Plastic Packaging Tax – What is it and how will it affect my business?
On 1 April 2022, the Government introduced a new indirect tax, Plastic Packaging Tax (PPT), with the aim of reducing the reliance on single use plastic and to encourage more use of recycled plastics, rather than new plastic, in packaging. The purpose is also to reduce the level of disposals by landfill and incineration.
If your business is impacted by PPT, this will mean additional costs could arise, as well as compliance actions being required – including registering for PPT. Read on for a summary of this new tax’s coverage and some of the key points arising.
10th April 2022
Marianne Hawksworth See profile
PPT will apply to defined types of finished plastic packaging or plastic packaging components produced or imported into the UK which does not contain a minimum of 30% recycled plastic, noting HMRC have definitions of what recycled means in the context of this tax.
PPT is payable at a rate of £200/tonne by the manufacturer or importer.
The threshold for PPT registration is 10 tonnes in a 12 month period, or where this limit will be exceeded in the next 30 days. In the first year of operation, the 30 day and the 12 month periods will only be counted as from 1 April 2022, and not for plastic imported or manufactured prior to this. The weight of recycled plastic and of exempt plastic counts towards the PTT threshold, even though PPT is not payable on them.
If your business substantially modifies plastic packaging materials, then you may be liable for PPT rather than the UK manufacturer. Equally, your customer may be liable rather than you as manufacturer if they make any substantial modifications. A substantial modification may be where there is an increase in thickness; weight; shape or structure. Excluded from this definition are processes involving blowing or forming from a pre-form; cutting; sealing and labelling.
The key packaging types attracting PPT include plastic packaging:
- designed for use in the supply chain;
- designed to be single use plastic packaging for the consumer;
- where the primary use is for storage;
- which is an integral part of the goods; and,
- to be reused primarily for presentation.
It is important to be able to define whether the plastic packaging materials produced or imported fall into the definition of ‘plastic’ for the purposes of this tax.
Plastic packaging components are individually subject to PPT e.g. bottles, caps and labels, which are manufactured separately before being combined into a bottle. However, if more than 50% of the weight of materials which are used in plastic packaging components are non-plastic substances, PPT will not be applicable.
A number of exemptions from PPT exist, such as plastic protection for goods being transported into the UK, or storage cases to contain and protect the item inside.
PPT registration is mandatory for all manufacturers and importers who produce and/or import 10 tonnes or more of plastic packaging per year, even if the plastic contains 30% or more recycled plastic or exempt plastic. If no tax is due, your business must still comply with the record keeping requirements, so it is important to consider compliance obligations in advance.
The tax regime comes into effect on 1 April 2022 and HMRC must be notified of your business’ liability to register within 30 days of meeting the 10 tonne threshold.. Plastic packaging manufactured/imported before 1 April 2022 does not count toward this threshold.
PPT returns are required on a quarterly basis, covering calendar quarter dates, i.e. 1 April – 30 June; and so on.
You will need to submit the return and pay any tax to HMRC by the last working day of the month following the end of the reporting accounting period, e.g. by 31 January 2023 for the return covering the calendar quarter to 31 December 2022.
HMRC are encouraging businesses to make their customers aware of the tax paid and to work together to increase the amount of recycled plastic used where possible.
Whilst guidance has been published on the various record keeping requirements (please see below link), at the time of writing HMRC have indicated that there will be a delay in providing guidance on how to include a statement on invoices that the tax has been paid.
PPT is only payable when the packaging is manufactured, or imported, or later substantially modified. It is not passed down the supply chain like VAT. You can claim a credit for any PPT paid if you export the goods within 12 months or where you are converting the packaging into a different method of packaging. Only the manufacturer or the importer is liable to register and to pay any PPT.
Please see the link below to current HMRC guidance on record keeping and accounts requirements:
VAT will continue to be paid on the whole price of the goods supplied. Therefore, VAT will be chargeable on the value of the goods including any PPT, if the cost is passed onto your customer.
- Decide who will be responsible for PPT compliance in your business
- Ascertain whether your business is liable to account for/pay PPT/needs to register
- Review supply chains to assess whether PPT efficiencies can be made
- Revisit agreements with suppliers and customers in relation to PPT
- Review whether any plastic packaging or plastic packaging components you produce are subject to PPT
- Identify the record keeping requirements for compliance and how to implement these
- We can advise and help with PPT registration.
- Advise on meeting record keeping requirements.
- Evaluate the impact on your business’ supply chains and identify whether your business is liable to register for the tax.
In the first instance please contact your usual Old Mill adviser, or alternatively click here…