New green tax now in effect

Overview

Plastic packaging tax (PPT) aims to reduce plastic going to landfill or incineration, boost recycling and incentivise use of recycled plastic in packaging manufacture. PPT applies to plastic packaging manufactured in, or imported into, the UK that doesn’t contain at least 30% recycled plastic. Imported plastic packaging is liable to the tax, whether the packaging is unfilled or filled. The rate of tax is £200 per metric tonne of chargeable plastic packaging components. Businesses registered for PPT will make quarterly returns to HMRC.

What counts as plastic packaging?

PPT applies to “finished” chargeable plastic packaging components. Businesses should refer to the guidance to check out the definitions, for example what constitutes plastic, recycled plastic, and packaging components, how to classify components made out of multiple materials, what’s meant by finishing. There are also some special cases and exemptions.

PPT is not intuitive. Businesses need to watch out for products that they may not automatically think of as packaging, like single use consumer items, e.g. sandwich bags, disposable cups, gift wrap.

Which businesses could be affected?

Businesses who manufacture or import packaging are obvious examples, but also those who produce fresh food and import plastic packaging for it; retailers who import carrier bags or drinks bottles; or businesses who make cosmetics and import bottles and jars, for instance. Business awareness of the PPT is thought to be low generally.

Obligations

Businesses must register for PPT if they’ve manufactured or imported ten or more tonnes of finished plastic packaging components within the last twelve months, or will do so in the next 30 days, so they need to look both forwards and back. It's important to realise that some packaging which is exempt from PPT still forms part of the registration calculation. As the tax only started on 1 April 2022, the retrospective test works differently between 1 April 2022 and 30 March 2023. Here businesses only look back to 1 April 2022. Registration is due within 30 days of becoming liable to do so. Tax has to be paid on all components on which it’s due from the day of liability to registration.

Even though PPT only applies if businesses manufacture or import ten or more tonnes of plastic packaging a year, there’s a catch. It’s up to them to be able to prove that they are under this threshold, so they’ll need appropriate records. That’s a whole new set of data to come up with.

In terms of pricing, it’s up to businesses paying the PPT what they do to cover their increased costs. But the idea is transparency: that they share the issue with customers as something to be tackled together. So businesses who aren’t in scope of PPT, but are business customers of those who are, could feel the change, too.