Is your business ready for Plastic Packaging Tax?

Plastic Packaging Tax (PPT) will launch on 1 April 2022 with the aim to encourage usage of recycled packaging. Any entity that interacts with plastic packaging is likely to be affected by the introduction of tax in some way, so it is important that businesses understand their obligations as soon as possible.

How will it affect me?

The liability to register when over the threshold applies to both UK and non-resident taxpayers. Any business that is under the tax threshold using exempt packaging or plastic packaging with recycled content, will still be required to keep records and analysis of the weight and type of plastic packaging they are using.

Furthermore, as PPT uses a system of credit and deferral, if you purchase plastic packaging, you may find your suppliers ask you to provide information on any intended further manufacturing or export in relation to the packaging. Businesses that must account for PPT can adjust their contracts with customers in two ways:

1. They can adjust the amount of the payment to reflect the PPT on the plastic packaging components supplied. (Whether a PPT charge is passed on to a customer will be a commercial decision)
2. They can adjust the contract to require their customers provide evidence of subsequent manufacturing or export as a condition of sale.

Businesses will need to take steps now to ensure that necessary information is available and can be passed between members of the supply chain.

Key Features

The tax will be introduced with an initial threshold of 10 Metric Tonnes of plastic packaging per legal entity and an initial tax rate of £200 per metric Tonne.

 A charge to PPT will be created when a ‘chargeable plastic packaging component’ is either:

1. Produced in the UK by a person acting in the course or furtherance of business – The manufacture must be the last substantial process. (e.g., Moulding / Printing etc)
2. Imported – The packaging may or may not already contain goods (e.g. filled plastic bottles)

Plastic packaging subject to the tax can be defined as that used for use in the supply chain or for ‘single use’ by a customer. Plastic packaging components with more than 30% recycled content are not liable to a PPT charge but do contribute to the threshold. There are also an extensive range of exclusions and exemptions for various kinds of plastic packaging, some of which do and do not contribute to the threshold.

PPT will be paid per ‘component’ and several components may make up the complete packaging of a single product. A packaging component will be deemed plastic for the purposes of PPT, if made of more plastic by weight than any other single material.

Deferral and Credit

Where PPT is due it may be deferred or credited (where already paid) in certain scenarios:

Subsequent Export

• An item of packaging which is always intended for export can be deferred and the PPT liability is cancelled if the export takes place with 12 months.
• Where PPT has been paid by the business but is exported (either by the same business or a business along the supply chain), an application for a tax credit of the PPT made can be made

Subsequent further modification

• An amount paid can also be credited where a subsequent business in the supply chain makes a further modification to the good
• The tax credit is normally offset against any future PPT liability but can be repaid in some circumstances

Businesses will need to obtain information from their customers. Where PPT has been included in the price charged for an item – some or all of this can be refunded where a tax credit is available.

Records, Returns and Joint and Several Liability

Businesses will need a means of monitoring the weights of the different kinds of plastic packaging components they interact with to ensure the threshold can be monitored and any tax due is reported once breached.

Evidence held in relation to the tax must be held for at least 6 years, Information required to complete a return will include:

• Total Weight of Finished Plastic Packaging Components
  • Manufactured in the UK
  • Imported into the UK
  • Not subject to the tax
  • Manufactured or imported for use in the immediate packaging of licenced human medicines
  • Due for export
  • Containing at least 30% recycled plastic content
• 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 true and correct

HMRC provide guidance on the different kinds of weight calculations that may be acceptable.

Where any business purchases plastic packaging on which PPT should have been due – they can be held jointly and severally liable for unpaid PPT in any situation where they knew or had reasonable grounds to believe PPT hadn’t been paid.

Further Support

If you have questions regarding how PPT may affect your specific business and agreements, its operation or whether your packaging is within the scope of tax, the PKF Francis Clark Indirect Tax Team will be more than happy to assist.