UK Plastic Tax – April 2022
The UK Government is introducing a new tax from April 1st 2022 on plastic packaging manufactured in or imported into the UK. The tax will be levied at a rate of £200 per tonne unless it qualifies for an exemption because the plastic packaging contains a minimum of 30% recycled material.
What is the plastic packaging tax?
PPT will be a tax on the plastic packaging manufactured in or imported into the UK, where the plastic used in its manufacture contains less than 30% recycled plastic. Where 30% or more recycled plastic is used, no tax will be due, but the plastic packaging will still need to be accounted for. The tax will be due on finished packaging components. Where plastic packaging components are imported, this will include products that are both empty or pre-filled.
Who is Liable to pay the plastic packaging tax?
PPT will be charged from 1 April 2022 and it is likely that everybody will see its effects. If you are a business that manufactures or imports 10 or more tonnes of plastic packaging over a 12-month period you may be liable to pay the PPT. The tax will be charged for a finished product that has “undergone its last substantial modification” such as extrusion, moulding, forming or printing. If a business is in the UK, it will be liable for PPT if it performs the “last substantial modification before the packing or filling process”. The business that packs or fills the packages will be liable for PPT only if it also “undertakes a substantial modification before the packing of filling process”. Importers will also be liable for PPT if the packaging they import has undergone its last substantial modification.
How much is the tax?
Packaging manufactured in or imported into the UK that does not contain 30% recycled plastic will incur the tax at the rate of £200 per metric tonne.
What packaging is included in the tax?
PPT will be a tax on plastic packaging that contains less than 30% chemically or mechanically recycled plastic. This will also apply to bioplastics, biodegradable, compostable and oxo-degradable plastics. In cases where packaging is made using multiple materials (paper/foil and plastic) if the packaging contains a larger proportion of plastic, the weight of the entire packaging will be considered plastic and will be taxable as such.
PPT will be levied on products “designed to be suitable for use, whether alone or in combination with other products, in the containment, protection, handling, delivery or presentation of goods at any stage in the supply chain of the goods, from the producer of the goods to the consumer or user”. Plastic food trays, film used to protect produce, reusable plastic crates, plastic carrier bags and disposable cups all constitute packaging components liable for the tax. But even plastic packaging that does not fit the definition provided but is designed as single-use consumer packaging will be taxable.
What packaging is exempt from the tax?
There are three main categories of packaging components that are exempt from PPT.
- products where the packaging is not the primary aim of the product but is instead there to store the good. This exemption includes items such as toolboxes, earphone cases and first aid boxes.
- products such as inhalers and room deodorisers, where the packaging is an essential aspect of the product that will be used by the consumer.
- products such as shop fittings and sales display shelves, which are created specifically for presenting products to consumers and will be re-used to this end.
Plastic packaging that is used to transport imported goods, used in aircraft, ship and rail goods stores, used to package medicinal products or that has another permanent use other than packaging will also be exempt from the tax. If the packaging is intended for export and is exported within 12 months, it is also exempt from the tax.
How will the PPT impact businesses?
All manufacturers and importers of plastic packaging will need to register with HMRC regardless of the amount of recycled plastic they use unless they produce or import less than 10 metric tonnes of plastic packaging in any 12-month period. A business must register if at any time after 1 April 2022, it expects to manufacture or import at least ten metric tonnes of plastic packaging in the following 30 days or it has manufactured or imported at least ten metric tonnes of plastic packaging in a 12-month period ending on the last day of a calendar month. Imports that have not cleared customs or are not in free circulation in the UK are not included within these calculations.
Businesses will be subject to increased record-keeping as they will need to maintain records to show:
- The total amount in weight and a breakdown by weight of the materials used to manufacture the plastic packaging (excluding packaging which is used to transport imported goods)
- The data and calculations used to determine if a packaging component is, for the most part, plastic and how much-recycled plastic it contains
- The weight of exempted plastic packaging and the reason for the exemption
- The amount in weight of plastic packaging exported, and therefore the allowed relief from the tax.
Even where the recycled content test is met, businesses will need to register, file, and retain evidence to show that the relevant plastic packaging meets the threshold. Plastic packaging will be assumed not to meet the recycled content test unless it is shown to do so.
Click here to see the latest guidance from the HMRC on the Plastic Packaging Tax