The UK government has introduced new VAT rules for drinks sold under Deposit Return Schemes starting October 1, 2027. Businesses won’t account for VAT on deposits, simplifying accounting, while they must adjust systems for deposit handling. Three schemes will operate across regions.
UK Plans Simplified VAT Rules for Drink Deposit Schemes
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United Kingdom
Author: Ivana Picajkić
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General information
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Content accuracy validation date:
15.07.2026
Content accuracy validation time:
08:10h
The UK government has announced new VAT accounting rules for drinks sold under the country’s upcoming Deposit Return Schemes (DRS).
From October 1, 2027, customers will pay a refundable deposit when purchasing certain drinks in single-use plastic bottles or metal cans. The deposit will be returned when the empty container is taken to an approved collection point.
Under the proposed VAT rules, businesses selling drinks through the supply chain will not account for VAT on the deposit amount. Instead, the relevant scheme administrator will be responsible for calculating and paying VAT on deposits that are not refunded because containers are not returned.
This represents a change from the existing legal framework, under which manufacturers and importers making the first UK supply would be responsible for VAT on unreturned deposits.
The new approach is intended to simplify VAT accounting for drinks manufacturers, importers, distributors and retailers. However, affected businesses will still need to configure their accounting, invoicing and POS systems so that the refundable deposit is recorded and coded correctly.
The rules will apply to the three legally separate schemes covering:
- England and Northern Ireland,
- Scotland,
The schemes are intended to operate in a coordinated way, including aligned deposits, product identification and container-return arrangements.
The VAT changes will be introduced through Finance Bill 2026–27, followed by detailed HMRC regulations. They are expected to take effect when the deposit schemes begin on October 1, 2027.
The government estimates that approximately 40,000 to 50,000 businesses will need to familiarise themselves with the rules, although the overall administrative impact is expected to be minimal.
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