Plastic Packaging Tax – The Lowdown


Where we are now

We are now just 4-months away from the implementation of the UK plastic packaging tax, a brand-new tax that it is estimated could impact 20,000 businesses. The latest HMRC consultation closed 1st December 2021 and provided an opportunity to give HMRC views on all aspects of the technical application of the regulations.

HMRC is increasingly focusing communications on the administrative requirements for businesses relating to registration of liability for the tax, completing tax returns and managing data records. Guidance is provided on methods for weighing plastic packaging components and units of measurement, creating exemption and export evidence for calculating recycled material in plastic. HMRC also set out the meaning of substantial modification, which determines when a plastic packaging component is finished and becomes chargeable for the tax.

As we wait for the consultation outcomes and the release of the legislation in its final form, Comply Direct has been raising awareness amongst business leaders likely to be impacted so they can be prepared for the potential impacts.

According to recent media reports it is estimated that circa 80% of businesses are unaware of the tax, indicating that we could see a lack of preparedness in terms of both data recording, reporting requirements, and budgeting, upon implementation of the tax from April 1st 2022.

Who is affected?

If a business manufactures or imports plastic packaging material destined for the UK market, then they must check if they will be liable. Such businesses will need to evidence that the plastic packaging they have manufactured and/or imported contains a minimum of 30% recycled content to avoid the tax.

If some or all the packaging components manufactured or imported don’t meet the 30% threshold by weight, then a £200 per tonne levy will apply to that which doesn’t, and businesses will need to think about the systems they have in place to capture and verify data records for submission to HMRC from next year. This is additional to factoring in the business cost of the tax passed on from those who have paid the tax earlier. Here, conducting due diligence and joint and several liability effectively are vital throughout the plastic packaging value chain.

Why is this happening now?

This is a key question indeed, especially with many businesses still navigating the challenges brought about by the pandemic.

The Plastic Tax is a measure put in place by HMRC as part of the UK’s resources and waste strategy which was first tabled in 2018 – it is part of a much wider plan to reform packaging waste legislation to be fit for a circular economy. The tax has been designed to drive behaviours that encourage the usage of recycled material in plastic packaging in the UK which in turn should drive investment in high quality recycling technologies for the numerous and varied plastic types used in packaging.

With a growing movement to step-up the protection of our environment, such behaviour change is considered necessary by government and perhaps even overdue by some. We must remember that despite plastic waste being an issue if it isn’t disposed of correctly, there are strong arguments that, as a material, it is very useful in terms of providing containment and protection of goods.

Managing your plastic tax liability

Whilst on the face of it, the tax is straightforward; either get at least 30% recycled content into plastic packaging or pay the tax on it when manufacturing or importing it, there are a couple of exemptions and a de-minimis to navigate. Businesses will need to carefully consider their reporting systems so that they are both efficiently recording data and fit for purpose to meet the evidencing requirements of the tax, to capture tax details at a component level, for example. Data accuracy will be key to ensure liable companies keep their plastic tax bill commensurate to the plastic manufactured and/or imported and the recycled content within it.

Comply Direct has several resources for businesses that manufacture and/or import plastic packaging, including a free to use plastic tax calculator which can be found HERE and provides a quick indication of a businesses’ potential plastic tax liability. In addition, keep an eye on their latest news page HERE for all the most recent updates, and the plastic tax page on their policy calendar HERE

Author: Chris Smith, Sustainable Packaging Leader of Comply Direct Ltd