Essential steps for packaging tax preparation

Leading publication Packaging News has recently published an article featuring findings from the Foodservice Packaging Association (FPA). Through a survey of its members in January, the FPA found almost 80% of businesses in the sector were not yet prepared for the UK Plastic Packaging Tax (PPT).

The survey found that more than half of respondent businesses were still unsure as to which packaging products would be subject to the tax, with 60% stating they did not yet have a method in place to measure recycled content.

The findings reflect the major challenge facing the UK packaging industry. For many businesses, there is still a great deal of uncertainty with regards to the new tax, how it will be calculated and what new obligations will need to be met.

In short, the new tax is spearheaded by HMRC, and is designed to encourage and incentivise the use of recycled plastic in packaging production. All packaging manufactured in – or imported to – the UK, that does not contain at least 30% recycled material, will be taxed at £200 per tonne. The new scheme requires quarterly reports to be submitted, beginning from April 1.

The new tax is unlike anything the UK packaging industry has seen before, which means that preparation is absolutely key in order to avoid any potential disruption to the supply chain, as well as negating any unwelcome surprises when it comes to cost of liability.

Access our Plastic Packaging Tax calculator to help calculate your costs.

The ecoveritas team, built on an ethos of simplifying the complex, believes that a focused data-oriented approach is key to preparing businesses for the PPT. This approach shapes and guides our service, product and tool portfolio, designed to help retailers, printers and converters better navigate a rapidly changing legislative landscape.

Whether liable for the tax or not, what are the steps that brands should be taking here and now in order to shore up their business and supply chain ahead of the tax?

Assess the likely PPT impact on the business

Gain an understanding of how potential tax liabilities will affect the business, with a top-level view of existing packaging designs and any potential exemptions. This is not purely in terms of cost, but in allocation of resources.

Review your supply chain to determine what will be affected and who will be responsible

Identify who, within the business, will be taking ownership of PPT compliance. Some supply chains are naturally more complex, which means auditing and reporting may be extremely resource intensive.

Make any required amendments to contracts and pricing

Brands looking to increase their recycled plastic content to ensure it is above the 30% threshold must have their new supply streams in place, particularly as the material becomes more scarce and tougher to acquire. In addition, it’s important to identify where the PPT costs will manifest, such as price increases for customers.

Engage with customers and suppliers

Clarity and communication are key – let customers and suppliers know if new PPT tax liabilities are likely to increase costs or if alternative options will be explored. Similarly, advise the supply chain if your packaging will be exempt from the tax.

Interrogate existing data collection and reporting

To know how prepared a business is for its new reporting obligations with regards to recycled plastic content, it’s important to understand what data is currently being collected, how, where it is stored and what it is used for.

Identify potential gaps in data collection

By auditing existing data collection, any gaps can be identified. The PPT returns will require information concerning the weight of:

  • Chargeable plastic components that the business has produced or imported
  • Non-chargeable plastic components that the business has produced or imported
  • Chargeable plastic components where the direct export condition is not met
  • Chargeable plastic components produced or imported for which the direct export condition is met
  • Plastic components which are exempt because they meet the required threshold of 30% recycled content
  • Plastic components that are exempt through current PPT legislation

Implement required system changes

Following thorough analysis of current reporting capabilities, it may become apparent that system changes are required in terms of how data is collected and stored. In this case, it is prudent for businesses to action these changes well in advance and ensure there are no gaps once the plastic tax reporting obligations take effect.

Explore our UK Plastic Packaging Tax Frequently Asked Questions to learn more.

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