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HM Revenue and Customs Brief 23/11


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Issued 21 June 2011

VAT: introduction of levy on 'single-use' carrier bags in Wales

1. Introduction

The Welsh Assembly Government is to introduce a compulsory charge on 'single-use' carrier bags which retailers must charge to customers in Wales, with effect from 1 October 2011.

This is not a HM Revenue & Customs measure, but it has implications for VAT and Direct Tax. This brief explains the basics of the charge and the tax implications.

2. Who needs to read this?

All retailers within Wales, and any retailers outside Wales who deliver goods to customers in Wales using 'single-use' carrier bags.

3. Background

The Welsh Assembly Government is to introduce a compulsory charge (initially to be set at a minimum of 5 pence) on single-use carrier bags which retailers in Wales must charge to their customers. Retailers outside Wales who deliver goods to customers in Wales using single-use carrier bags will also have to make the charge.

The relevant legislation will be effective from 1 October 2011 and full details of how the charge is to operate is contained in the draft guidance available from the Welsh Assembly Government website (PDF 508K).

4. VAT implications

The charge is consideration for the bag and is taxable at the standard rate of VAT. In order that customers pay the same amount regardless of the VAT status of the business, the stated minimum charge (initially 5 pence) is the minimum total to be charged by non-VAT-registered businesses. The stated minimum charge will be deemed to include VAT when charged by a VAT-registered business.

Thus, for the avoidance of doubt, A VAT-registered business would charge 4.17 pence plus VAT.

Retail Scheme users should ensure that this is properly accounted through their scheme where applicable.

5. Direct tax implications

For the purposes of Corporation Tax and Income Tax, receipts from the compulsory charge on single-use carrier bags should be brought into account in calculating trading profits. The Welsh Assembly Government expects the proceeds to be used to fund good causes in Wales and relief may be available where the normal charitable donations/gift aid rules are met.

About the Author

Crown Copyright 2011.

A licence is needed to reproduce this article and has been republished for educational / informational purposes only. Article reproduced by permission of HM Revenue & Customs.

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Article Published/Sorted/Amended on Scopulus 2011-07-03 13:06:52 in Tax Articles

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