The new tax will apply to plastic packaging material manufactured or imported into the UK in a drive to divert plastic from landfill and incineration.
What is the plastic packaging tax at a glance?
The plastic packaging tax (PPT) is a new tax that will apply to plastic packaging manufactured in, or imported into the UK, that does not contain at least 30% recycled plastic.
What's the aim of the tax?
The aim of the tax is to provide a clear economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging, which makes up the majority of plastic waste. It is hoped that this will create greater demand for recycled plastic, which in turn will stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill and incineration. Revenue from the tax will be used to help address single-use plastics, waste and litter.
What's the scope of the tax?
A charge to the tax arises on a "chargeable plastic packaging component" which is either produced in the UK by a person acting in the course of a business or imported into the UK on behalf of such a person. A "plastic packaging component" is chargeable if:
- it is designed for use in containing, protecting or presenting goods at any stage in the supply chain, including for use by the consumer;
- it contains less than 30% recycled plastic (measured by weight); and
- the component is "finished", ie it has undergone its last substantial modification.
Imports of filled packaging (eg plastic bottles filled with drinks) are also within scope of the tax.
Certain types of packaging are exempt, including packaging for medicinal products and transport packaging used on imported goods.
How much is the tax?
The tax is charged at a flat rate of £200 per metric tonne of chargeable plastic packaging components of a single specification.
Who will it impact?
Primary liability to pay the tax falls on manufacturers and importers of the packaging, although others in the supply chain can be made secondarily liable or jointly and severally liable for the tax where they know or ought to have known that PPT has not been paid.
Manufacturers and importers of at least 10 tonnes of plastic packaging over a 12-month period must register for the tax. Significantly, packaging which has over 30% recycled content or falls within an exemption still counts towards this 10 tonne registration threshold and therefore manufacturers and importers with no tax to pay may still be impacted and must be aware of their registration compliance obligations.
Due to the broad scope of the tax, businesses in many sectors will potentially be affected, including the packaging and manufacturing sectors, consumer goods and retail, food and drinks, industrial manufacturing, pharmaceutical and chemical transportation and production.
HMRC estimates that the tax will impact 20,000 manufacturers and importers of plastic packaging.
The tax is not expected to impact individuals unless businesses pass on the charge. The government expects that even if all the tax were passed on to individual consumers, the impact would not be significant as plastic packaging usually makes up a very small amount of the total cost of goods.
What's the timeline?
The tax comes takes effect from 1 April 2022. Primary legislation is included in Finance Act 2021 and further technical and administrative detail is included in secondary legislation.
What should companies do to prepare?
Affected businesses should familiarise themselves with the new legislation and assess their supply chains to identify potential liability and opportunities to change packaging used in order to fall outside the scope of the tax. Registration requirements must be identified and complied with, and record-keeping systems and processes should be implemented. Contracts should be reviewed and price adjustments considered to take account of any PPT liability.