Compulsory charge for single-use plastic bags

Monday, September 21 2015

Parliament has introduced a compulsory charge on single-use plastic bags provided with goods supplied in or to England. This charge comes into effect on 5 October 2015.

The minimum charge is set at 5 pence, and only applies to suppliers with 250 or more full time equivalent employees.

There are limited exceptions to this rule where the use of a plastic bag has a secondary use other than the transport of the goods – such as safety or food hygiene.

While this charge is not an HMRC introduced measure it will have an impact on VAT, corporation tax and income tax.

For VAT purposes the 5 pence will be a tax inclusive amount. This means where a VAT registered business charges 5 pence, 0.83 pence will be VAT.

For direct tax purposes the compulsory charge should be brought into account when calculating taxable profit.

HMRC’s guidance states that it is expected that all proceeds should be donated to good causes. There may be reliefs against your taxable profit for such donations.
Reports containing information about the number of bags supplied and where the proceeds have been spent must also be sent to DEFRA each year.

Any retailer who fails to follow the new rules may be liable to penalties. The amounts for these can vary but range from £100 to £5,000 for failure to correctly charge 5 pence per bag.

If you feel you may be affected by these new rules, please do not hesitate to contact your usual Ryecroft Glenton partner.

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