27th January 2022Plastic Packaging Tax: What you need to know

A new tax, Plastic Packaging Tax (“PPT”), is being introduced in the UK with effect from 01 April 2022 aimed at reducing single use plastic and encouraging the use of recycled plastic. In effect, it is an environmental tax that aims to change behaviour and increase recycling.

What is it?

Plastic packaging is defined as packaging that is predominantly plastic by weight. PPT will apply to plastic packaging manufactured in, or imported into, the UK that does not contain at least 30% recycled plastic. Imported packaging will be subject to PPT whether it is filled or unfilled. This measure is likely to have an impact in many sectors including manufacturing, consumer goods, food and drink and online retailers.

What is the rate of tax?

PPT will be payable based on weight and the rate will be £200 per tonne.

Who must register?

Manufacturers or importers of plastic packaging that have manufactured or imported more than 10 tonnes in any 12 month period or less as at 01 April 2022, or who plan to do so in the next 30 days alone from that date, must register for PPT with effect from 01 April 2022. In order to register, businesses simply notify HMRC in writing and they will then be given a unique reference number. All businesses breaching the threshold must register for PPT whether any tax is payable or not and therefore a large number of businesses are expected to be affected.

When is the tax payable?

PPT is payable on the date that the packaging is finished or imported. Once registered for PPT, a business must submit Returns for calendar quarters and any tax must be paid with 30 days of the quarter end.

Are there any reliefs?

If the finished or imported plastic packaging is exported within 12 months, or converted into different packaging, then it is possible to claim a credit or relief from PPT.

In addition, there are four categories of packaging exempt from the tax. These are products designed to be:

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

The first two categories above, while not incurring PPT, do count towards the 10 tonne registration threshold. Therefore, if a business manufactures or imports more than 10 tonnes of packaging in either category, they must still register for PPT.

A further exemption from payment of the tax also applies to products which are designed to be:

  • used in the long-term storage of goods e.g. earbud cases
  • an integral part of the goods e.g. inhalers
  • reused for the presentation of goods e.g. shop fittings

The exemptions need to be reviewed to ensure compliance with the tax and may not be as widely interpreted as some may think.

What should businesses do?

As with any tax, businesses will need to consider their packaging strategy in the build up to the tax taking effect. Some of the issues/questions that businesses need to address are:

  • Undertake a review of supply chains to assess what parts of your business might be impacted
  • Review the products you manufacture/import to determine if PPT applies
  • Do your contracts allow for the cost to be passed on and how does the tax impact on margins?
  • Do you have the correct systems in place to capture the information to comply fully as of 1 April 2022?
  • In your business, which team will have responsibility for compliance?
  • What due diligence processes will be put in place to ensure that you avoid becoming jointly and severally liable for the non-compliance of others?

Further information

For further information or to discuss the way forward, please contact Gerry Myton or Mike Block.

Key contacts

Gerry Myton
Partner

020 7874 7982
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Mike Block HW Fisher

Mike Block
Director - VAT

020 7380 4987
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