Why is this tax being introduced?
In the UK, the plastic bag tax has proved effective as it has led to major changes in consumer behaviour: the Government believes that a new Plastic Packaging Tax (PPT) will have a similar effect on producer and retailer behaviour. It will become law during 2021 and take effect from 1 April 2022.
PPT will focus on the materials used in delivery of goods to the end user. The Government recognises that the lightness and versatility of plastic means it has environmental benefits in terms of transport and protection of a vast range of goods, but it current use patterns are not sustainable.
Using new plastic typically has greater environmental impact than using recycled plastic: it requires unnecessary resource extraction and processing, with higher energy use and emissions than using recycled material. Therefore, the PPT is designed to ensure that a higher percentage of recycled plastic is used in packaging from April 2022 onwards.
Will your packaging liable be liable to PPT?
Most new plastic polymers fall within the rules although the definition of plastics in the legislation excludes cellulose-based polymers that have not been chemically modified. PPT will be levied on all forms of packaging where the heaviest component is plastic. Therefore, a plastic bottle with a paper sleeve would probably be within the tax whereas a cardboard sandwich wrapper with a clear film front would probably not.
However, the important point is that where packaging is mostly plastic by weight, the whole of the packaging is deemed to be plastic and the whole weight of the packaging will be taxed as plastic. Even goods imported in plastic packaging can be liable to the levy and it has to be paid by the business who controls the goods once they have gone through customs and entered the UK.
30% recycled plastic threshold
Packaging classed as predominantly plastic will not be liable to PPT if at least 30% (by weight) of the packaging is comprised of recycled plastic.
All forms of recycled plastic (except ‘scrap and regrind’ within a production facility) count towards the 30% test for recycled plastic content. The aim is for the majority of this to be sourced from post-consumer plastics so that the packaging industry plays an increasing role in the circular economy.
Where plastic does not meet the 30% recycled content test then a levy of £200 per tonne of non-qualifying plastic will be charged to the producer or importer selling on the packaged goods in the UK.
The impact on your business
Businesses using less than 10 tonnes of liable plastic (ie plastic that does not meet the 30% test) in a year will not need to register or pay the tax. However, it is expected that all large retailers and packaging producers will need to register. Businesses importing plastic and packaged products into the UK (even if they are not established in the UK) may need to register for PPT or appoint an agent to register and administer the tax on their behalf.
PPT goes live from 1 April 2022 and businesses will need to notify HMRC that they are liable to pay within 30 days of when a liability arises. Liable businesses must make quarterly returns and payments to HMRC.
In the run up to April 2022, businesses will need to assess their current use of plastic packaging that does not meet the 30% test as this will present a real cost to businesses that will either need to be absorbed by the manufacturer, passed on to consumers or a mixture of both
How BDO can help
While PPT may raise revenue for the Government, its main aim is to encourage the sustained use of more recycled plastic in the production of plastic packaging to help tackle plastic waste. In the run up to April 2022, we can help you get to grips with the PPT through external reviews and impact assessments, staff training and business assurance reports about your PPT exposure as well as advice and support on R&D claims as you develop new packaging solutions.
For help and advice please contact a member of our local tax team.