Taxation

The New Plastic Packaging Tax

Chris Stedman
Senior Partner
December 6, 2021
    

Plastic packaging tax is a brand-new tax with a brand-new acronym (PPT) and a brand-new set of rules and regulations. It kicks in on April Fool’s Day 2022, but businesses affected need to be preparing now…

Key Points

  • PPT is an environmental tax aimed at encouraging the use of less new plastic.
  • It catches some items that may not ordinarily be associated with packaging such as coat hangers, imports of filled packaging, and plastic products designed for consumer use such as bin bags, clingfilm and plastic cups.
  • It only applies to businesses that manufacture or import ten or more tons of plastic packaging a year, but businesses will need to keep records to show that they are below the threshold.
  • If a packaging component contains plastic, it is up to the manufacturer or importer to show how much plastic it contains. Failure to do this will mean that the whole component will be treated as plastic.
  • Registration requirements are wide and may catch businesses which will not have a PPT liability because their packaging contains at least 30% of recycled plastic or is exempt.
  • Although the primary liability for the tax is on manufacturers and importers, HMRC has wide powers to make businesses secondarily or jointly liable where the primary business has not paid PPT. Some form of supply chain due diligence will be necessary.
  • New contracts need to factor PPT into the pricing and should specify whether prices are inclusive or exclusive of PPT.

The Tax Charge

The initial rate will be £200 per metric ton of plastic packaging but is applied only to those who manufacture or import ten or more tons of plastic packaging a year.

Scope of Charge

What is caught and what is not? Sadly, detailed guidance has not yet been published by HMRC even though D-day or (P-day) is less than four months away.

Basically, PPT catches all plastic packaging with less than 30% recycled plastic. Caught in all this will be coat hangers, plastic crates for fruit and vegetables, bottles and bottle caps, plastic bags, bin liners, nappy sacks – the list is endless. There are exemptions covering packaging for items such as:

a)       Medicinal products for humans (but not for animals!)

b)      Transport packaging

No doubt more and more products will be exempted in time to produce a complete maze for the uninitiated.

Aim of the Charge

At the heart of all this is politics – the government has to be seen to be taking action against environmental waste and to be promoting increased levels of recycling plastic waste, diverting it away from landfill or incineration. It is essentially an environmental tax.

Registration

A business must register if;

  • at any time after 1 April 2022, it expects to import or manufacture at least ten tons 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
  • if it has manufactured or imported at least ten tons of plastic packaging in a 12-monthperiod ending on the last day of a calendar month. In that case the business becomes liable for PPT from 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 exceeds ten tons in a 12-month period from 1st April 2022.

If either of these conditions is satisfied, registration is required even if a business’s packaging is not chargeable, and it does not have to pay any tax.

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. Businesses based outside the UK must be registered for and pay the tax if they import plastic packing into the UK.

Challenges

PPT will result in practical and administrative challenges for many sectors (food & drink, cosmetics, pharmaceuticals as well as those engaged in manufacturing packaging). New systems will be needed, if only to provide robust evidence that packing contains more than 30% or recycled content for each component. Not a pleasant prospect.

 

C&H Stedman are here to advise on tax and related issues.

 

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