Plastic Packaging Tax: What You Need to Know
The UK Government is introducing a new Plastic Packaging Tax (PPT). Initially proposed in 2018, the tax now comes into force on April 1, 2022. This article outlines the details behind the tax, implications for businesses, Intact’s guidance and what steps companies need to take in the coming weeks.
Who Is Affected?
It affects UK manufacturers of plastic packaging, importers of plastic packaging, business customers of manufacturers and importers of plastic packaging. It also impacts consumers who buy plastic packaging or goods in plastic packaging in the UK.
Businesses can pass on the charge to consumers by increasing the price of products. However, the UK Government assesses that the cost to consumers will be small as plastic packaging usually makes up a minimal amount of the total cost of goods.
The Tax: A Brief Explanation
The UK Government wants businesses to switch to using recycled materials. The new tax applies to plastic packaging manufactured in—or imported—into the UK that does not contain at least 30% recycled plastic.
Is My Business Liable?
A plastic packaging component is defined as packaging that is predominantly plastic by weight. For example, suppose a packaging component contains mixed materials, such as cardboard, paper, and plastic, and the weight of the plastic materials is heavier than the others. In that case, it is liable for taxation.
Businesses that manufacture or import ten or more tonnes of plastic packaging within 12 months need to register for the tax. You should keep a record of all documents you intend to use to complete your Plastic Packaging Tax return or claim any credits or exemptions.
It is important to note that even if your business manufactures or imports less than 10 tonnes of plastic packaging, the government recommends keeping detailed records to prove this.
Some plastic packaging is exempt from PPT. And if a business has always intended the packaging to be exported, they can defer the PPT liability and later cancel it.
If the tax applies to your business, it is charged at £200 per metric tonne of plastic packaging that contains less than 30% recycled plastic.
When Do I Need to Submit?
If applicable, you will need to submit a return to HMRC every quarter. Your returns must cover an accounting period, which are:
- April 1—June 30
- July 1—September 30
- October 1—December 31
- January 1—March 31
You must submit the return and pay any tax due no later than the last working day of the month following the end of the accounting period. Report all weights in kilograms (kgs).
Intact is currently developing a solution to aid customers in their efforts to upload required recorded information into Intact iQ or Xline before the first submission deadline in late June. However, the HMRC have still not provided guidelines regarding the exact format required for any data to be submitted to their online portal. In the meantime, we advise all of our customers to assess whether or not their business is liable for this tax and if they are they should work through the guidelines below—as a significant amount of diligence is needed before any data is input into the software.
- Work out which packaging is subject to Plastic Packaging Tax. Businesses need to perform due diligence to check what classifies as plastic, recycled plastic and packaging components. And if the packaging you manufacture, or import is subject to tax. There are many nuances involved, so Intact advises companies to start this process earlier rather than later.
- Decide if you need to register for the tax. If the plastic packaging component finishes in the UK, PPT is chargeable. Or when finished plastic packaging is imported. Suppose you manufacture plastic packaging or import unfilled plastic packaging. In that case, you will need to work out when the packaging component is finished.
- Work out the weight of the packaging you manufacture or import. Businesses must know the following:
- The weight of the packaging component recorded in metric values—shown in kilograms on your return
- The percentage of recycled plastic content
- Find out when you must register for the tax. Please check if your packaging is subject to tax and work out the weight of each component. The UK government recommends doing two tests (on its website) to check if you need to register.
- How to register. You need to provide the following information to HMRC.
- Business type
- Businesses address and contact details
- The date your business became liable for PPT
- An estimate of how much-finished plastic packaging you expect to manufacture or import in the next 12 months
- A customer reference number, which could be your: Corporation Tax Unique Tax Reference; Self-Assessment Unique Tax Reference; Company Reference number; Charity Registration number; National Insurance number or Temporary National Insurance number
- Check which records and accounts you must keep and how to carry out due diligence. For instance, the UK Government advises you to keep your account records for six years from the end of the accounting period.
- Claim a credit or defer paying Plastic Packaging Tax (if applicable). You may be able to defer the liability to pay the tax or claim tax back on your tax return if the packaging is either exported or converted into different packaging.
- Find out how to complete your return.
Here is a list of what you need to include on your return:
- The total weight of finished plastic packaging components manufactured in the UK in the accounting period
- The total weight of finished plastic packaging components imported into the UK in the accounting period
- The total weight of finished plastic packaging components not subject to tax in the accounting period
- The total weight of finished plastic packaging components manufactured or imported for use in the immediate packaging of licenced human medicines in the accounting period
- The total weight of finished plastic packaging components manufactured or imported in this accounting period which are due for export by you
- The total weight of any finished plastic packaging components that contain at least 30% recycled plastic content in the accounting period
- The total value of taxed plastic packaging components for which a credit is being claimed in the accounting period
- The total weight of chargeable plastic packaging components after deductions
- The tax due for this period
- A declaration that the information is accurate and correct
Please note: This is a new tax that is still awaiting some final legislation by the UK government. As such, Intact advises all customers to follow the advice and direction prescribed by HMRC on its website. Intact will facilitate recording required information related to the Plastic Packaging Tax per the HMRC’s submission guidelines. Intact is not in a position to provide any advisory assistance in relation to this tax. If anyone would like greater details on PPT, EY produced a Plastic Packaging Tax Guide for the British Plastics Federation, which can be viewed here.