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Plastic Packaging Tax – What You Need To Know

Plastic Packaging Tax – What You Need To Know

Posted on March 8th, 2022

Many of us make small efforts here and there to reduce our plastic usage, with the government introducing small changes such as the instigation of the 5p plastic bag charge in supermarkets in 2015 and the subsequent increase to 10p 2021. But, the UK has now taken steps to target manufacturers and importers of plastic packaging by introducing a new Plastic Packaging Tax to help further reduce the use of new plastics and increase plastic recycling.

What is the Plastic Packaging Tax?

The UK’s Plastic Packaging Tax (PPT) is due to take effect from 1 April 2022 and will be payable by UK manufacturers and importers of plastic packaging containing less than 30% recycled plastic content at a rate of £200 per metric tonne.

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. Packaging which is imported into the UK will also be liable for the tax, whether the packaging is unfilled or filled.

What classes as a liable plastic packaging component?

  • A finished piece of packaging where plastic is the majority material by weight.
  • Components are reviewed separately so a bottle and a cap would be treated as individual components, despite forming part of the same finished consumer product.

What is the aim of the Plastic Packaging 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 will help create greater demand for recycled material. In turn, this will stimulate increased levels of recycling and collection of plastic waste, reducing the amount that ends up in landfill or being incinerated.

A crucial aspect of the PPT regime is that downstream businesses that buy plastic packaging on which the tax should have already been paid may be found jointly and severally liable for any unpaid tax.

Who is likely to be affected?

The tax is expected to have a significant impact across a wide range of sectors due to its broad scope including, but not limited to:

  • Manufacturing.
  • Consumer goods.
  • Online retail.
  • Pharmaceutical and chemical.
  • Food and drink.
  • Cosmetics.

Any business that imports plastic packaging or products contained in plastic packaging into the UK or manufactures plastic packaging in the UK, including packaging that already contains something such as water, will be liable to register for PPT and pay any tax due. 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.

Who is liable to pay PPT?

The plastic tax will impact businesses differently depending on their position in the supply chain. The business liable for PPT is either the one that manufactures the plastic packaging component in the UK, or the business that imports it into the UK. For plastic packaging imported into the UK – the business who first takes ownership of the packaging in the UK would be liable. For plastic packaging manufactured in the UK – the first business who manufactures a finished plastic packaging component would be liable.

This can also be separated into direct and indirect costs.

Direct costs apply to businesses who would pay the cost of the tax and register with HMRC:

  • Importers of finished goods in plastic packaging.
  • Importers of empty plastic packaging.
  • UK plastic packaging manufacturers.

Indirect costs are applied where the tax has been paid higher up the supply chain, therefore, the cost of products increase for everyone subsequently handling the material. This would include the following parties:

  • Businesses selling or handling products in plastic packaging.
  • Consumers.
  • Waste management companies.

While it’s a business decision whether the cost of PPT should be passed on to customers, the purpose of it is to increase the use of recycled plastics – businesses are therefore considering if they should bear this cost or pass it on to their customers.

What can liable businesses do next about PPT?

The introduction of PPT will generate a need for certain systems and processes to collate data for compliance, pricing, contracts, and supply chains, which take time to deal with. Therefore, businesses need to start planning now for their strategy for dealing and complying with the tax. Here are a few things for business to consider before April:

  • Check what records you may need to keep – unless you can demonstrate that plastic packaging meets the recycled test, it will be deemed not to.
  • Ask your suppliers how they intend to record the recycled content of the materials they supply.
  • Check if you will need to start creating paperwork such as invoices to show a customer how much PPT has been paid.
  • Make sure to register before the April 2022 deadline if you are liable.

To check if you need to register for Plastic Packaging Tax and further advice on what steps to take visit: https://www.gov.uk/guidance/check-if-you-need-to-register-for-plastic-packaging-tax.

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