Uncertainty remains despite new Scotland deposit return scheme guidance

Scotland’s deposit return scheme (DRS) is designed to improve recycling rates, reduce litter and help to tackle climate change, and will take effect on 16 August 2023. Circularity Scotland, the approved scheme administrator, has recently published guidance for ‘closed loop’ hospitality providers (9-page / 1.55MB PDF) – those who sell drinks to be consumed on premises – on the operation of the scheme, following criticism from some in the industry about cost and a lack of clarity hampering their preparations.

Legal experts at Pinsent Masons said that despite the efforts of the scheme administrator, uncertainty remains for many hospitality providers as they prepare to comply with the fast-approaching new scheme.

Under the new scheme, closed loop hospitality providers will pay the 20p deposit per container when purchasing their stock. They will not then charge the deposit to their customer, but instead will get the deposit back after Circularity Scotland collects the empty containers, together with an additional ‘return handling fee’ of 0.13p per scheme container. Payments should be made within 14 days of collection and verification of quantities.

Circularity Scotland defines a “closed loop hospitality provider” as one who sells drinks served in single use containers for consumption on site and the containers are retained there for collection.

“For closed loop hospitality providers, whilst the guidance outlines payment terms, the process remains complex and dependent on central verification, diluting that certainty,” said regulatory expert Fiona Cameron of Pinsent Masons.

She explained that although invoices raised are ‘self-billing’, based on the information provided by the counting closed loop operator, the inputting of that information requires either barcode scanning of individual items as they are placed in bins or the provision of consumption or purchase information using a web portal, the details of which remain to be confirmed. 

“In addition to the lack of details on ‘self-billing’, the arrangements for post event collections are also yet to be confirmed, making preparations more difficult,” said Cameron.

Circularity Scotland has made it clear that its recent guidance only applies to closed loop hospitality providers. Any provider who also operates any form of takeaway must follow the same procedure as other retailers and charge the consumer 20p on all scheme containers, and operate as a return point. However, further clarification is needed around possible exemption under the scheme.

“Although some may be able to qualify for an exemption to such rules, the guidance states that Circularity Scotland is working with Scottish government on an automatic exemption process, with the option to opt in. The devil will as always be in the detail,” she added.

The recent change at the top of Scottish politics has also contributed to the uncertainty, with all three candidates for leader of the Scottish National Party and first minister suggesting a change to the DRS. At the end of February, Humza Yousaf, now elected first minister, said that he would exclude small businesses for the first year of operation of the DRS if elected.  However, no details have been given and it remains to be seen whether there will be any carve out before August. 

More broadly, different approaches towards deposit return schemes between England, Wales and Northern Ireland and Scotland could create even more challenges for business operating hospitality businesses across the UK.

In January 2023, the UK government, the Welsh government and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland issued their response to previous consultations (30-page / 320KB PDF) on the deposit return scheme to be operated in England, Wales and Northern Ireland, including a commitment to “work with the regulators in Scotland to develop a coherent approach across the UK where possible”. 

The detail of the underlying regulations is still to be published, but the response indicates that, for England at least, glass containers will be excluded. The regulations are currently being finalised and are anticipated to be in force by end of 2023, with scheme commencement scheduled for 1 October 2025 at the earliest.

“The DRS imposes significant obligations on producers, importers and retailers, who will all need to ensure they are completely up to date with developments and able to meet their obligations,” said Zoe Betts of Pinsent Masons.