Lyndon Firth
VAT Partner
The Plastic Packaging Tax (PPT) applies to all businesses that trade in the UK and either manufacture or import more than 10 tonnes of plastic packaging a year. Companies that meet these criteria must register and currently pay a tax of £210.82 per tonne (which will increase to £217.85 effective from 1 April 2024).
Why was Plastic Packaging Tax introduced?
In the UK, the plastic bag tax has proved effective as it has led to major changes in consumer behaviour: the Government believed that a new Plastic Packaging Tax (PPT) would have a similar effect on producer and retailer behaviour. It became law during 2021 and took effect from 1 April 2022.
Plastic Packaging Tax focusses on the materials used in delivery of goods to the end user. The Government recognises that the lightness and versatility of plastic means it has environmental benefits in terms of transport and protection of a vast range of goods, but its current use patterns are not sustainable.
The Plastic Packaging Tax was introduced in April 2022 to ensure that a higher percentage of recycled plastic is used in packaging. Using new plastic typically has greater environmental impact than using recycled plastic: it requires unnecessary resource extraction and processing, with higher energy use and emissions than using recycled material.
Which businesses are affected the PPT?
The tax affects UK manufacturers of plastic packaging as well as businesses that export to the UK regardless of whether they have a presence in the UK. Multinational businesses that do not manufacture in the UK can still be caught by the requirement to register because they export items to the UK through HMRC depending on the product and immediate packaging.
Will your packaging be liable for Plastic Packaging Tax?
Most new plastic polymers fall within the rules, although the definition of plastics in the legislation excludes cellulose-based polymers that have not been chemically modified. Plastic Packaging Tax will be levied on all forms of packaging where the heaviest component is plastic. Therefore, a plastic bottle with a paper sleeve would probably be within the tax whereas a cardboard sandwich wrapper with a clear film front would probably not.
However, the important point is that where packaging is mostly plastic by weight, the whole of the packaging is deemed to be plastic and the whole weight of the packaging will be taxed as plastic. Even goods imported in plastic packaging can be liable to the levy and it has to be paid by the business who controls the goods once they have gone through customs and entered the UK.
We are seeing multinational businesses registering for the tax based on either the product imported and/or its immediate packaging. This can be more complicated as it requires an in-depth consideration of the transport packaging exemption and determining who is liable for the delivery of the goods to the UK base. You will need to review and consider all available production data. This will reduce the risk of potential penalties for late registration.
PPT - The impact on your business
If your business uses less than 10 tonnes of liable plastic (i.e. plastic that does not meet the 30% test) in a year, you do not need to register or pay the tax. However, it is expected that all large retailers and packaging producers will need to register. If your business imports plastic and packaged products into the UK (even if they are not established in the UK), you may need to register for PPT or appoint an agent to register and administer the tax on your behalf.
You will need to notify HMRC that you are liable to pay within 30 days of when your liability arises. Liable businesses must make quarterly returns and payments to HMRC. Get advice on your liability now.
Plastic Packaging Tax exemptions
Not all plastic is liable to PPT. Packaging classed as predominantly plastic is not liable to PPT if at least 30% by weight of the packaging is comprised of recycled plastic. All forms of recycled plastic, except ‘scrap and regrind’ within a production facility, count towards the 30% test for recycled plastic content.
Where plastic does not meet the 30% recycled content test then a current levy of £210.82 per tonne of non-qualifying plastic will be charged to the producer or importer selling on the packaged goods in the UK.
Plastic Packaging Tax guidance
If you are a UK manufacturer or a non-UK business operating in the UK, we can help you get to grips with PPT by analysing your packaging data. We will then collaborate with you to establish a strategy for management of the tax. This will include training your teams and setting up robust documentation processes. We can also explore ways to mitigate the tax via R&D claims if you are considering development of new packaging solutions to reduce your use of virgin plastic or increase its recycled plastic content.