Is your business ready for the introduction of Plastic Packaging Tax (PPT)?

What is PTT and what is the purpose?

From 1 April 2022, PPT is being introduced to encourage a more environmentally friendly use of plastic and is designed to provide a financial incentive for businesses to use recycled plastic material. Therefore, PTT aims to stimulate an increase in recycling levels and reduce plastic waste.

HMRC define plastic packaging components as any packaging that is “predominantly plastic by weight”, and the new tax will apply to finished plastic packaging components that are less than 30% recycled plastic content (subject to limited exceptions), and includes:

• Plastic drinks bottles (and bottle tops)
• Readymade meal trays
• Plastic films
• Plastic wrappers
• Sandwich bags
• Bin bags/carrier bags
• Bubble wrap
• Sticky tape

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When is a plastic packaging component finished?

A component is in a finished state if it has undergone its last substantial modification. The UK business that performs the last substantial modification before the packing or filling process is the one that is liable to pay the tax (generally a modification will include any change in the physical properties of the component which is undertaken prior to packing or filling).

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Who is liable and when?

PPT is aimed at those who manufacture plastic packaging in the UK, or those who import plastic packaging into the UK for their own use or for the use of customers. From 1 April 2022, a business must register for PPT if;

1. The manufacture or import of finished plastic packaging is expected to reach 10 tonnes or more in the following 30 days — the business must register within 30 days of the first day that this condition is met.
2. The business has manufactured or imported 10 tonnes or more of finished plastic packaging in a 12-month period ending on the last day of a calendar month (e.g. December) — the business becomes liable for PPT from the first day of the month and must register within 30 days.*

*The 12-month monitoring period will start on 1 April 2022 (so earlier periods will not count towards the 10-tonne limit).

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Record keeping requirements

It is not possible to register until 1 April 2022, however, we would suggest that affected businesses review production levels/supply chains to determine if a PPT registration obligation is likely to arise – these records should include:

• The total weight of plastic packaging manufactured (and weight of raw materials used in that process).
• The weight of any plastic packaging which is exempted from PPT (see next heading).
• Calculations of recycled content included in manufactured/imported plastic packaging components.
• The weight of any plastic packaging components which are exported.

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Exemptions from PPT

The following groups are exempted from PPT:

1. Transport packaging used when importing goods into the UK.
2. Plastic packaging used in aircraft, ship or railway stores for international journeys.
3. Plastic packaging produced or imported for use in the immediate packaging of a human medicine.
4. Components permanently designated or set aside for non-packaging use.

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PPT Rate and application

PPT will be charged at the rate of £200 per tonne for the producer or importer of the tax qualifying packaging. The tax applies to plastic packaging manufactured or imported to the UK containing less than 30% recycled plastic when measured by weight.

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Considerations for importers

Generally, the importer of record will be liable to the tax upon customs clearance whether the finished components are filled or unfilled. When goods are placed into a customs procedure (such as Inward Processing Relief or Customs Warehousing) no tax is due until the goods are released into UK free circulation. If the goods are re-exported prior to being released from the customs procedure, no PPT is due.

It is important to note that any non-UK companies who clear tax qualifying plastic packaging into the UK will be liable to register for the tax.

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Considerations for exporters

If a business manufactures or imports packaging that is subsequently re-exported from the UK, the business can request a credit for any PPT paid on the goods (subject to a 2-year time limit for re-export).

Alternatively, if it is known at the point the packaging becomes liable to tax that is will be exported, the tax can be deferred provided the goods are exported within 12 months (detailed records must be kept to evidence the right to defer the tax).

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Reporting

Quarterly returns will be required by PPT payers. If multiple members of a group are liable to PTT, a representative member may be appointed to submit a return and pay the tax for the group.

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Further considerations

PPT will apply on a joint and several liability basis, so it is essential that detailed records are kept/obtained from the wider supply chain to ensure all parties are aware of their compliance obligations. If HMRC find that a party has known, or should have known that PPT was unpaid, it is (in principle) possible for HMRC to hold all parties concerned accountable for the tax until it is paid.

Contacts should also be reviewed to ensure there is provision for the tax to be charged to customers, otherwise, profit margins may be restricted due to the imposition of the tax.

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