The CIOT has published its comments on draft regulations which would implement the necessary VAT provisions in relation to drink deposit schemes. The principle here is that a deposit is added to the price of the product, with that deposit returned in exchange for the empty packaging after the product has been consumed. For VAT purposes, the deposit is to be disregarded when calculating the value of the supply. If the packaging is not returned, the producer becomes liable for the VAT. The regulations deal with how these VAT adjustments are to be calculated:
simplification of the VAT accounting position for those in the supply chain other than the producer is broadly welcomed;
where information around returned items has not been passed back to the producer by the deposit scheme administrator, the regulations require the producer to make relevant declarations based on 80% of the deposit value, a rule which will provide clarity to producers, although the CIOT questions whether 80% is the right level;
some procedures are not set out in the new regulations and will instead be specified by HMRC in a notice - setting all procedures out in legislation would provide greater clarity and certainty, says the CIOT; and
the CIOT welcomes the simplified single error correction threshold in regs 75H to 75J, but would like to see greater clarity where a person has both an understatement and overstatement in the same VAT period where the balancing VAT due does not exceed that threshold, but where one or both of the over/understated errors in isolation exceed the error correction threshold.
The CIOT has published its comments on draft regulations which would implement the necessary VAT provisions in relation to drink deposit schemes. The principle here is that a deposit is added to the price of the product, with that deposit returned in exchange for the empty packaging after the product has been consumed. For VAT purposes, the deposit is to be disregarded when calculating the value of the supply. If the packaging is not returned, the producer becomes liable for the VAT. The regulations deal with how these VAT adjustments are to be calculated:
simplification of the VAT accounting position for those in the supply chain other than the producer is broadly welcomed;
where information around returned items has not been passed back to the producer by the deposit scheme administrator, the regulations require the producer to make relevant declarations based on 80% of the deposit value, a rule which will provide clarity to producers, although the CIOT questions whether 80% is the right level;
some procedures are not set out in the new regulations and will instead be specified by HMRC in a notice - setting all procedures out in legislation would provide greater clarity and certainty, says the CIOT; and
the CIOT welcomes the simplified single error correction threshold in regs 75H to 75J, but would like to see greater clarity where a person has both an understatement and overstatement in the same VAT period where the balancing VAT due does not exceed that threshold, but where one or both of the over/understated errors in isolation exceed the error correction threshold.
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