Plastic packaging tax – what you need to know

Plastic packaging tax (PPT) is an environmental tax designed to provide a financial incentive for businesses to use more recycled plastic in packaging. The government envisages that the tax will divert plastics from landfill or incineration by creating greater demand for recycled plastic.

What you need to know

When does PPT apply?

PPT will apply to chargeable plastic packaging components where the recycled content is less than 30 per cent. It applies at a rate of £200 per metric tonne.

There is a 10-tonne threshold, under which importers or manufacturers will not be required to register for PPT. This threshold applies on a 12-month rolling basis. Unregistered businesses operating below the threshold will therefore need to keep records of the materials they import to evidence registration status.

The tax comes into effect from 1 April 2022, and businesses will need to notify HMRC of a requirement to register by 30 April 2022.

What is considered to be a plastic packaging component?

Any components that meet both the definition of plastic and of packaging will be caught under PPT. A plastic component for these purposes is one where it is majority plastic by weight (ie plastic is the heaviest item).

A plastic component is packaging if it is used for the storage, handling, containment, delivery, or protection of goods at any stage in the supply chain. Examples include:

• Bin bags
• Bubble wrap
• Disposable cups
• Plastic labels used in the presentation of goods
• Film used to protect goods
• Pots designed to handle and deliver products
• Crates designed to deliver products

There are, of course, exceptions to this rule. If products meet certain conditions, and the plastic packaging component is used for a purpose other than packaging, or the packaging function is secondary to another function, the component won’t fall under PPT. Examples include:

• Toolboxes
• Product cases
• Printer cartridges
• Lighters

Who is liable to pay PPT?

Any UK manufacturer or processor will be liable to pay PPT when a chargeable plastic packing component is finished.

Anyone importing plastic packaging components will be required to pay PPT. The person importing the plastic will be the named importer of the goods on the customs declaration.

When is it payable?

The legislation is not as straightforward as it initially appears. A plastic packaging component is considered to be finished only once it has undergone its final substantial modification. This will be the last point in the manufacturing process, enabling the plastic packaging component to be packed or filled. A ‘substantial modification’ can be defined as any process that makes a significant alteration to the shape, thickness, weight, or structure of the component. Examples of these processes include:

• Laminating, printing, moulding, forming, extrusion

Any business that alters a plastic packaging component as the final modification in the supply chain will be the party liable to pay PPT for the component in question. To give further context to this area of the legislation, HMRC has provided some examples of processes that it does not consider ‘substantial’ modifications:

• Blowing, cutting, labelling, sealing

A business which does one these to a plastic packaging component as the final modification would not be liable to pay PPT on it, because these modifications are not considered substantial.

Exemptions

There are three main exemptions for plastic packaging components, which are:

1. Plastic packaging in direct contact with a medicinal product eg blister packs
2. Transport packaging used to secure safe transit of imported goods eg pallet wrap
3. Plastic packaging used as aircraft, rail, or ship stores.

There are specific conditions around whether items will fall under the exemption, and these will need to be reviewed for each product where appropriate to see if they will apply.

Required administration

It is important that businesses are aware that registration is mandatory, even if the products they import or manufacture will not ultimately be subject to PPT. Items containing more than 30 per cent recycled plastic and those falling under the exemption for medical products, although exempt, still count towards the threshold.

HMRC expects businesses to maintain records to show the weight and composition (materials used and recycled content) of their products as proof that the plastic packaging component is not chargeable. For imported plastic packaging, these details must be obtained from the overseas manufacturer.

Businesses must also keep detailed records of the calculations used to determine if a packaging component is plastic and how much plastic it contains for HMRC to judge the fair and reasonable treatment of products. Businesses are required to provide evidence and sound reasoning for treating any plastic packaging components as exempt.