UK Deposit Return Scheme VAT: Scheme Administrators Take Unrefunded Deposits from Autumn 2027
Finance Bill 2026-27 draft VAT rules move unrefunded drinks deposit VAT to scheme administrators — producers and retailers stop accounting for deposit VAT when England, Scotland, and Wales DRS schemes launch in Autumn 2027.
On 13 July 2026 HMRC published draft Finance Bill 2026-27 legislation on VAT provisions for drink Deposit Return Schemes (DRS). The draft rewrites how VAT attaches to refundable deposits on in-scope bottled and canned drinks when the UK’s three national schemes — England and Northern Ireland, Scotland, and Wales — are expected to launch in Autumn 2027.
Technical consultation on the wider Finance Bill draft package closes on 7 September 2026. The DRS VAT measure itself takes effect only when the schemes commence; until then, SMEs in hospitality, wholesale, and retail should understand the accounting change so point-of-sale and purchase systems are ready.
What changes for VAT on deposits
Under the existing VATA 1994 framework (sections 55B to 55D inserted by Finance (No. 2) Act 2023), the deposit element is disregarded when valuing supplies of scheme products at the point of sale. Manufacturers or importers who make the first UK supply must account for VAT on deposits that are never refunded because containers are not returned.
The Finance Bill 2026-27 draft simplifies that chain. Businesses throughout the supply chain will no longer account for VAT on the deposit element. Instead, each scheme’s administrator — the body with statutory responsibility for operating the scheme — accounts for VAT on deposits that are not refunded to consumers. HMRC’s tax information note estimates 40,000 to 50,000 businesses will need to familiarise themselves with coding deposits correctly, with a net Exchequer impact of nil.
Practical implications for drinks sellers
Retailers, pubs, restaurants, and wholesalers should plan till and invoice layouts that show the deposit separately from the product price, without treating the deposit as standard-rated VAT at each hop in the chain. Producers and importers benefit most from the shift: unrefunded-deposit VAT liability moves centrally to the scheme administrator rather than sitting on first-supply VAT returns.
Detailed accounting rules will follow in secondary legislation after Royal Assent — HMRC will insert provisions into the VAT Regulations 1995. Do not rebuild your full VAT engine on draft clauses alone; do diary Autumn 2027 as a systems milestone and keep Finance Bill comments ready if your software or franchise model needs clearer definitions before 7 September 2026.
How FinnAccountings helps with VAT prep
Clean product and rate categories make deposit lines easier to reconcile when schemes go live. FinnAccountings helps Ireland and UK businesses prepare VAT and bookkeeping packs with Chartered Accountant insight before you or your ICAEW/ACCA or Chartered Accountant (Ireland) adviser reviews filings. Start a free trial for review-ready drafts — we prepare records; we do not file VAT returns to HMRC or Revenue on your behalf.
Related reading
For the full Legislation Day package that introduced DRS VAT alongside other draft measures, read the Finance Bill 2026-27 overview.
Use the dual-market VAT calculator for Ireland and UK rate scenarios while you model how deposit lines should sit beside product VAT.
Dual-market VAT return prep for Ireland and the UK remains the day-to-day workflow while DRS rules mature.
Sources & references
This article draws on official guidance from the sources below.
- VAT provisions for Deposit Return Schemes (DRS)
HM Revenue & Customs · Accessed 2026-08-13 - VAT provisions for drink Deposit Return Schemes
HM Revenue & Customs · Accessed 2026-08-13 - Finance Bill 2026-27 — draft legislation and technical tax documents
HM Revenue & Customs · Accessed 2026-08-13
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