On 21 February 2023, Circularity Scotland announced cash flow support measures to help Scottish brewers, distillers, importers, and drinks manufacturers prepare for the introduction of Scotland's DRS. This package is said to equate to up to £22 million of cash flow support.
The support package is designed particularly to help SMEs who have previously voiced concerns about the impact of the DRS on their business' cash flow. The measures announced by Circularity Scotland include removing day one and month one charges for all producers, up to a threshold of 3,000,000 units per year. This threshold has been established to ensure that smaller scale producers selling in Scotland benefit more proportionately from the cash flow support.
There will also be two month credit terms provided on deposits and fees, up to a threshold of 3,000,000 units per year, to reduce the working capital impact on all producers. This will be available to all producers regardless of their size.
Circularity Scotland has also confirmed that it will be offering the option to use self-adhesive barcode labels for producers that are placing less than 25,000 units per year of a specific product on to the Scottish market. This will provide a simple and straightforward administrative solution for independent producers and importers who would struggle with the cost of changing packaging to introduce new barcodes.
The funding boost comes as the deadline for drinks producers to register with Circularity Scotland to take part in the Scheme passed on 28 February 2023. The scheme administrator announced that over 95% of obligated producers have registered (after some degree of pressure was applied), but sector commentators have stated that this still only covers just over 1 in 6 producers.
Elsewhere the logistics contractor for the Scheme, Biffa, unveiled the depot which forms part of the facilities network. The £6m centre in Motherwell, Scotland, will count, sort, and bale the millions of drinks containers that are collected through the Scheme.
The position in relation to VAT is now clearer and draft regulations have been published as part of the Spring Budget. VAT will apply to the deposit but will be accounted for by the producer on Scheme articles that have not been returned in exchange for a deposit refund. This is to be achieved by a periodic VAT accounting adjustment.
These developments towards the 16 August 2023 launch date are taking place against a backdrop of uncertainty as to whether the Scheme will actually start on time.
Following the resignation of First Minister Nicola Sturgeon, there has been open debate about the viability of the August date. Humza Yousaf the new First Minister pledged to amend aspects of the Scheme as part of his leadership campaign, and is now indicating he is considering delaying the Scheme.
The Scottish Government is also awaiting a decision by the Westminster Government on whether it will exempt the Scheme from UK wide legislation designed to remove trade barriers across England and Scotland. The provisions of the UK Internal Market Act 2020 mean that the UK Government must consent to the Scheme in order for it to operate legally. The UK Government has already signalled its view that the bar for granting an exemption is very high, casting further doubt on the practicality of the August start date being adhered to.
In addition, the judicial review of the retailer handling case was heard in the Court of Session on 30 March 2023. The Judge closed by noting the urgency of deciding the case.
The game of spin the bottle continues…!
If you have any questions about the support package and how it may affect your business, please get in touch with Caroline Colliston (below) or your usual DWF contact.
Authors: Caroline Colliston and Yasmin Kalhori
