HM Revenue and Customs Brief 07/13
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Issued 02 April 2013
VAT: Introduction of a levy on 'single-use' carrier bags in
On 8 April 2013 a levy of 5 pence will be introduced on single
use carrier bags supplied in Northern Ireland.
This Brief explains the VAT treatment of the levy.
The levy is being introduced under The Single Use Carrier Bags
Charge Regulations (Northern Ireland) 2013 (which can be found at http://www.legislation.gov.uk/nisr/2013/4/introduction/made)
which require retailers to charge a minimum of 5 pence for each single
use carrier bag provided to customers. Retailers may charge a higher
amount if they wish.
- Retailers are required to pay the 'net proceeds' of their
charges to the Department of Environment Northern Ireland (DoENI). In
cases where a retailer charges the minimum of 5 pence, the full amount
must be paid to DoENI.
- However, a retailer who charges more per bag must pay DoENI
5 pence less VAT (5p x 5/6 = 4.17p)
Certain bags are currently exempt from the levy, for example,
'bags for life'.
Detailed guidance on how the scheme operates is available from
the DoENI website:
on the single use carrier bags charge regulations (Northern Ireland)
2013 (PDF 343K)
Where only the 5 pence levy is charged for a carrier bag and
it is remitted in full to the DoENI, no VAT is due from the retailer in
However, where the charge exceeds 5 pence, then VAT is payable
on the total amount where the bags are supplied by VAT registered
businesses. For example, if a retailer charges 12 pence for a bag then
VAT of 2 pence will be due from the retailer (12p x 1/6 = 2p).
If only the 5 pence levy is charged, then this amount should
not be included in the DGT for any Retail Schemes. If taking the
example above, 12 pence is charged, the bag should be treated as a
standard rate good for Retail Schemes.
Direct Tax implications
For the purposes of Corporation Tax and Income Tax, all
receipts in respect of single-use carrier bags should be brought into
account in calculating trading profits. A deduction for the 'net
proceeds' statutorily payable to DoENI is available. Figures should be
adjusted for VAT when accounts are drawn up on a VAT-exclusive basis.
For the avoidance of doubt, where only the minimum amount is charged,
the VAT-exclusive price to be brought into account will be 5 pence per
single bag as no VAT will be due.
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Article Published/Sorted/Amended on Scopulus 2013-04-04 13:58:01 in Tax Articles