From 1 April 2022, businesses face a new Plastic Packaging Tax (PPT), which will affect plastic packaging manufactured in, or imported into the UK, that does not contain at least 30 per cent recycled plastic.

Although this change remains relatively unknown, it is thought it could affect many organisations that utilise plastic packaging to protect and secure their goods.

Those affected by the new tax, including importers of packaging are being encouraged to act now to prepare for PPT, which will be chargeable at £200 per metric tonne.

The new tax is aimed at changing the behaviour of manufacturers and importers in line with the Government’s commitments to reduce plastic pollution.

It is hoped that it will provide a financial incentive for businesses to develop and use recycled plastic or other forms of packaging in their production processes.

Businesses should begin to plan now for this landmark change.

What components are subject to Plastic Packaging Tax?

When a chargeable plastic packaging component is produced in the UK by a person acting in the course of a business, or where it is imported into the UK on behalf of such a person, a PPT charge is created.

The charge only applies to ‘finished’ products’, i.e., those that have undergone a last substantial modification, or in cases where the last substantial modification happens when the component is packed or filled, its last substantial modification before being packed or filled, containing, or protected by a ‘packaging component’.

This is a product that is:

“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.”

This means that single-use packaging products for use by a consumer or user containing any commodity or waste, such as plastic bags, bin liners, nappy sacks, disposable cups, fall within the scope of this charge.

However, the wide definition of plastic packaging is challenging as it also covers many items not typically seen as packaging, including reusable items such as crates made of plastics and intermediate bulk containers (IBCs) that are common in the transport of many goods.

Whether the item is produced or imported for use by the consumer or an end-user, or whether it is just part of its transportation in the supply chain, the PPT is charged.

If the packaging component meets the definition, it does not matter if it is produced or imported for use in the supply chain of the goods, or by a consumer or user.

However, it isn’t charged on plastic packaging that is designed to be used during the presentation of goods, such as shop fittings or stands, as long as the packaging is readily reusable.

What plastics are affected by the Plastic Packaging Tax?

The content of the plastic used does have some bearing on whether this new tax is charged, but even plastics that are seen as more eco-friendly, such as biodegradable, compostable, and oxo-degradable plastics, are affected. However, plastic packaging which contains at least 30 per cent recycled plastic is exempt.

Importers and manufacturers will need to consider each component of their packaging separately, even if they form a single product.

As an example, a plastic contained ready meal would need to consider the tub, the film that covers the meal and any plastic cutlery included within the packaging.

Packaging that contains multiple materials but contains more plastic by weight than any other single substance will be a plastic packaging component for the purposes of the tax, according to the latest guidance.

It will be the responsibility of the producer or importer to prove to HM Revenue & Customs (HMRC) that packaging components containing plastic are not subject to the tax by demonstrating that the component is not entirely plastic.

HMRC have already issued guidance on when packaging is considered plastic and what is deemed to constitute recycled plastic, which can be found here.

Are any packaging components exempt from the Plastic Packaging Tax?

HMRC has confirmed that four categories of packaging components are exempt from the tax, regardless of how much recycled plastic they contain:

• Plastic packaging manufactured or imported for use in the immediate packaging of a human medicinal product.
• Transport packaging used on imported goods.
• Packaging used as aircraft, ship, and rail stores.
• Components that are permanently designated or set aside for use other than packaging use.

There is also a deferral of liability to the PPT if the product is exported and meets the direct export condition. The packaging on products that meet this condition can defer the payment of the tax for up to 12 months.

Do I have to register for the Plastic Packaging Tax?

You must register for PPT if you are a producer or importer that handles more than 10 or more tonnes of plastic packaging over a 12-month period.  This includes non-UK resident businesses.

Although some forms of plastic are exempt, as highlighted above, they must still be factored into the total use of plastic packaging to determine if a business must register for the tax.

Registration is required if:

• At any time after 1 April 2022, a business expects to import or manufacture at least 10 tonnes of plastic packaging in the following 30 days. In that case, registration is required within 30 days of the first day that this condition is met: or
• A business has manufactured or imported at least 10 tonnes of plastic packaging in 12 months ending on the last day of a calendar month.

In the latter case, the business becomes liable for PPT from the first day of the next month and must register by the first day of the subsequent month.

In the first year of the tax, a business only needs to register for the tax when the amount of plastic packaging exceeds 10 tonnes in a 12-month period from 1 April 2022.

If either of these conditions is satisfied, registration is required even if a business’ packaging is not chargeable, and it does not have to pay any tax. Businesses registered for PPT must also complete and submit quarterly returns.

Group Companies can have one registration, providing certain criteria is met.

If you are liable for PPT you must also highlight this on any invoice issued to a business customer, including the amount of PPT that has been paid on the packaging concerned. This will initially be a voluntary requirement but could become mandatory in future.

Although it is the importer or manufacturer of packaging components that are primarily liable for PPT, others in the supply chain can be made secondarily, jointly, and severally liable for the tax where they know or ought to have known that PPT has not been paid, which is why it is important to include PPT on invoices and consider your contracts with customer and suppliers.

If plastic components are imported using incoterms, it is important that all parties are aware who is responsible for PPT.

HMRC has issued guidance on the example due diligence checks that businesses should be undertaken, which is available here.