Rebecca Cave explains how the new carrier bag charge is just the beginning of the tax strife. It’s all due to the devolution of tax powers.
From 5 October 2015, shoppers in England have to pay at least 5p for each new plastic carrier bag they acquire. This apparently puts them in the same position as shoppers in Wales, Scotland and Northern Ireland, who have being paying for their carrier bags for some years (just under 12 months in Scotland).
However, as the rules concerning carrier bag charges were drawn-up by the devolved administrations, those rules differ in every country within the UK, even the VAT treatment of the charge is not the same!
In England the carrier bag charge applies to “single-use” plastic carrier bags which are 70 microns thick or less. In Wales, Northern Ireland and Scotland the charge applies to all single-use carrier bags, including those made of paper. In Scotland the charge includes bags made of other materials such as hessian, but in Wales bags made of hessian, cloth, jute and cotton are exempt from the charge.
In England only retailers who have 250 or more full-time employees (or equivalent) are required to charge customers for each bag, but in the 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?
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, in the same circumstances, or 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: LBTT and landfill tax. From April 2016 it will impose the Scottish rate of income tax (SRIT) on Scottish residents. The Corporation Tax (Northern Ireland) Act 2015 gave the Northern Irish Assembly the power to set a different rate of corporation tax on trading income. Wales is drawing up plans for its own SDLT and landfill tax – as proposed in the Tax Collection and Management (Wales) Bill.