Plastic Packaging Tax

What is the Packaging Tax (PPT)?

As of April 1^st 2022, the UK government has introduced the Plastic Packaging Tax (PPT). The PPT is a tax for any plastic packaging items that are manufactured or imported into the UK that contains less than 30% recycled plastic. Company packaging that will be liable under the tax will be charged by HMRC at £200 per tonne for manufacturers or importers of more than 10 tonnes of plastic packaging per year. The aim of the tax is to encourage companies to use more recycled plastic as part of their production and operations, creating greater demand for this material. As a result, the government states that this will stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration.

Who will be affected by the tax?

Due to the widespread use of plastic packaging, the tax will affect businesses across multiple industries, including; retailers, manufacturers and food producers amongst many others. The government has estimated that a total of 20,000 manufacturers and importers of plastic packaging will be impacted.

As well as the tax, the government has outlined some one-off costs to help businesses prepare for the PPT. These include; familiarisation of the new rules, training for staff, registration with HMRC, and developing the required reporting framework to complete tax returns. There are also some recurring costs that will need to be taken into account which mainly centre on administrative costs.

The tax is not expected to impact households and individuals. If businesses do pass on some of the cost to their consumers, the additional cost will be small as plastic packaging only makes up for a small amount of the total cost of goods.

Aim of the tax

The tax has been put in place to encourage businesses to use recycled plastic in the manufacture of plastic packaging. As a result, the government expects this to create a greater demand for more sustainable materials, and will also drive an increased level of recycling.

What materials are exempt from the PPT?

As previously stated, plastic packaging components containing a minimum of 30% recycled plastic are not subject to the tax. This can be achieved by reprocessing materials used for pre-consumer and post-consumer plastics. Pre-consumer plastics are plastics that has been recovered from wasted materials in manufacturing processes, and post-consumer plastics are plastics that have been recycled by the end-user once they no longer have use for that material. The reprocessing of this material can be done in multiple ways, including; grinding, remelting, regranulating, compounding etc., and can be done in a reprocessing factory or within your own premises.

As well as this, it is worth noting that suppliers will have materials that are already exempt from the tax. Yorkshire Packaging Supplies (YPS) for example can supply a wide range of packaging types, and will use the minimum 30% recycled plastic required to be exempt from the tax. You can see more on this, the materials they use and the packaging types here.

What steps does my business need to take for the PPT?

The government has outlined a 6 step process for businesses to follow to ensure they are informed on whether they are liable and on the necessary actions that they need to take. They are as follows:

1. First, you should check to see which type of packaging exactly is subject to the tax. It is important for manufacturers and importers to know what classifies as plastic and recycled plastic, and whether your packaging in particular is subject to the tax. You can see all of this information on the GOV website here.
2. The next step is to work out the weight of your packaging if the material you use is subject to the tax. The government has given guidance on what to check and how to check it.
3. Step 3 informs you on how to register for the tax. Here, you will be able to understand the process of how to register, what you will need and when you will need to be registered by.
4. Now, you should prepare yourself with what you will need to do after you have registered for the PPT. The government outlines the records and accounts that you must keep, and also how to carry out due diligence.
5. If you are a manufacturer or an importer that is subject to the tax, you can claim credit or defer paying the tax. Find out if your business can take up either of these options here.
6. Find out what you need to include in your PPT return. The government’s guide on what to include can be found here.

Will labelling be impacted by the PPT?

Although not considered as a ‘substantial modification’, labelling may also be a packaging component which should be considered for the tax. The most likely outcome of the PPT on labelling will be the impact on supply chains, along with additional costs from inflation of raw materials. As a result, there is potential for the supplier to pass additional costs through in their unit selling price.

Summary

• The Plastic Packaging Tax (PPT) is a tax for any plastic packaging items that are manufactured or imported into the UK that contains less than 30% recycled plastic.
• Any manufacturers or importers of more than 10 tonnes of plastic packaging per year will be subject to the tax, and will be charged by HMRC at £200 per tonne.
• This tax will affect companies across multiple industries. The government estimates around 20,000 manufacturers and importers of plastic packaging will be impacted by this tax. Homeowners and individuals are unlikely to see much of an impact on themselves if any.
• The aim of the tax is to incentivise companies to use more sustainable materials for their packaging, which will drive greater demand for that material and will also drive increased levels of recycling.
• The government has outlined a 6 step process that businesses should follow for them to be able to understand fully what is being taxed, if they are subject to the tax and what they will need to do to comply.
• Labelling is not considered as a ‘substantial modification’, but may also be a packaging component which should be considered for the tax.