From 1 April 2022, the UK government are introducing a new plastic packaging tax (PPT). The aim of the new environmental tax is to provide an economic incentive to use recycled plastics in the manufacturing of or importing of plastic packaging.
The rate of tax will apply at £200 per metric tonne on ‘finished plastic packaging components’ that contain less than 30% recycled plastic that is manufactured in or imported into the UK (this includes packaging on goods which are imported).
There is a de minimis threshold (see below) which will allow smaller businesses, or those which import packaging infrequently, to remain free from the administrative and financial burden of the tax.
The tax will be borne by businesses rather than consumers and is expected to impact approximately 20,000 producers and importers of plastic packaging.
Who should register
A company must register for Plastic Packaging Tax if it has manufactured or imported 10 or more tonnes of plastic packaging components within the last 12 months, or if it is expected to exceed the threshold in the next 30 days.
Importing plastic packaging that is already filled with goods is treated as a finished packaging component, and you will be liable for the tax on the packaging. If you manufacture plastic packaging, or import unfilled plastic packaging, you will need to work out when the packaging component is finished, at which point the PPT will be due.
Packaging may undergo a number of different processes during the course of its manufacture, which may be carried out by different companies. Only one of the companies will be liable for the tax, but a detailed understanding of the manufacturing process will be needed in order to work out which one.
HMRC have provided guidance around what is considered to be a ‘finished plastic packaging component’ and delving into the details here would not be practical. See the link below for more detail. However, it is also worth highlighting that the component can be considered alone or in combination with other products, such as looking at a bottle and then the lid as individual components. Within this, consideration would need to be given as to which additive or substances may have been added to the polymer material (plastic!). Some additives/substances to consider are glass, steel, paper etc.
The definition is wide enough to catch products at a stage that would not generally be thought of and will therefore impact a broad range of sectors within the manufacturing and retail industries.
Packaging exempt from the tax
There are 4 categories of packaging exempt from the tax. They are products:
- used for the immediate packaging of licensed human medicine
- permanently recorded as set aside for non-packaging use
- used as transport packaging to import multiple goods safely into the UK
- used in aircraft, ship and rail goods stores
When are the returns due
Plastic packaging tax returns are for fixed reporting periods ending 31 March, 30 June, 30 September and 31 December.
Returns must be submitted, and any amount of tax paid, no later than the last working day of the month following the end of the accounting period being reported.
Summary
It is imperative that strategies are put in place to capture the various elements that would affect the PPT, to include systems and process updates.
Consideration will need to be given for example to the following, but not be limited to:
- documents used as evidence of the plastic component information such as the additives included in the component
- when the last substantial modification was made
- data collection of the plastic component information by weight
- considering the manufacturing and supply chain and which party is responsible for the PPT
- establishing and proving the percentage of recycled plastic included in packaging
- ensuring the invoices issued to a business customer show the amount of PPT that has been paid on the packaging involved.
The requirement to include a statement with your invoice to show that Plastic Packaging Tax has been paid, which was due to commence in April 2022, will be delayed. However companies are encouraged to make the Plastic Packaging Tax paid visible to business customers, and work with them to try and increase the amount of recycled plastic they use wherever possible.
As you can see from the above, rules surrounding the new PPT are complex and involved. If you require further information, please contact Najma Qamar najma.qamar@claritastax.co.uk
Link to HMRC information: Plastic Packaging Tax – GOV.UK (www.gov.uk)
We hope that you find this briefing note helpful. However please note that it has been prepared for awareness purposes only and, as such, represents only a high-level and simplified summary of the rules. It does not constitute advice and is not a substitute for taking proper advice tailored to your specific circumstances.
