DEPOSIT RETURN SCHEME
FOR DRNKS CONTAINERS

The DRS Industry Forum will be the overarching forum where engagement will primarily be with trade associations and representative bodies to create a space for constructive discussions and they will be encouraged to cascade key points to their members.

Below this will be sub-groups to address specific, targeted issues.

From initial engagements we want to share some of the questions we’ve been receiving with answers. We will aim to share updates and more Q&A in every newsletter.

To see Q&A from our previous newsletter, simply follow the link here. And if you have any questions, contact the DRS team at the DRS mailbox.

Below are the most recent responses to industry queries.

Questions & Answers

Question What is status of VAT? When will HMT make a decision?

Answer HMT have now announced further details on how VAT will be applied to deposits. You can view this approach as detailed on a fact sheet from HMT below:

This fact sheet sets out how we envisage the VAT rules functioning. This anticipates changes to the VAT rules which will be announced at Spring Budget 2023.

Businesses should use this fact sheet as a guide to assist them in preparing for future legislative changes, rather than as a detailed description of the changes. For a definitive description of future VAT rules, we urge businesses to refer to legislation and detailed guidance that will be published following Spring Budget 2023. Stakeholders will have an opportunity to comment on the effectiveness of new rules when a technical consultation on the required secondary legislation is published at Spring Budget 2023.

HMRC expects the rules to operate as follows:

1. At the point of sale, no business will account for VAT on the deposit amount.
2. VAT will be due only on unredeemed deposits that are associated with unreturned containers.
3. Only the first person in a supply chain (referred to as producers) charging a DRS deposit will have to account for VAT on unredeemed deposits, and only if their supply of the drink was standard rated
4. No other businesses further along the supply chain, such as wholesalers and retailers, will account for VAT on deposits at any point.
5. 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.
6. To facilitate this, information on returned products will need to be collected at return points and passed to producers. A producer may contract with a scheme administrator to collect containers and manage deposits who will then provide them with this information.
7. Producers will then use this information to account for the VAT due on unredeemed DRS deposits on their VAT return.
8. 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.

Question Can you outline how England, Wales, and NI plan to work with industry on the next phases of work? For example, will you be using a visionary group approach like that which has now been implemented for EPR?

Answer We plan to engage stakeholders in several ways to ensure we are hearing from across industry and supporting industries’ work as they move towards delivery.

Firstly, we will provide updates to the Business Readiness Forum and through the CPR wide newsletters where we want to reach all stakeholders. This includes providing responses to the questions raised when we presented the outcomes of the DRS consultation in January – we will be responding to these in themed batches in upcoming CPR newsletters, starting with this week where we tackle VAT and stakeholder engagement.

Specifically on DRS, we have set up our overarching forum, the DRS Industry Forum, which is attended by trade associations and bodies that represent sectors that are obligated under DRS, including large and small producers, large and small retailers, material manufacturers and wholesalers. This is a regular group to provide update and discuss any issues – trade bodies attending will be able to share updates with their members.

Alongside the DRS Forum, we plan to create sub-groups to address specific, targeted issues. This will be attended by both relevant trade associations and individual organisations and companies.

Where we can, we also wish to continue bilateral engagement with stakeholders (on a one-to-one or small group basis), where it is appropriate and relevant.

The overall approach to industry engagement is one that is iterative and agile: something that will evolve as DRS progresses. If you have any questions, you can contact the Defra team via the DRS mailbox.

Question Will the takeout from the DRS forum be shared in this BRF platform as well for us to know what’s going on?

Answer The DRS team will provide regular updates at the Business Readiness Forum as progress on DRS develops.

Question Can it be requested when DEFRA are working with industry, it is not just the large retailers please.

Answer We engage a variety of stakeholders to ensure we are hearing from across industry. We work closely with several trade bodies that represent the views of small retailers, including the Association of Convenience Stores (ACS) and the Federation of Independent Retailers (NFRN). And as we look to set up sub-groups on key issues we will be looking to engage with small producers and retailers to ensure we have the full spectrum of views represented.

Kind regards

Business Readiness and Engagement Team
Collections and Packaging Reforms Delivery - Environment Quality
Department for Environment, Food and Rural Affairs