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UK Plastic Packaging Tax - are you ready?

The UK Government is expected to introduce a new tax on plastic packaging from 1 April 2022. Whether you manufacture plastic packaging or whether you are an importer of packaged goods the UKs proposed Plastic Packaging Tax could have implications for you.

What is plastic packaging tax (“PPT”)?

A brand new tax on plastic packaging will be introduced in the UK with effect from 1 April 2022. The aim of the tax is to incentivise the use of recycled material in the production of plastic packaging.

The draft primary legislation (which was introduced in the Finance Bill 2021) provides that the tax will apply at a rate of £200/tonne on plastic packaging with less than 30% recycled plastic manufactured or imported into the UK (including packaging on goods which are imported).

The tax will affect a very wide range of businesses due to its broad scope. Crucially, registration for PPT will be required even if a business meets the 30% recycled content threshold and does not need to pay any tax. Impacted businesses therefore need to be aware of and start preparing to meet their compliance obligations well in advance of 1 April 2022 and many are already doing so.

Who will be liable to pay UK PPT?

Any business that imports plastic packaging or products contained in plastic packaging into the UK or manufactures plastic packaging in the UK will be liable to register for PPT and pay any tax due if they exceed the threshold of 10 tonnes of plastic packaging per annum. Credits will be available for exported packaging, including on packaged goods.

This will affect the majority of companies in the following sectors, amongst others:

 supplier mediumgrey

Packaging manufacturing

 manufacturing mediumgrey

Industrial manufacturing

 consumer markets mediumgrey

Consumer goods

 devices mediumgrey

Online retail

 pharmaceuticals mediumgrey

Pharmaceutical

 chemicals mediumgrey

Chemical

 fruits vegetables mediumgrey

Food and drinks

 beauty personalcare mediumgrey

Cosmetics

 refinery mediumgrey

Oil

What do I need to do?

PPT will create a need for systems and processes to collate data for compliance, pricing, contracts, and supply chains. These things take time to deal with, which means that businesses need to start planning now for their strategy for dealing and complying with the tax.

In our experience, many businesses are already considering their packaging strategy, but often that doesn’t involve all the business stakeholders or the data points needed for compliance with the new proposed taxes. Key business stakeholders should also be involved in the conversation in order for effective systems to be implemented.

Critical actions that businesses should be considering now include:

  • assessment of the likely impact of PPT on your business;
  • assess supply chains to determine which are affected, who is the responsible party, and any required amendment to contracts and pricing;
  • interact with customers and suppliers;
  • review existing data and reporting capabilities to assess the gap that needs to be closed in order to comply with the PPT compliance obligations;
  • design systems and assign roles and responsibilities for meeting PPT compliance obligations; and
  • implement required changes to systems to enable necessary data collection, reporting and invoicing requirements to be met.

Developments in other territories

The EU introduced a plastic packaging levy on Member States (not businesses) at a rate of €800/tonne on 1 January 2021 based on the amount of plastic packaging placed on their own markets. We expect that this will encourage Member States to speed up their own development and introduction of plastic taxes to fund their liability to the EU. It may also prompt existing proposals to be reviewed and adjusted to match the proposed EU rate.

Italy is introducing a tax of €450 per tonne on virgin plastic used in manufacture or importation of single use which has been deferred to 1 January 2022.

Spain has also proposed a tax of €450 per tonne on non-reusable plastic packaging from 1 July 2021. However the start date is expected to be delayed to late 2021/early 2022.

It is easy to forecast that developments within the EU which result in a tax charge, which is comparable to an import tariff on certain goods, may prompt other non-EU territories to adopt similar measures to avoid distortion of trade.

How can we help?

Our environmental tax specialists can help tax teams to understand the proposed new tax, how it will affect their business, assist with development and implementation of systems and controls necessary to collect the relevant data points for compliance, and help to bridge the gap with sustainability, operational and commercial teams in bringing tax considerations into the formulation of revised packaging strategies.

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Jayne Harrold

Jayne Harrold

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Prinal Nathwani

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Holly Grantham

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