Plastic Packaging Tax: Is your business ready?

Plastic Packaging Tax: Is your business ready?

As part of the ongoing bid to become more sustainable, the Government’s new Plastic Packaging Tax was implemented earlier this year. The new environmental tax will be crucial in incentivising businesses to use more recycled plastic in their packaging.

If your business manufactures or imports plastic packaging in the UK, it’s likely that the tax will effect you in some way, so now is the time to start preparing to ensure you’re ready.

What is plastic packaging tax?

Designed to encourage the use of recycled plastics (or alternatives) in packaging, the environmental tax was introduced on 1 April 2022. The tax is charged on plastic packaging which is either produced or imported into the UK, if it contains less than 30% of recycled packaging.

Packaging is considered plastic if it is made up of more plastic by weight than any other material, the PPT is then calculated on the total weight of packaging, including the non-plastic components.

Recycled plastics include pre-consumer plastic waste recovered from manufacturing processes, and post-consumer plastics recovered from households and other facilities. However, scrap/regrind recovered during the manufacturing process isn’t considered to be recycled.

How will the tax work in practice?

You will need to prepare and submit plastic tax returns on a quarterly basis. Any tax that is due will need to be paid no later than the last working day of the month, following the end of the accounting period being reported.

Even where plastic makes up more than 30% of the weight, there will be record keeping obligations for most businesses, and you will need to register for the tax.

You can find more detail on your record keeping obligations here.

Do I need to register?

In the same way as there’s a VAT registration threshold, there’s also a plastic threshold of 10 tonne, which is based on plastic packaging sold or imported, regardless of the percentage of recycled plastic included in the packaging.

Two tests for registration:

1. Forward look - do you expect to exceed the 10 tonne allowance within the next 30 days?
2. Backward look - have you exceeded the 10 tonne allowance in the last year, this is calculated on the 1^st of every month?

Once the threshold has been breached, you have 30 days to register and pay £200.00 per tonne of plastic packing you import or produced from the date you exceeded the threshold.

Are there any exemptions?

There are exemptions to the tax where you will not need to pay PPT. The first 2 exemptions are not included as part of the 10 tonne threshold and are excluded from tests above:

• Transport packaging when importing goods into the UK (i.e. shrink wrap around a pallet of goods).
• Plastic packaging used in aircraft, ships, or railway stores for international journeys.

The second 2 exemptions are included as part of the 10 tonne threshold and included in the tests above:

• Plastic packaging for use in the immediate packing of human medicine
• Products that are permanently designated for non-packaging use.

You will need to register for PPT if you meet one of the two tests, even if all of the packaging you manufacture or import is exempt.

Claiming credit and deferring payments

There are also instances where you will be able to claim credit on PPT. If a company pays PPT on packaging produced and is then exported or substantially modified (within 2 years) after it is sold, the original company can claim a credit for the amount they accounted for – provided it has the evidence of this.

You can defer PPT is the products you are producing are always intended for export, and the tax can be cancelled entirely if it is exported within 12 months of import or production.

What does it mean for group companies?

Group companies can register for the tax together. If you opt to do so, the lead company will make the returns and pay for the group.

It’s also worth noting that all of the companies in the group will have its own 10 tonne allowance.

Supporting businesses with plastic packaging tax

Our VAT team are on hand to help you prepare for the plastic packaging tax, answer your queries and advise you. Please feel free to get in touch if you need any support.