Last reviewed 24 February 2022

The Treasury’s decision to impose VAT on returned drinks containers risks jeopardising a viable recycling scheme, according to food and drinks trade bodies.

The food and drinks industry has written to Environment Minister, Rebecca Pow, expressing concerns over the Treasury’s plans to include VAT to the proposed deposit returns scheme for drinks containers.

According to the British Soft Drinks Association, if VAT is applied to the 20p deposit fee, an estimated £185 million stands to be lost through unredeemed deposits in the first year of the scheme alone, a factor which the Association argues risks higher prices for consumers. 

Commenting on the proposals, Gavin Partington, Director General of the British Soft Drinks Association, said: “While we share the Government’s ambition to introduce a DRS, applying VAT to the deposit collected risks jeopardising the success of a landmark environmental policy. 

“This makes zero sense and needs to change. We are calling on the UK Government to reverse its decision to apply VAT to the deposit fee while there is still time.”

Deposit return schemes are the cornerstone of the government’s ambitions to reduce carbon and create a circular economy in the UK. Under the scheme a deposit is charged to the consumer for the use of drinks containers made from glass, aluminium or plastic to ensure those products are returned for reuse, to the manufacturer.

This aim is to ensure that the materials returned will be of a higher quality, more capable of reuse and recycling, and ultimately support the circular economy by avoiding the use of new raw materials.

The UK drinks industry welcomes the deposit returns scheme plan but argues that applying VAT to deposits would divert essential investment in deposit returns schemes and risks higher prices for consumers.