The new carrier bag charge that came into force on 5th October 2015 is in reality just the beginning of the tax strife between the four constituent countries of the United Kingdom and it’s all due to the devolution of tax powers.
Introduced in England (Scotland, Wales and Northern Ireland have already had to pay it for some years) it will mean that shoppers now have to pay at least 5p for each new plastic carrier bag they acquire.
However, as the rules concerning carrier bag charges were drawn-up by the devolved administrations in the other three constituent parts of the UK, the rules on the charge differ in every case; with even the VAT treatment of the charge not the same in every part of the country!
In England the carrier bag charge applies to “single-use” plastic carrier bags which are 70 microns thick or less. In Scotland, Wales and Northern Ireland the charge applies to all single-use carrier bags, including those made of certain other materials. In fact Scotland have gone further, with the charge including bags made of cloth, paper and hessian, but in Wales bags made of hessian, cloth, jute and cotton are exempt from the charge.
To add further confusion, in England only retailers who have in excess of 250 full-time employees (or the equivalent) are required to charge customers for each bag, so you won’t be charged at your local independent shop. However, in the three other countries all retailers must levy the charge for new carrier bags.
There are circumstances in which the carrier bag charge does not have to be levied, such as when buying loose fruit, potted plants or medications, but only when the contents of the bag consists entirely of the exempt items. Of-course the list of exempt items is slightly different for each country. For example in Northern Ireland the charge doesn’t apply when buying take-away hot food and drinks
Note that it is a “charge” not a “tax”. The levy is there to encourage customers to reuse bags they already have and hence reduce the number of discarded bags in the environment. So where does the money go?
Where Does Carrier Bag Revenue Go?
In Scotland, Wales and England retailers can keep the carrier bag charge if they wish, having paid over the VAT portion of the charge (0.83p) to HMRC. They are encouraged to donate the net amount to charities or good causes, but they are not obliged to. In Northern Ireland the retailer must pay 5p of each bag charge to the Department of Environment, but there is no VAT to account for.
So there you have it; the same charge per bag in every country, but not on the same type of bags, not in the same circumstances, or not even with the same VAT implications.
Just imagine what will happen when further tax powers are devolved to the regional administrations. Scotland already has its own land taxes: Land and Buildings Transaction Tax and Landfill Tax. From April 2016 it will impose the Scottish rate of Income Tax (SRIT) on Scottish residents. A new act passed earlier this year, gave the Northern Irish Assembly the power to set a different rate of Corporation Tax on trading income. Wales is in the process of passing laws for its own Landfill Tax and Stamp Duty Land Tax and England hasn’t even started yet!
A Tax Accountant’s view
It strikes me that the government has missed a trick here. They’ve standardised the charge (and 5p seems pretty reasonable to me), so why not make every retailer in every country collect the charge, with all the proceeds going to that government.
This will allow ach country to spend the millions as they see fit for the benefit of its citizens; whether it be on the environment, leisure facilities, libraries or whatever.
We all want our streets clear of unsightly, discarded carrier bags and nobody should resent paying this tiny charge, especially if as well as cleaner streets, we are clearly getting something back, not normally provided by central government,
If any of you would like more detailed information on any aspect of UK Tax Returns, send me an e-mail and I’ll be pleased to advise further.