How will the Plastic Packaging Tax affect your business?

HMRC have recently issued guidance around Plastic Packaging Tax (PPT). This tax will come into force on 1 April 2022 and will be charged at a rate of £200 per tonne. As PPT has not started, the guidance will be subject to change until all the legislation is approved by Parliament. It will continue to be updated.

Do I need to register for PPT?

You need to register for the Plastic Packaging Tax if you have manufactured or imported ten or more tonnes of finished plastic packaging components within the last 12 months. Or you will do so in the next 30 days. From 1 April 2022 to 30 March 2023, the 12 months threshold will be worked out differently.

Does the tax apply if the plastic I import is recycled?

PPT only applies to manufacturers and importers of plastic packaging components which contain less than 30% recycled plastic. Packaging should only contain recycled plastic where it is permitted under other regulations and food safety standards.

Are there any exemptions I could look into?

There are a number of potential exemptions from the PPT, as set out in HMRC’s guidance. But even if this applies to your business, there may still be record keeping and reporting requirements.

A particularly difficult element of the rules is the treatment of importers. UK companies importing goods from overseas may be required to gather information on packaging content from their suppliers. This means they become the ‘liable company’ for taxable plastic in their packaging.

What is the purpose of this tax?

The purpose of PPT is to encourage the use of recycled plastic in packaging, where plastic is necessary. Therefore, PPT is essentially an operational issue. It needs to bring together procurement and quality teams with input on systems and tracing.

Early indications are that it is much more efficient to ask a member of those teams to own the PPT response. Tax can focus on feeding technical support in and taking questions to HMRC and other advisers. Perhaps around grey areas in what ‘recycled content’ might mean in practice for a particular business.

Should we pass costs on?

The business liable for PPT is either the one that manufactures the plastic packaging component in the UK, or the business that imports it into the UK. Businesses are therefore considering if they should bear this cost or pass it on to their customers.

While it is a business decision whether the cost of PPT should be passed on to customers, the purpose is to increase the use of recycled plastics. Therefore, businesses are encouraged to make the tax that they have paid visible to their business customers, and then collaborate with them where possible to try and increase the amount of recycled plastic used.

Updated guidance on invoicing

HMRC’s original guidance required that from April 2022 a statement be included with the invoice for the packaging that PPT had been paid. However, HMRC has now delayed this requirement, stating that further information will be published in due course.

The complexities of actually including such a statement on an invoice are recognised. HMRC will now allow more time for businesses to prepare and make any required changes to invoicing systems.

Get your business ready

For more information and guidance on the UK plastic packaging tax, find out more about our Business Tax Team here and how they can help you get ready, or call them on 01903 234094.