UK Plastic Packaging Tax
What is it?
The UK government are imposing 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. Plastic packaging is packaging that is predominantly plastic by weight.
It will not apply to any plastic packaging which contains at least 30% recycled plastic, or any packaging which is not predominantly plastic by weight.
Imported plastic packaging will be liable to the tax, whether the packaging is unfilled or filled.
When is it happening?
1st April 2022.
The government published the draft primary legislation for technical consultation on 12 November 2020, alongside a summary of responses for the consultation held earlier in 2020. Feedback from the technical consultation was used to amend the primary legislation.
Primary legislation was included in Finance Bill 2021 and received Royal Assent 10 June 2021.
Who is likely to be affected
UK manufacturers of plastic packaging, importers of plastic packaging, business customers of manufacturers and importers of plastic packaging, and consumers who buy plastic packaging or goods in plastic packaging in the UK.
To mitigate against disproportionate administrative burdens in comparison to the tax liability for those who are likely affected, there will be an exemption for manufacturers and importers of less than 10 tonnes of plastic packaging per year.
Businesses are exempt from paying the tax if they manufacture or import less than 10 tonnes of plastic packaging in a 12 month period.
Impact on businesses
The tax is expected to impact on an estimated 20,000 manufacturers and importers of plastic packaging. One-off costs include familiarisation with the new rules, training for staff, registration with HMRC, and developing the required reporting framework to complete tax returns.
Continuing costs could include completing, filing and paying tax returns, keeping appropriate records (including those required to claim the export credit), and amending returns. There will also be new registrations and de-registrations each year. In addition, joint and several liability requirements mean some businesses or civil organisations will need to conduct due diligence on their supply chain or take action following notification of wrongdoing by a taxpayer they are connected with.
These regulations, which ensure the tax is properly targeted, are expected to have a negligible impact on business beyond those set out above. Business experience with HMRC could be negatively impacted as this is a new tax that businesses will need to understand and comply with. However, to support businesses HMRC will develop clear guidance and other tools to help businesses understand and meet their obligations.
The average annual net increase in continuing administrative burden for businesses is estimated to be £0.4 million. This is largely for costs related to completing returns, but also includes the costs of new registrations after the commencement of the tax.
Registering for the tax
Manufacturers or importers of 10 or more tonnes of plastic packaging over a 12-month period must register for the tax. Plastic packaging which contains at least 30% recycled plastic or is exempt from the tax because it is used for medicinal products or is set aside for a non-packaging use must still be factored into the total to determine if a business must register for the tax.
Registration is required if:
- at any time after 1 April 2022 a business expects to import or manufacture at least 10 tonnes of plastic packaging in the following 30 days. In that case registration is required within 30 days of the first day that this condition is met; or
- a business has manufactured or imported at least 10 tonnes of plastic packaging in a 12-month period ending on the last day of a calendar month. In that case the business becomes liable for PPT from the first day of the next month and must register by the first day of the subsequent month. In the first year of the tax, a business only needs to register for the tax when the amount of plastic packaging exceeds 10 tonnes in a 12-month period from 1 April 2022.
If either of these conditions is satisfied, registration is required even if a business’ packaging is not chargeable and it does not have to pay any tax.
HMRC has published guidance on how to register for PPT – although this cannot be done until 1 April 2022.
Businesses based outside of the UK must be registered for and pay the tax if they import plastic packaging into the UK.
Quarterly returns will be required. Businesses which are members of a group of companies will be able to appoint a representative member of the group to submit returns and pay the tax for the whole group. HMRC has published guidance on group registration. HMRC is consulting on the draft regulations dealing with the administration of PPT.
Check if you will need to keep records
If you are a business that manufactures or imports plastic packaging, even if it is less than 10 tonnes a year, you will need to keep records of the packaging you manufacture or import. Plastic packaging is assumed to not meet the recycled content test unless it can be shown that it does.
If you are a business that manufactures or imports less than 10 tonnes of plastic packaging a year, we intend that the record keeping requirements will be reduced, but you will still need to keep some records. Further information will be published later in the year.
If you are a business that supplies recycled plastic, your business customers may want more information from you about the types and quantities of material you supply to them.