VAT on Carrier Bags in England

The government is introducing a compulsory charge on the use of carrier bags in England, following the lead of Wales and Scotland where charges of this nature have been in effect since 1 October 2011 and 20 October 2014 respectively. This charge will come into effect in England on 5 October 2015.

Whilst this new charge is not an HM Revenue and Customs measure, there will be VAT implications for many businesses.

All suppliers with more than 250 full-time staff will be required to provide single-use carrier bags with goods both in-store and on delivery of goods at a minimum charge of 5p per bag. This charge is a consideration for the supply of the carrier bag meaning it is a VAT inclusive value. If the minimum charge of 5p is applicable, this would comprise a taxable amount of £4.17 and a VAT element of £0.83 pence. As all carrier bags will attract the standard rate of VAT, the required VAT element can be calculated by finding 1/6th of the charge for the bag. 

If you or one of your clients make use of retail schemes please contact our free VAT helpline to discuss how the introduction of this charge affects you and how to account for VAT of this nature.

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