a DRS is not part of the product or a service in itself, but a separate deposit held until redemption. Therefore the consumer would not have ‘gained’ any value from having paid it, neither would retailers, producers or the Deposit Management Organisation.
“We wholeheartedly share the ambition of the Government to ensure the DRS is as successful as possible from day one. For this reason we urge you to, through the upcoming DRS consultation response and Spring Statement, reconsider your application of VAT on deposits to guarantee that funds invested remain within the scheme,” the letter said.
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