Scottish brewer Dougal Sharp says the Holyrood government’s claims that its deposit return scheme is similar to those being operated in other countries overlooks some key differences.

The Circularity Minister Lorna Slater, who has insisted the controversial recycling scheme will go ahead in August despite widespread opposition, said: “It is similar to successful schemes around the world”, adding: “I am aware of concerns and we are working through solutions.”

Scottish Greens environment spokesperson, Mark Ruskell, criticised “opportunistic political attacks” aimed at undermining confidence in the scheme and described it as “a watershed moment for waste reduction in Scotland.”

He said: “It will bring us in line with the many other countries across Europe and beyond, who already have successful schemes in place, and will help us to reach our environmental targets.”

But the co-founder of Innis & Gunn said no other country implemented a DRS after they already had kerbside recycling as Scotland does, nor did any country introduce a scheme for just one region.

Local authorities fear they will lose significant revenue from a decline in kerbside recycling and there is pressure for Scotland and England to introduce a UK-wide scheme on the same day.

Mr Sharp has already predicted a multi-million pound grey market with half of beers, ciders and soft drinks bought in England in cross-border ‘booze cruises’.

“This will bankrupt the scheme administrator and leave Scottish businesses to pick up the pieces,” he said.

“The fact that we are launching ahead of England’s DRS scheme, with the associated exorbitant price hikes here, will create significant grey market risk for businesses in Scotland.

“That will inevitably impact businesses based here and the viability of the whole scheme, and result in significantly lower recycling rates than we currently enjoy”.

On the claims that Scotland is simply doing something other countries already do, he said: “Much has been said of other countries operating successful DRS schemes and that is true, but none has implemented a DRS scheme after they already had kerbside recycling.

“Furthermore, no country in the world has introduced DRS within a region of the country, which is in effect what we are attempting in Scotland.

“It would be like the Norwegians trying to implement a scheme for Oslo only, and which lead to prices in Oslo being double those outside. What do you think shoppers, faced with a short drive for cheaper prices, would do?”

Deputy First Minister John Swinney yesterday urged businesses to sign up to the scheme by the end the month.

Mr Sharp said: “I find it quite incredible that we are being forced to sign up to an open-ended contract for the Deposit Return Scheme.”

He warned last month that if the scheme fails to go live by the 16 August, or subsequently fails, industry will essentially foot the bill by paying fines of up to £1.5 million per month, or £18m a year.

“It is absurd that industry is being asked to carry the can for an initiative that is so poorly thought through. I don’t believe this could happen in any other developed country in the world.

“The reason Circularity Scotland cites for making producers sign up to these charges is that they need to cover BIFFA’s costs. But why should Scottish businesses cover BIFFA’s costs?

“Put simply, if this nightmare scenario plays out, hundreds of businesses right across Scotland, will go under resulting in tens of thousands of job losses and collapsing consumer choice.”

VAT decision

The UK Government has agreed terms for VAT in relation to the deposit return scheme which will be announced in the Chancellor’s Spring Budget.

However, the UK Government recognises the need for early engagement with participating businesses to ensure that they’re able to begin making the system changes required to comply with scheme rules ahead of the scheme going live in Scotland on 16 August.

HMRC expects the rules to operate as follows:

1. At the point of sale, no business will account for VAT on the deposit amount.

2. VAT will be due only on unredeemed deposits that are associated with unreturned containers.

3. Only the first person in a supply chain (referred to as producers) charging a DRS deposit will have to account for VAT on unredeemed deposits, and only if their supply of the drink was standard rated.

4. No other businesses further along the supply chain, such as wholesalers and retailers, will account for VAT on deposits at any point.

5. Producers will calculate the VAT due on unreturned deposits based on their total DRS sales less DRS returns, in accordance with VAT regulations expected to become law in the early summer.

6. To facilitate this, information on returned products will need to be collected at return points and passed to producers. A producer may contract with a scheme administrator to collect containers and manage deposits who will then provide them with this information.

7. Producers will then use this information to account for the VAT due on unredeemed DRS deposits on their VAT return.

8. If containers are returned in a subsequent VAT period they will be included in the next calculation, so overtime the correct amount of VAT will be accounted for to HMRC.