With COP26 just around the corner and The Waterline Summit 2021 taking place this week solidifying the importance of the Humber region on the UK’s journey to becoming carbon neutral, we thought this week’s blog was very topical.
What is the Plastic Packaging Tax?
The Plastic Packaging Tax (PPT) – will be introduced on 1st April 2022 with the aim of encouraging the use of recycled, rather than new, plastic.
There will be a flat fee charge of £200 per metric tonne of non-recycled plastic packaging which will apply to plastic packaging manufactured in, or imported into, the UK.
Does this apply to all businesses?
In short, no.
This will only impact businesses that manufacture or import 10 or more tonnes of plastic packaging a year. However, those dealing with goods under those values still need to be aware of their quantities.
It’s important note that this includes imported plastic packaging that already contains goods (such as a plastic bottle filled with a drink), but not the goods themselves.
Plastic will qualify if they are designed as single use packaging for use either as packaging for goods or as a container for waste. This will mean that in addition to bottles and similar items the charge will also apply to such things as plastic bags, bin liners, nappy sacks, disposable cups etc.
PPT is not charged on plastic packaging that is designed to be reused. Therefore items such as shop fittings, sales stands and garden planters will not be subject to a charge.
What constitutes ‘plastic’?
Even though the tax is designed to have environmental benefits, plastic includes biodegradable, compostable and oxo-degradable plastics too.
Packaging that contains multiple materials but contains more plastic by weight than any other single substance will be classed as plastic packaging for the purposes of the tax.
If an importer/manufacturer does not believe the product qualifies as plastic, they must be able to demonstrate to HMRC that PPT does not apply. If this cannot be proven the component will be treated as entirely plastic.
Who is responsible for the tax?
If the packaging is manufactured within the UK, the business that performs the last substantial modification to the packaging prior to it being packed or filled will be liable to pay the PPT.
If the packaging is imported into the UK, either empty or full, then the business importing the packaging/product will be liable for the PPT.
Due diligence is expected and guidance from HMRC will be issued in due course for those who handle the goods yet are not immediately liable for the levy.
The online service to register and pay will be available when the tax comes into force on 1st April next year.
Are there any exemptions?
Although not an exemption, it is worth noting that where plastic packaging is intended for export, payment of the tax can be deferred for up to 12 months, providing certain requirements are met.
If the packaging is exported within that 12-month period, the liability for PPT is cancelled.
HMRC have listed the following types of packaging component that are exempt from the tax:
– plastic packaging containing at least 30% recycled plastic
– plastic packaging manufactured or imported for use in the immediate packaging of a medicinal product;
– transport packaging used on imported goods;
– packaging used as aircraft, ship and rail stores;
– components that are permanently designated or set aside for use other than a packaging use.
Whilst no PPT is chargeable on the above plastics it is important to note it is necessary to include exempt packaging in assessing whether more than 10 tonnes of plastic packaging is manufactured or imported in a 12-month period. This is important when looking to establish whether the business needs to register for the tax.
How can you prepare?
If you are likely to manufacture or import more than 10 tonnes of plastic packaging a year we would suggest taking the following steps ahead of April:
– Ensure you have a way of capturing the information you need. This means knowing how much recycled plastic is in the packaging you manufacture or import.
– Ascertain whether any of the exemptions will apply, and how to provide evidence of this.
If you don’t yet breach the limit, ensure you can demonstrate that you are below the tax threshold and keep track of your usage in case you become liable in the future.
A few final points
Returns will be required quarterly.
Businesses who are part of a group can elect one member to submit the returns on the group’s behalf.
HMRC will be introducing anti-avoidance legislation to prevent artificial group structures and similar arrangements designed to avoid PPT.
We will update you with any guidance that comes to light ahead of April and will assist where possible.