29 Mar 2022

Plastic Packaging Tax – Are you ready?

It’s no secret that plastic is a global environmental problem, and its production heavily contributes towards climate change. According to the Department for Environment, Food and Rural Affairs (DEFRA) over 2 million tonnes of plastic packaging is used in the UK each year, the vast majority of which is made from new, rather than recycled plastic.

But recycled plastic offers a remedy - according to studies, the production of recycled plastic produces 79% less carbon emissions compared to virgin plastic.

During the 2018 Budget, the government announced the introduction of a new environmental tax on produced or imported plastic packaging. The new rules are due to come into effect from 1st April 2022.

In a similar way to the carrier bag charge, the tax aims to encourage a change in behaviour and to incentivise businesses to increase their use of recycled materials. As a result of the tax, it is estimated that the use of recycled plastic in packaging could increase by around 40%.

What Is Plastic Packaging Tax (PPT)?
The Plastic Packaging Tax will apply if you manufacture or import into the UK ten or more tonnes of plastic packaging that does not contain at least 30% recycled plastic. If packaging does not meet the recycled material threshold, tax will be charged at a rate of £200 per metric tonne.

Plastics suitable for use in the supply chain such as films, trays designed to contain and protect certain foods and pots made to deliver products may be caught by these rules, along with plastics intended to be single use such as plastic bags, disposable cutlery and plates and gift wrap.

Who will be affected by PPT?
Any business importing or manufacturing plastic packaging in the UK could be liable to register for PPT and may be subject to a charge.

Although the tax is aimed at the manufacturers and importers, it is also likely to affect the customers of those businesses and every-day consumers, particularly if the higher costs associated with plastic packaging are passed on in an overall price increase on products that do not comply with the recycled material threshold.

The tax is expected to impact an estimated 20,000 manufacturers and importers of plastic packaging.

Are there any exemptions?
A limited range of products are excluded from the tax. These are products intended for the long-term storage of goods such as toolboxes and first aid boxes, products designed to be an integral part of goods such as inhalers or printer cartridges and products which are made primarily to be reused for the presentation of goods, such as sales display shelves and shop fittings.

More information on these exemptions can be found on the government website.

What do I need to do?
An initial assessment of the likely impact of the PPT should be undertaken to determine whether the relevant import/manufacturing thresholds will be met. There are certain rules surrounding the identification of recycled plastics and the modification of products which should be fully reviewed and considered.

Following the initial review, you may need to consider your supply chains, pricing and future record keeping. Whilst PPT is labelled as an environmental tax, the application of the tax is really an operational issue – systems may need to be created to monitor purchases and product specifications and certain manufacturer evidence will need to be retained.

Regardless of whether your packaging contains 30% or more recycled plastic you will still be required to register for PPT with HMRC and submit a return if you manufacture or import ten tonnes or more over a 12-month period or will do so within the next 30 days. Registrations open from 1st April 2022.

We understand that this new tax can add another burden onto your already heavy workload. If you have any questions on PPT please get in touch with the friendly team at MHA Monahans who will be more than happy to help.

Stephanie Hurst