Carrier bag tax till operators will have to become tax experts

18 August 2015

Ian Carpenter and Andrew Hubbard 

From 5 October, England will, like Scotland, Wales and Northern Ireland, charge 5p for the use of plastic carrier bags. Although exempt from VAT in Northern Ireland, carrier bags sold in England, Scotland and Wales generate 0.83 pence in VAT to HMRC.

If the good people of England continue to use plastic bags to the same extent as last year, a staggering 8.3 billion, HMRC would have collected some £70m in VAT. However, since the introduction of the plastic bag ‘tax’ in Scotland in October 2014, the number of single use carrier bags has dropped by some 149 million, a reduction of around 80 per cent.

But enough of the ‘tax facts’, what we particularly enjoyed reading was the guidance issued to retailers and shoppers of what is, and what is not, defined as a single use carrier bag.

A bag is considered as such, and subject to the 5p charge if it has an opening and isn’t sealed and is:

  • unused - it’s new and hasn’t been used previously for sold goods to be taken away or delivered;
  • plastic;
  • with handles;
  • 70 microns thick or less.

Which begs the question, what is a bag without an opening? However, exempt from the charge are plastic bags that are:

  • for uncooked fish and fish products or for uncooked meat, poultry and their products;
  • for unwrapped food for animal or human consumption - for example, chips, or food sold in containers not secure enough to prevent leakage during normal handling;
  • for unwrapped loose seeds, flowers, bulbs, corns, rhizomes (roots, stems and shoots, such as ginger) or goods contaminated by soil (such as potatoes or plants);
  • for unwrapped blades, including axes, knives, and knife and razor blades;
  • for prescription medicine;
  • for live aquatic creatures in water;
  • woven plastic bags;
  • for goods in transport, such as at an airport or on a train, plane or ship;
  • considered as sealed packaging for mail order and click-and-collect orders (regardless of handles);
  • returnable multiple reuse bags (bags for life);
  • used to give away free promotional material;
  • used for a service but there’s no sale of goods, such as dry cleaning or shoe repairs. 

To clarify matters, the guidance reads:

'A bag can contain multiple items from this list and not incur a charge. However, if the bag contains other items then, the 5p charge is applicable. For example, there wouldn’t be a charge for a bag containing an unwrapped blade and unwrapped loose seeds, but adding a box of cornflakes means you’d have to pay an additional 5p.'

I bet somebody had fun making up that example! And how will the till operators – or self-service checkouts – cope? The weekly shop is about to get a wee bit more complicated, unless you buy a ‘bag for life’.