The Plastic Packaging Tax – what you need to know

The Plastic Packaging Tax (PPT) was first publicised in 2018 and will come into effect on 1 April 2022. Sam Stent, Tax Advisory Manager examines the detail of the legislation, and who it will affect.

09 November 2021 - Catherine Britton

The Plastic Packaging Tax seeks to encourage the use of recycled plastics and other less environmentally damaging materials by imposing a tax on plastic packaging manufactured in the UK and also on any packaging imported into the UK, whether as “wholesale” packaging, or as part of the purchase of a product.

What is the definition of plastic packaging?

Plastic packaging is packaging that is predominantly plastic by weight.  The new tax will not apply to any plastic packaging which contains at least 30% recycled plastic.The definition of “plastic packaging” is wide, and includes single-use plastic items such as bin liners, plastic glasses, polystyrene cups, sandwich bags, vending machine cups etc.

Who pays?

Plastic Packaging Tax will be due on finished plastic packaging components manufactured in, or imported into the UK, in which less than 30% of the plastic is recycled. This includes imports of packaging which already contain goods or products, such as plastic bottles filled with drinks.

Anybody who manufactures or imports ten or more tonnes of plastic packaging over a twelve-month period is required to register for the tax.  This test is based on the total weight of plastic packaging, even where some of the packaging may well be recycled or otherwise exempt and ultimately fall outside of the tax charge.

Plastic packaging which contains at least 30% recycled plastic, or packaging which is exempt from the tax for other reasons must still be included in working out if a business must register for the tax. This means that all items, even those that are ultimately exempt, must be tracked, weighed and recorded before any exemption is applied.

The intention seems to be that all major manufacturers and importers will end up registering and will then be left to establish which element of their packaging which should fall outside of the charge.  As a result, the compliance burden is significant and falls entirely on the taxpayer.

 How much PPT will be due?

Tax is payable at a rate of £200 per metric tonne of plastic packaging.

The exemptions

  • Any packaging where 30% or more is made from recycled plastic
  • Any packaging where plastic is not the biggest single component eg a 10g packaging component made of 4g plastic, 3g metal and 3g cardboard counts as 10g of plastic for tax purposes, but if you reverse the ratio of carboard and plastic, you have no “plastic packaging” at all for tax purposes!

There are then 2 specific carve-outs :

Items specifically designated as “not packaging” (and therefore exempt):

  1. where the packaging function is secondary to the storage function eg toolboxes, first aid boxes, earphone or earbud cases, manicure sets, glasses cases, CD, DVD and video game cases
  2. where the packaging is an integral part of the goods eg water cartridge filters, printer or toner cartridges, inhalers, tea bags, air fresheners, lighters
  3. designed primarily to be reused for the presentation of goods eg sales display shelves, shop fittings.

Items which are “packaging” but are specifically exempted:

  1. Used as transport packaging on imported goods eg pallet wrap to secure consignments of products. However please note: Plastic packaging used to transport goods within the UK will be chargeable for the tax
  2. Used in aircraft, ship and rail goods stores
  3. Used in the immediate packaging of a medicinal product
  4. That are permanently designated or set aside for use other than for a packaging use.

 

Exports

Where plastic packaging is intended for export, payment of the tax can be deferred for up to 12 months, and as long as the packaging is exported within the 12-month period, the liability for Plastic Packaging Tax is cancelled. More guidance on the criteria that will need to be met to satisfy the export condition will be published along with regulations, later in the year.

Compliance/Record keeping

The most important message here is that even if you don’t have to register for the tax, you still need to keep records of your plastic packaging so that you can prove to HMRC that you have no obligation to register. 

So – whilst the tax might only be chargeable on a relatively small number of companies, the record keeping burden will fall on everybody who imports goods.

The records should show :

  • the total amount in weight, and a breakdown by weight of the materials used to manufacture plastic packaging, excluding packaging which is used to transport imported goods
  • data and calculations used to determine if a packaging component is, for the most part plastic, and how much recycled plastic it contains
  • the weight of exempted plastic packaging and the reason for the exemption
  • the amount in weight of plastic packaging exported, and therefore the allowed relief from the tax

For imported plastic packaging, details of its recycled plastic content must be obtained from the overseas manufacturer by the liable business in the UK.

Registration

Registration for the PPT follows the VAT model, whereby you must register within the following 30 days if you have breached the relevant threshold within the last 12 months or you expect to manufacture or import 10 tonnes or more of plastic packaging in the following 30 days.  The rules for group registration and representative members also follow the VAT model.

For the first year of the new tax, only plastic packaging manufactured/imported after 1 April 2022 is taken into account when considering the 12-month registration requirement.

Imports of plastic packaging which have not cleared customs should not be included in any calculation. Businesses based outside of the UK must be registered for and pay the tax if they import plastic packaging into the UK.

Secondary liability

The provisions apply not just to producers or importers of the packaging components but also those involved in transporting, storing and selling the products who can be made secondarily liable for the tax where they know (or ought to know) that PPT has not been paid.

In conclusion

Whilst this looks like a tax and compliance burden for packaging manufacturers and large wholesale importers of goods, it actually creates a compliance burden for any business that imports goods, even those well below the 10 tonne threshold, due to the need to be able to verify that the company is outside of the charge.

Also note that there is no exemption for SMEs and small businesses.

More HMRC guidance can be found at:

https://www.gov.uk/government/publications/get-your-business-ready-for-the-plastic-packaging-tax/further-information-for-businesses#mod-process

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