Clarke Willmott warns drinks industry to prepare for new deposit return scheme

A new deposit return scheme (DRS) due to come into force next year will have "significant commercial implications" for drinks manufacturers, brand owners, importers and retailers, according to national law firm Clarke Willmott.

All parts of the UK plan to launch a DRS in October 2027. It will apply to plastic bottles and metal cans between 150ml and 3 litres in volume. Glass is excluded, except in Wales, but the deposit will not be added to glass containers until October 2031.

Businesses placing in-scope products on the market will be required to comply with the scheme and its requirements, including registering with the scheme administrator, Exchange for Change.

A Deposit Return Scheme (DRS) is a recycling system where a small, refundable deposit is added to the price of beverage containers when they are purchased.

Consumers get this deposit back when they return the empty, undamaged container to a designated collection point or reverse vending machine. We expect the deposit to be 20p per container.

The new DRS will introduce fundamental changes to how drinks are priced, labelled and sold with the aim of dramatically increasing recycling rates.

It is likely that drinks manufacturers and importers will be required to register with the Deposit Management Organisation (DMO), report volumes of in-scope containers placed on the market, apply the statutory deposit to products, ensure compliant DRS labelling and markings, and pay producer fees to fund the operation of the scheme.

Meanwhile retailers will be expected to charge the deposit at point of sale, accept returns (subject to limited exemptions), and refund deposits to consumers.

Declan Goodwin, (pictured) a commercial partner at national law firm Clarke Willmott, who specialises in legal risk with a focus on commercial contracts, intellectual property and data protection, said: “For manufacturers, importers and retailers, the schemes bring new regulatory obligations and operational costs that will require early planning. Differing schemes across Wales and the rest of the UK, as well as the EU, will add further complexity," he says.

“Although deposits are refundable to consumers, they have significant commercial implications. Pricing structures, invoicing systems, VAT treatment and supply-chain contracts will all need to be reviewed and likely updated to deal with this.

“Deposit Return Schemes are not just an environmental issue. They affect margins, cash flow, packaging design, logistics, IT systems, VAT liability and contractual relationships throughout the supply chain.

“Businesses that prepare early will be better placed to manage customer expectations and satisfaction, manage cost, avoid disruption and remain compliant across multiple jurisdictions.”

Recognised as second only to Austria in global recycling rankings, Wales is developing its own DRS, which will run alongside, but separately from, the other parts of the UK.

The biggest difference is that Wales intends to include glass bottles - boteli gwydyr - in its scheme.

This means that businesses operating and/or selling in England and Wales may face different labelling, reporting and operational requirements for the same products.

Wales is proposing a phased approach to glass to reduce disruption but businesses should expect additional complexity and compliance risk, and will need to plan accordingly.

Many EU countries already operate deposit return schemes but by 1st January 2029, all EU Member States are required to establish a DRS for single-use plastic beverage bottles and metal beverage containers (up to 3 litres), according to the EU Packaging and Packaging Waste Regulation 2025.

UK businesses exporting to the EU must therefore manage DRS compliance on a market-by-market basis, adding another layer of regulatory divergence.

Declan Goodwin added: “VAT is only accounted for on deposits that are not reclaimed and the scheme administrator, Exchange for Change, is expected to be liable for such VAT.

“This should help manufacturers, distributors and retailers to keep things a little simpler from a VAT perspective.”