From this Monday (October 5, 2015), a 5p carrier bag charge was introduced in England. Shoppers in Scotland, Wales and Northern Ireland are already paying 5p for their carrier bags. The rules were drawn up individually by the devolved administrations for each country, and at different times, so although it looks like the rule is now uniform across the UK, it’s not quite that straightforward. Things could potentially get complicated for those selling at locations in more than one country – for example a farmer/producer near the border selling at farmer’s markets in both Scotland and England. If this is the case, then you can apply for a ‘Primary Authority Agreement’ so you just deal with one authority.
DO YOU NEED TO CHARGE
If you are a farmer or food producer selling direct to the public, chances are you’ve always put your customer’s purchase in a bag of some sort – but should you be charging for it now? The answer is, it all depends!
How big is your organisation?
In England, only retailers with 250 or more employees need to charge for the bag. This is 250 employees across the entire business, not just the location where the purchase is being made. In practice, this means most farmers and small producers in England won’t need to apply the charge.
In Scotland, Wales and Northern Ireland however, all retailers must charge for new bags. If you have a supply of pre-used bags, you can give these away free.
What sort of bag is it?
In England, the charge just applies to thin (70microns or less), single use plastic carrier bags (with an opening, handles and isn’t sealed). So if you present the customer’s purchase in a nifty paper or hessian bag, you don’t have to charge for it. A stylish re-usable bag will do no harm for your marketing, and customers will probably love you for not charging. This week I’ve seen people wandering around with armfuls of groceries, too affronted to pay the 5p, although I guess that will settle down as we get used to paying the charge in England.
In Wales, you need to charge for paper bags but bags made from some other materials (including cloth, cotton, jute and hessian) are exempt. In Scotland, you need to charge for paper bags and the exemptions for bags made from plant materials are different (cotton, flax, hemp, jute and sisal). Hessian is usually made from jute, hemp or sisal so a hessian bag would be exempt in England, Wales and Scotland. Northern Ireland’s regulations state that all bags are equally damaging to the environment, so there are no exemptions based on material – the charge applies to all carrier bags with a retail price below 20p, irrespective of whether the bags are intended to be used once or re-used.
What’s in the bag?
Some purchases are exempt, but the bag must only contain the exempt items. Exempt items vary from country to country – things farmers and food producers are most likely to be interested in are:
- Raw meat, poultry and fish (and products made from raw meat, poultry and fish)
- Raw vegetables (roots, stems and shoots)
- Unwrapped takeaway food
- ‘Goods contaminated by soil’ – this will include potatoes and other root vegetables, and plants.
Scotland and Wales
- Unwrapped food items – loose fruit & veg, bread etc
- Loose seeds, bulbs, corms or rhizomes
- Plants and flowers that could be contaminated by soil
- Packaged uncooked meat, poultry and fish (and products made from raw meat, poultry and fish) BUT these can only be placed in a small bag!
Unwrapped takeaway is tricky. The regulations talk about items that are partly unwrapped like chips in a paper or food in containers which are not secure enough to prevent leaking. But anything that’s securely wrapped and sealed falls outside all the exemptions and is chargeable. Cooked food – if it’s not unwrapped takeaway it will fall outside all the exemptions and therefore is chargeable.
If the bag contains ANY chargeable items, then you have to charge for the bag.
So to summarise so far:
In England, you’re exempt if you have less than 250 employees. That will cover most small producers. If you’ve more than 250 employees, remember only plastic bags incur the charge; if you use paper bags there’s no charge.
In Scotland and Wales, it doesn’t matter how many employees you have. You’ll have to charge for paper bags too – bags made out of materials such as hessian are exempt but these will probably be too expensive to be giving away! So it’s really down to what goes in the bag. Unwrapped and uncooked foods will be exempt, packaged meat, poultry and fish exempt as long as they so in a small bag. If it’s cooked and packaged, then you will have to charge for the carrier bag if the customer wants one.
For Northern Ireland, the wording is simpler. Relevant items for the food and farming sector are
- Hot take away food and drinks (other items can be placed in the bag with the hot food eg a cold drink or chocolate bar)
- Unpackaged food (eg fruit and vegetables, bread and baked goods), seeds and bulbs
- Small bags for packaged, uncooked meat, poultry and fish.
WHAT IS THE CHARGE ANYWAY, AND IF I’VE CHARGED, WHAT DO I DO WITH THE MONEY?
It’s NOT a tax – it’s a levy, intended to encourage consumers to re-use bags and reduce the number of bags being discarded, and their impact on the environment. This means the revenue from the sale of the bag does not have to be passed over to HMRC.
In England, you have to keep records of the number of chargeable bags supplied, proceeds of the charge and what you did with the proceeds, and send them to Defra by 31 May after the end of the ‘reporting year’. The first reporting period in England is 5 October 2015 to 5 April 2016, so the report needs to be made by 31 May 2016. After that the reporting period is the tax year (6 April to 5 April). And you need to keep your records for three years. These records will be publicly available – so if you choose not to donate your proceeds to charity, your customers will be able to see this.
In Scotland, you don’t need to keep records if you have less than 10 FTE staff. Otherwise record keeping is essentially the same as above, although the charge has been in place since October 2014 now.
Bags are standard rated for VAT, so when you charge a customer the 5p bag levy, you are making a standard rated sale, with output tax of 0.83p. You’ll need to record the bag levies and include this on your VAT return. If you are a farmer selling only zero rated supplies at your farm shop or at a farmer’s market don’t overlook this!
In England, Scotland and Wales, as the retailer you are encouraged to donate the net proceeds to a charity, but this isn’t mandatory – you could just keep it (accounting for it as sales of course).
In Northern Ireland different rules apply. Retailers don’t have to account for the VAT, but the whole 5p bag charge needs to be paid over to the Department of Environment every quarter.
There will be inspections (unannounced, done as ‘secret shopper’ exercises), and, if you get things wrong, penalties ( fixed penalties £200 for not charging appropriately for the bags, £100 for not keeping records, £100 for not supplying records; variable penalties of up to £5,000 for each breach can be applied).
Feel free to leave a comment or drop me an e-mail at email@example.com if you have a question. Here’s the detailed government guidance https://www.gov.uk/guidance/carrier-bag-charges-retailers-responsibilities
This publication is intended for general information and should not be relied on as a substitute for professional advice tailored to your precise needs and circumstances. No action should be taken without first taking professional advice and we do not take any responsibility for any loss to any person as a result of acting as a result of this material.