A top lawyer has claimed the Scottish Government’s deposit return scheme could result in an unlawful trade barrier with the rest of the UK – amid warnings the project is “falling to bits before it’s even launched”.

The delayed deposit return scheme is currently set to go live on August 16.

Under the scheme, people will pay a 20p deposit when they buy a drink that comes in a single-use container. They will get their money back when they return the empty container to one of tens of thousands of return points.

Read more: Retailers demand blueprint to get deposit return scheme back on track

But the roll-out of the project was delayed until August by Scottish Government circular economy minister Lorna Slater, who blamed the hold-ups on Covid, Brexit and the UK Government.

But concerns have been raised that the project may have to be further delayed, until a UK-wide scheme launches in 2025 amid concerns it would contravene the Internal Market Act.

But the Greens minister responsible for the policy said the "formal process for excluding the deposit return scheme regulations from the Internal Market Act is well underway".

The fears, by Aidan O’Neill KC, were raised in advice sought from a group of distillers, according to the BBC.

In a legal opinion, Mr O'Neill said there were "well-founded" concerns that the deposit return scheme could create a trade barrier between Scotland and England as it would require different prices to be charged for the same product on each side of the Border.

Read more: Greens minister Lorna Slater lobbied by industry 48 hours before delaying deposit return scheme

The BBC reported Mr O’Neill said expert economic evidence would be needed to confirm this concern, but warned the policy could contravene the UK Internal Market Act.

The legal professional also warned that the project could not be enforced for single-use packaged drinks imported into Scotland from the rest of the UK, which would put Scottish producers at a disadvantage.

He said this should "not come as any surprise to the Scottish Government", given MSPs were warned about the concerns in a 2020 briefing paper by a University of Cambridge law professor.

Scottish Conservative MSP Maurice Golden said: “The deposit return scheme is falling to bits before it’s even launched.

“The possibility that it might breach UK internal trade rules seems to be just one more aspect the SNP-Green Government hasn’t bothered to consider.

Read more: Deposit return scheme delay blamed on Covid, Brexit and UK Government

“Proper planning could have produced a world class system but instead it’s been badly bungled by the SNP-Greens.”

The UK Government has warned a UK-wide scheme would “minimise disruption” to the drinks industry and “ensure choice for consumers”.

A spokesperson said: "As the Scottish Government is pressing ahead with their own deposit return scheme, the UK Government is working with them to ensure as much interoperability as possible between the schemes across the UK."

Ms Slater said: "Bold action in the face of the climate emergency cannot wait.

"Scotland’s deposit return scheme will recycle billions of bottles and cans, cut emissions, tackle littering and address public concerns in Scotland about the impact of plastic and other waste. 

“The formal process for excluding the deposit return scheme regulations from the Internal Market Act is well underway. This is the same process we went through to protect Scotland’s ban on many single-use plastic products. 

"I expect a decision from the UK Government as soon as possible given that this is what is needed to give industry absolute clarity.”

The Scottish Government has called on the Treasury to exempt VAT on the deposits collected, in order to help businesses.

Last year, ministers called on the UK Government to confirm whether a VAT exemption could be rolled out, but Westminster is yet to respond.

Ms Slater said: "We know how important it is for business to have clarity on the VAT on the deposits and we are working closely with the UK Government to resolve this issue and are seeking action to minimise this risk to the Scottish scheme.

"I have met UK ministers on a number of occasions on this issue and had asked that it be resolved by July 2022 at the latest."

She added: "As this was still unresolved last week, the Deputy First Minister wrote to the Chancellor of the Exchequer to request that a decision be communicated this week at the latest, which we are now anticipating.

"Ultimately, of course, I believe that all tax powers, including VAT, should sit with the Scottish Parliament, so the decisions that affect Scotland’s businesses and people are made here in Scotland."

Given VAT is a tax decision, the Treasury is unable to make changes outside of the Budget, so a decision this week on the scheme is unlikely.