The UK Government is introducing a new tax on plastic packaging from 1 April 2022. Whether you manufacture plastic packaging or import packaged goods, the UK's Plastic Packaging Tax could have implications for you.
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 primary legislation (set out in Finance Act 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 most are already doing so.
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:
Packaging manufacturing
Industrial manufacturing
Consumer goods
Online retail
Pharmaceutical
Chemical
Food and drinks
Cosmetics
Oil
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, most 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 tax. Key business stakeholders should also be involved in the conversation in order for effective systems to be implemented.
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, technology 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.
One of the key challenges in preparing for PPT will be ensuring that each plastic packaging component your business deals with is appropriately tax coded. Numerous factors need to be considered in order to complete this exercise, which can be time consuming and introduce a risk of errors if completed manually.
We have developed a technology solution which can help reduce the burden and improve accuracy and consistency. If you are interested in hearing more about this, please register your interest.
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 2023.
Spain has also proposed a tax of €450 per tonne on non-reusable plastic packaging. The start date is also deferred to 1 January 2023.
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.
