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Businesses must prepare for plastic packaging tax

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The government’s green credentials are on show again with a new plastic packaging tax set to enter force next year.

26th Oct 2021
Journalist
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With the Cop26 climate change summit just around the corner, the government has released more details of its incoming green packaging levy.

Plastic Packaging Tax (PPT) will be claimed on packaging manufactured in, or imported into the UK, where the material used contains less than 30% recycled plastic. 

This will cover plastic bags, single-use food containers, and bioplastics, including biodegradable, compostable and oxo-degradable plastics.

The tax is expected to raise £670m for the treasury between 2022 and 2026 and will enter force on 1 April, 2022. 

The rate of tax will be £200 per metric tonne of plastic packaging.

Where 30% or more recycled plastic is used, no tax will be due, but the plastic packaging will still need to be accounted for. This includes imports of packaging which already contain goods, such as plastic bottles filled with drinks.

Where the packaging imported already contains other goods, the tax only applies to the plastic packaging itself, the government said. 

According to RSM’s tax team, PPT will affect businesses such as retailers that import products such as bin liners and fizzy drinks, publishers that import plastic used for laminating books, fresh food producers, manufacturers and transport providers that import plastic like bubble wrap for transport.

Increase levels of recycling

The PPT was introduced to encourage the use of recycled packaging. 

“This will in turn stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration,” HMRC said. “Packaging should only contain recycled content where it is permitted to do so under other regulations, such as those covering food safety.”

Where plastic packaging is intended for export, payment of the tax can be deferred for up to 12 months as long as certain requirements known as the ‘direct export condition’ are met.

If the packaging is exported within the 12-month period, the liability for PPT is cancelled.

Businesses that have accounted for PPT on packaging that was intended for the UK when it was manufactured or imported, but is subsequently exported from the UK, can claim a tax credit.

To receive a tax credit, firms must hold records demonstrating that the export has taken place.

There is also a deferral of liability to the tax for plastic packaging which is exported that meets the direct export condition.

More guidance on the criteria that will need to be met to satisfy the direct export condition will be published along with regulations, later in the year.

Who will be affected by PPT

If the direct export condition is not met, PPT will become due on the packaging from the date when the condition was no longer met. For example, the date when the packaging was no longer intended for export, or the 12 month deferral period, has elapsed – whichever is the sooner.

Although it is the importer or manufacturer of packaging components that is primarily liable for PPT, others in the supply chain can be made secondarily liable or jointly and severally liable for the tax where they know or ought to have known that PPT has not been paid, said Steven Porter, head of tax disputes and Investigations at law firm Pinsent Masons.

“The provisions apply not just to those involved in the production or importation of the packaging components but also those involved in transporting or storing products and operators of online marketplace or fulfilment businesses,” Porter said. 

This secondary liability and joint and several liability provisions mean that any related business needs to conduct due diligence to ensure that it cannot be said that it ought to have known that PPT was not paid, he added. 

“HMRC is expected to give guidance on the due diligence required,” Porter said. “It is likely to include requirements for manufacturers to check whether suppliers of recycled plastic are accredited and to intermittently check the levels of new plastic and recycled plastic in each product run. Due diligence may be particularly difficult in relation to imported packaging.”

Steps to take

Anne Holt and Grace King from RSM have warned that businesses are likely to require updated systems to monitor and document the amount of plastic packaging that they produce or import.

In order to prepare, the RSM tax team advises businesses to carry on the following action points:

  • Carry out an assessment of whether and to what extent there will be a liability to PPT.
  • Review supply chains to consider whether efficiencies can be achieved.
  • Create systems to ensure compliance with the new record-keeping requirements.
  • Decide who will be responsible for PPT compliance.
  • Prepare staff training in relation to the new rules.

 

Replies (4)

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FirstTab
By FirstTab
26th Oct 2021 12:37

From a sustainability perspective, some from tax to discourage so much plastic packaging should have been put in place 10 years ago.

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By ireallyshouldknowthisbut
26th Oct 2021 15:22

More greenwash then.

£200/tonne is almost nothing.

Outlawing black plastic would be a start, completely unnecessary and hard to recycle.
Outlawing "big packets" would help, and forcing manufacturers to use better shapes. Eg if you buy 6 bars of chocolate they should be stacked 3&2 not in a single strip, and moreover don't need a whole packet around them - a simple paper loop would do. The foil backed packaging should be outlawed - the difference on freshness is minute.

Fiddling about at the edges with a tiny tax changes nothing.

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By harrison67
27th Oct 2021 11:42

Unfortunately there isn't enough recyclable material in the world to make plastic packaging recyclable and the little there is, is so expensive its cheaper to pay the tax

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By AndrewV12
24th Nov 2021 11:00

'Plastic Packaging Tax (PPT) will be claimed on packaging manufactured in, or imported into the UK, where the material used contains less than 30% recycled plastic. '

I suppose its fair enough, it discourages those who use cheap nasty plastic (normally the black thin stuff.), and rewards those company's who use recycled products,

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