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February 18, 2022

Plastic Packaging Tax - What You Need To Do To Prepare

A new plastic packaging tax (“PPT”) will be coming into force in the UK from 1 April 2022, after being introduced in the Finance Act 2021. The new tax aims to provide an economic incentive to businesses to use recycled material in plastic packaging. The PPT follows on from approaches taken by other European countries introducing plastic packaging levies.

What is PPT and who is liable to pay it?

The tax will apply to 'finished plastic packaging components' containing less than 30% recycled content produced in the UK by a person acting in the course of a business or imported into the UK (including packaging on goods which are imported) at a rate of £200 per tonne.

Furthermore, registration is required for businesses who produce or import more than 10 tonnes of ‘finished plastic packaging components’ in a 12-month period or will do in the next 30 days. Registration will go live on 01 April 2022.

What is a ‘finished plastic packaging component’?

‘Finished plastic packaging component’ refers to components which have undergone their last substantial modification. If the last substantial modification happens as part of the packing/filling process of the packaging, the component is classed as ‘finished’ after it has undergone the last substantial modification before that one. Therefore, the business that undertakes the last substantial modification before the packing or filling process will be liable for PPT.

Business owners will need to consider whether they are manufacturing or importing a ‘finished plastic packaging component’ and, if they are, they will then need to calculate the percentage of recycled content in the packaging. HMRC have published guidance on how to calculate the recycled plastic content of plastic packaging components which can be accessed here.

Even if a business meets the 30% recycled content threshold, and therefore does not need to pay any tax, they will still be required to register for PPT if they exceed the threshold of 10 tonnes of plastic packaging in a 12-month period or will do in the next 30 days. Check if you need to register for PPT by clicking here.

Are there any exemptions?

There are four types of packaging that are exempt from PPT, regardless of how much recycled plastic they contain. These are as follows:

  • Plastic packaging manufactured or imported for use in the immediate packaging of a medicinal product;
  • Transport plastic packaging used on the transport of imported goods;
  • Plastic packaging used in aircraft, ship and rail stores; and
  • Plastic packaging components that are permanently designated or set aside for use other than in the containment, protection, handling, delivery or presentation of goods and the producer or person on whose behalf they were imported keeps a record of that designation or setting aside.

In addition to the above, there are certain items that will not be classed as plastic packaging components such as plastic packaging designed to be used in the long-term storage of goods or designed to be an integral part of the goods. These include items such as inhalers, printer or toner cartridges, toolboxes, first aid boxes and earphone cases.

Do I need to keep accounts and submit returns?

Businesses will need to submit a quarterly PPT Return in accordance with the PPT quarterly accounting periods. Businesses will be required to pay any PPT due no later than the last working day of the month following the accounting period being reported.

If you are registered for PPT, the business must keep accounts and records to support the information you submit in your PPT quarterly tax returns. These accounts will need to demonstrate how you have worked out the figures you have submitted on your return. Records will need to be kept up to date.

Your accounts and records must:

  • Be kept for at least 6 years from the end of the accounting period; and
  • Record weight in tonnes, kilograms and grams.

Further information on what information needs to be included in your accounts and records if you are registered for PPT can be found here.

If certain conditions can be met, businesses may be able to defer the liability to pay PPT and potentially claim a tax relief on exporting packing from the UK or converting it into different packaging.

Preparing for the new tax

Businesses should start preparing for the implementation of the new plastic packaging tax now. If you are a business owner, key questions you should be asking are:

  • Will the product you manufacture/import be subject to PPT?
  • Does the product qualify for an exemption?
  • Does your business undertake the last substantial modification?
  • Do your existing systems capture all of the information needed to comply with PPT compliance requirements, even if no PPT is payable?
  • Has the direct export condition been met and are you therefore able to defer PPT? Or are you able to reclaim PPT?

Due to its broad scope, the tax will affect a wide variety of businesses including those in the manufacturing, consumer goods and online retail sectors and, with the tax coming into effect on 1st April 2022, businesses are not left with much time to prepare. If you require any further advice on the new plastic packaging tax, please contact a member of our team.

There are a number of complexities and additional conditions with regards to the qualifications of PPT, so independent tax advice should be sought before registration.

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