Objective

From 1 April 2022, Plastic Packaging Tax (“PPT”) will be introduced in the UK. HMRC anticipates that PPT will affect 20,000 UK businesses that are either manufacturing or importing plastic packaging components. It is expected that there will be a projected 40% increase in the use of recycled plastic over the period 2022-2023 compared to current levels, leading to projected carbon savings of nearly 200,000 tonnes in 2022-2023 due to the diminished use of virgin plastic.

Amount of tax

PPT will be charged at a rate of £200 per metric tonne of chargeable plastic packaging components either manufactured in the UK or imported into the UK that contain less than 30% recycled content by weight.

Who is liable to PPT?

PPT is a single stage tax that applies to a single party within a supply chain. A manufacturer will be liable to PPT where they are the person who produces finished plastic packaging components in the UK.

An importer will be liable to PPT where they are the person on whose behalf packaging is imported, where the tax arises on the importation of goods into the UK. This will typically be the consignee for customs purposes.

Where the importer or manufacturer does not correctly account for the tax, other businesses in the supply chain may be found to be secondarily or jointly and severally liable for unpaid tax. It is therefore recommended that due diligence is carried out to ensure businesses are aware where the liability to PPT falls within their supply chain.

What is chargeable to PPT?

Tax is due on chargeable plastic packaging components. A packaging component is any product that can be used for containing, protecting, handling, delivering, or presenting goods at any stage in a supply chain. However, products primarily designed to fulfil a storage purpose, fulfil an integral function of the goods themselves, or be used for presentation purpose are specifically excluded from PPT.

A plastic packaging component is a component whose chief material is plastic by weight. As such, for a component to be considered a plastic packaging component, plastic must be the heaviest individual element.

A plastic packaging component only becomes chargeable to PPT where:

• It is a finished plastic packaging component that has undergone its last substantial modification;
• Has plastic content consisting of less than 30% recycled plastic; and
• Is not eligible for any exemptions from PPT

“Substantial modification” means a chargeable modification to a plastic packaging component made by a relevant manufacturing process.

Exemptions

There are four exemptions of plastic packaging components that will not be chargeable to PPT. These are:

• Transport packaging or tertiary packaging on imported goods
• Plastic packaging in immediate contact with a medicinal product
• Packaging used in aircraft, ship, and rail goods stores
• Packaging components permanently designated for a use other than packaging.

Registration

From 01 April 2022, businesses must register for PPT if they have manufactured or imported 10 tonnes or more of plastic packaging within the last 12 months, or if they plan to do so within the next 30 days.

Businesses will only be able to register from the implementation date, i.e., 1 April 2022. There is no ability to register for PPT before this date.

Businesses must account for PPT from the point they identify their registration obligation and register within 30 days. As this threshold is based on the amount of finished plastic packaging, rather than chargeable plastic packaging, a registration requirement may exist even if there is no tax liability.

The PPT return

Businesses will need to file a PPT return to HMRC each calendar quarter. The return and any tax due should be paid no later than the last working day of the month following the end of the accounting period being reported. All weights will be given in kilograms on the PPT return.

Penalties may apply when the return and payment are late, also if the return contains incorrect information.

Record keeping requirements

If registered for PPT, accounts and records must be kept for at least 6 years from the end of the accounting period, to support the information submitted on the PPT returns.

Businesses must keep accounts showing how they’ve worked out each entry on the quarterly PPT return to include:

• A breakdown of the weight of plastic packaging components finished or imported in each period
• The weight of plastic packaging exported in the period on which the tax was deferred
• Any adjustments or corrections made to previous accounting periods
• A breakdown of the weight of any plastic packaging for which a credit is claimed if the packaging has been:
  • Exported
  • Converted into new packaging components.

Businesses wishing to claim an exemption from PPT based on their plastic packaging components containing more than 30% recycled content must have records that:

• Show how they’ve worked out the percentage of recycled plastic
• Provide sufficient supporting evidence that recycled plastic was used
• Show which dates the evidence relates to, such as the dates that the components were finished or imported
• Show which plastic packaging component the percentage relates to, including product lines or production runs
• Are an accurate reflection of the proportion of recycled plastic contained in the output materials of that recycling process
• Confirm the source of the recycled plastic

Tax credits and deferrals

Business may be eligible for relief from PPT (or a subsequent refund) in the form of tax credits and deferrals where chargeable plastic packaging components are exported from the UK. Tax credits can also apply where packaging is converted into different packaging components and therefore the manufacturer did not perform the last substantial modification.

For more detail or assistance please contact Emma Robinson.