Update - 15 March 2023
The UK Government’s Spring Budget announced on 15 March 2023 included a rate change from 1 April 2023 for Plastic Packaging Tax. The rate, as set out in section 45 of the Finance Act 2021, will be amended from £200 per tonne to £210.82 per tonne.
It is reported that the measure is expected to have a negligible impact on the registered population of manufacturers and importers of plastic packaging. One-off costs will include familiarisation with the rate increase and there are not expected to be any continuing costs. There should be no impact on the business experience of dealing with HMRC as there will be no changes to any existing processes or tax administration obligations. Full details can be found here.
As of 1 April 2022, manufacturers or importers of plastic packaging products into the UK may be liable under Part 2 of the Finance Act 2021 (the Act) to pay a tax on products that contain less than 30% recycled plastic, known as Plastic Packaging Tax (PPT).
The introduction of PPT reflects the growing trend toward sustainable practices across industries and the demand for greater corporate responsibility by large scale manufacturers, importers and their insurers. It aims to incentivise manufacturers and importers to incorporate more recycled plastic into packaging, with the ultimate goal of reducing plastic waste.
The sectors that will be impacted by PPT are varied and include food and beverage, industrial, pharmaceutical and cosmetic products. If they have not done so already, it is crucial that businesses that produce and import plastic packaging take steps to assess whether they are required to register for PPT.
When does the charge to PPT arise?
The charge to PPT arises when a chargeable ‘plastic packaging component’ is:
- Produced in the UK by a person acting in the course of business.
- Imported into the UK on behalf of such a person.
What is a plastic packaging component (PPC)?
As a first step, manufacturers and importers must assess whether the plastic products they produce and/or import constitute a PPC for the purpose of the Act.
A PPC is any plastic product, at any stage of the supply chain, which contains more plastic when measured by weight than any other single substance, and has one or more of the following functions:
- Contains the goods
- Protects the goods
- Handles the goods
- Presents the goods
- Delivers the goods
The plastic product can be used alone, or in combination with other products.
Examples of PPC include:
- Trays used to contain and protect food.
- Film to protect goods, such as cling film or vacuum packed plastic film pots designed to handle and deliver products.
- Single use plastics designed to hold waste or a commodity, such as plastic bags, disposable cups, plates and bowls and gift wrapping, including ribbon and sticky tape.
PPC includes biodegradable, compostable and oxo-degradable plastics.
What makes a PPC ‘chargeable’?
PPT applies where the PPC contains less than 30% recycled plastic, when measured by weight, and where the product is ‘finished’.
A PPC is ‘finished’ when it has undergone its:
- ‘Last substantial modification’.
- ‘Last substantial modification before being packed or filled, even if waste or surplus material remains attached’. Such waste or surplus material is not to be treated as part of the PPC.
A product is considered to have undergone its ‘last substantial modification’ when it has reached the final stage of the manufacturing process that makes a significant change to the nature of the packaging component such that its shape, structure, thickness or weight is altered.
Single use plastic packaging that meet the above criteria and is designed to hold waste or a commodity, such as a plastic cup, will also attract PPT.
Who should register for the tax?
Manufacturers or importers of more than 10 tonnes of ‘finished’ PPC into the UK within a 12 month period, or will do so within the next 30 days, are required to register for the tax.
Manufacturers and importers may therefore be required to register for PPT, although registration does not necessarily give rise to a liability to pay it, as discussed further below.
PPC exempt from PPT
Four categories of PPC which are exempt from PPT, as set out in Section 52 of the Act, are:
- Those used in the delivery of goods into the UK and are transport packaging or road, rail, ship and air containers.
- Packaging used in goods for use in ships, aircrafts or railway vehicles.
- Use in the immediate packaging of a ‘medicinal product’.
- Those that are permanently recorded as set aside for a non-packaging use.
PPC that is for use in the immediate packaging of a medicinal product and non-packaging PPC still count towards the 10 tonne threshold for registration, even if the liability to pay PPT does not subsequently arise. It is important that businesses impacted by PPT are aware of this nuance when it comes to determining thresholds for registration.
Packaging excluded from PPT
In addition to the Section 52 exemptions, there are also three types of products that are excluded from PPT completely. These products do not need to be included when calculating the total weight of packaging manufactured or imported for the purpose of PPT registration and/or any liability under the Act.
They are products designed to be:
- Used in the long-term storage of goods, for example a CD case, toolbox or first aid kit.
- An integral part of the goods, meaning the goods cannot be used or consumed without it (for example, a printer/toner cartridge or an inhaler).
- Reused for the presentation of goods, for example a display shelf.
Other plastic packaging, such as cling film or plastic wrap around a plastic case used for long-term storage, such as a CD case, that is removed in order to use an exempt or excluded product, will still attract PPT.
The UK Government’s website sets out some helpful steps for companies to consider:
- Determine which packaging is subject to PPT.
- Register for the tax if the plastic packaging you produce qualifies as PPC.
- Calculate the weight of the packaging you manufacture or import. There are Regulations, which came into force on 1 April 2022, which provide guidance as to how to calculate the percentage of recycled plastic and the weight of applicable PPC.
- Check deadlines for registration.
- Find out how to register.
- Check which records and accounts you must keep and how to carry out due diligence.
- Read how to claim a credit or defer paying Plastic Packaging Tax, if applicable.
- Find out how to complete your return.
A word of warning
It is also vital that they communicate with all parties involved in the supply chain in order to confirm which entity is responsible for PPT, as the Act confers joint and several liability on other actors in the supply chain where they know, or ought to have known, that the primary responsible party, i.e. the manufacturer or importer, has not paid the PPT.
The financial and organisational burdens placed on manufacturers and importers by the Act with respect to PPT are not insignificant, but its overarching goal in reducing plastic waste signifies a strong commitment by legislators to demand accountability for the market actors responsible for the majority of plastic waste production in the UK and drive positive environmental change.