Plastic Packaging Tax

Overview

Plastic Packaging Tax, or PPT, is a new environmental tax on plastic packaging which contains less than 30% recycled plastic content that is manufactured in or imported into the UK. This tax was introduced in the UK from 1 April 2022. The aim of the tax is to encourage the use of recycled material in the production of plastic packaging.

PPT will apply to businesses that manufacture or import plastic packaging or components or import packaged goods into the UK. Businesses which are small, i.e., import or manufacture less than 10 tonnes of plastic packaging per year, will be exempt from paying the tax.

Packaging subject to the tax

A plastic packaging component is any product designed to be suitable for use, whether alone or in combination with other products, in the containment, protection, handling, delivery or presentation of goods at any stage in the supply chain. Such a product will be a plastic packaging component if it contains more plastic by weight than any other single substance.

PPT will only be charged on a plastic packaging component if it is finished. A component is defined as finished either where it has undergone its last ‘substantial modification’, or in the case of a component that undergoes a substantial modification when it is packed or filled, its last substantial modification before being packed or filled.

How much tax is payable and who is liable?

The rate of tax is £200 per metric tonne of plastic packaging. The tax must be paid by importers of filled or unfilled plastic packaging, or manufacturers of plastic packaging that contain less than 30% recycled content.

PPT can be deferred for up to 12 months if, at all times since manufacture, your business intends to export the packaging and has written records evidencing this intention. If the packaging is exported within the 12-month period, the PPT liability is cancelled. If however the packaging is not exported, your business will be liable for PPT from the date it is known that the packaging will not be exported.

If packaging which has been subject to PPT is subsequently exported at a later date and you retain the records to evidence this, your business can apply for a credit for the PPT paid. The credit will be offset against PPT liabilities for the accounting period when it is claimed. If there are insufficient liabilities for the credit to be fully offset, a refund will be issued by HMRC. Claims must be made within two years of the packaging being manufactured.

Who is required to register for PPT?

You must register online for PPT if you have manufactured or imported 10 tonnes or more of finished plastic packaging components since 1 April 2022, or if you expect to do so in the next 30 days. From 31 March 2023, you will need to look back over the last 12 months on the last day of each month, as well as looking forward to the next 30 days.

If you meet the 10 tonnes threshold, you must register within 30 days of meeting this threshold to avoid penalties being levied. You must pay tax on any chargeable components from the day you become liable to register. Penalties will be applied if you fail to meet the relevant deadlines.

Businesses who meet either of the registration conditions but are not required to pay any tax will still be required to register with HMRC.

Can everyone register online?

Certain entities such as partnerships cannot currently register online for PPT and must email HMRC separately to register.

What happens after I have registered?

Once you have registered, you will need to complete quarterly returns and submit these to HMRC. The return must be submitted and any tax due must be paid by the end of the month following the accounting period being reported.

Are there any exemptions?

There are four categories of packaging which are exempt from the tax. The exemptions apply to products:

  • Used for the immediate packaging of licensed human medicine
  • Permanently recorded as set aside for non-packaging use
  • Used as transport packaging to import multiple goods safely into the UK
  • Used in aircraft, ship and rail goods stores

Despite the exemption, some of the above products still count towards the 10-tonne threshold for registration and you should seek advice as to whether the product must be included when calculating the total weight of packaging manufactured or imported.

Other exemptions and exceptions may apply which are not covered further in this article.

Do I need to keep records?

You must retain sufficient records to support your position.

If you are not required to register for PPT, you should keep records to demonstrate that you manufacture or import less than 10 tonnes per year of finished plastic packaging, including filled packaging.

If you are required to register, you will be required to keep more detailed records. Generally, these records must be kept for at least six years from the end of the accounting period.

What should I do now?

If you have not already done so, you will need to carry out an assessment of whether and to what extent your business is liable to PPT. Other points you can consider include:

  • Assessing the impact of PPT on your business
  • Reviewing your supply chains and whether any amendments can be made
  • Interacting with customers and suppliers
  • Providing guidance to individuals within your business so teams are aware of any PPT obligations
  • Implementing a PPT recording system including implementation of systems and assigning responsibilities, so PPT compliance obligations are met
  • Implementing changes to systems to allow for data collection, reporting and invoicing requirements to be met

If you have any queries, please do not hesitate to contact us.

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