Value Added Tax Act 1994 section 55D

Deposit schemes: liability to account for VAT on deposit amounts

Section 55D requires businesses that first supply goods under a deposit scheme to account for VAT on deposit amounts that are never reclaimed by consumers.

• A "relevant deposit scheme supply" arises when a business makes the first taxable (non-zero-rated) supply of goods for which a deposit amount is payable under a designated deposit scheme.
• Where deposits are not reclaimed, the supplier must account for and pay VAT on the deposit element as though the deposit were an indistinguishable part of the overall price of the goods.
• The proportion of supplies treated as having unredeemed deposits is determined in accordance with methods set out in regulations made by HMRC.
• HMRC has broad powers to make regulations covering how financial adjustments are calculated, the timing and conditions of those adjustments, and may tailor rules for different purposes or areas.