Plastic Packaging Tax | All you need to know

The Plastic Packaging Tax is a new tax introduced on 1^st April 2022. The tax is designed to encourage the use of more recycled plastic and applies to plastic packaging produced in, or imported into, the UK that does not contain at least 30% recycled plastic.

The environmental tax forms part of the UK Government’s bid to tackle avoidable plastic waste and aims to drive real and lasting change in the packaging industry.

Registered companies will need to submit returns four times a year to HMRC.

What is the Plastic Packaging Tax?

The UK Plastic Packaging Tax (PPT) came into force on April 1, 2022, and applies to any UK business that manufactures or imports 10 or more tonnes of plastic packaging per year. The tax is due on finished plastic packaging components that contain less than 30% recycled plastic and is charged at a new rate of £210.82 per tonne of packaging.

The environmental tax forms part of the UK Government’s bid to tackle avoidable plastic waste and aims to drive real and lasting change in the packaging industry.

The government estimates the use of recycled plastic in plastic packaging could increase by approximately 40% as a result of this tax.

Plastic Packaging Tax (PPT) is an environmental tax designed to provide a financial incentive for businesses to use recycled plastic to manufacture plastic packaging. The government envisages this will create greater demand for recycled plastic, stimulating increased levels of recycling of plastic waste and diverting it away from landfill or incineration.

Who does it affect?

Any business that produces or imports plastic packaging into the UK will be liable to pay the tax if the packaging contains less than 30% recycled content. Companies are exempt from paying the tax if they manufacture or import less than 10 tonnes of plastic packaging in 12 months.

If you identify that some of your plastic packaging is subject to the tax, you need to accurately calculate the weight to find out if you are liable and need to report.

If there are multiple operators in the manufacturing supply chain in the UK, the liable party will be the business that undertakes the last substantial modification before pack/filling.

The importer is defined as the company on whose behalf the packaging enters the UK, and/or the first company to commercially exploit it.

You need to register for the Plastic Packaging Tax if you:

expect to import into the UK or manufacture in the UK 10 tonnes or more of finished plastic packaging components in the next 30 days
have imported into the UK or manufactured in the UK 10 tonnes or more of finished plastic packaging components in the last 12 months

Packaging should only contain recycled plastic where it is permitted under other regulations and food safety standards.

The tax came into force on 1 April 2022 and is charged at a rate of:

£200 per tonne from 1 April 2022
£210.82 per tonne from 1 April 2023

What you must do

Check which packaging is subject to Plastic Packaging Tax and the definitions of finished components and substantial modifications, to find out if the packaging you manufacture or import is subject to the tax.
Work out the weight of the packaging you manufacture or import to find out if you must register for the tax.
Find out how to register.
Check which records and accounts you must keep and how to carry out due diligence.
Find out if you can get tax relief on exported and converted components.
Find out how to submit your return.

How much is the tax?

The tax of £210.82 will apply to all plastic packaging components with less than 30% recycled content. The rate, as set out in section 45 of the Finance Act 2021, will be amended from £200 per tonne to £210.82 per tonne, effective 1 April 2023.

Where can I find the legislation?

The primary legislation is in law and forms part 2 of the Finance Act 2021.

The secondary legislation can be found in The Plastic Packaging Tax (General) Regulation.

What packaging is liable for the tax?

A charge to PPT arises when a chargeable plastic packaging component is produced in the UK by a person acting in the course of a business or where it is imported into the UK on behalf of such a person. It only applies to ‘finished’ products.

A ‘packaging component’ is a product that is designed to be suitable for use, whether alone or in combination with other products, in the containment, protection, handling, delivery or presentation of goods at any stage in the supply chain of the goods, from the producer of the goods to the consumer or user. This broad definition catches items that may not be considered packaging, such as coat hangers. It also covers reusable and refillable items such as intermediate bulk containers (IBCs).

If the packaging component meets the definition, it does not matter if it is produced or imported for use in the supply chain of the goods or by a consumer or user.

Imports of packaging which already contains goods, such as plastic bottles filled with drinks or plastic packaging around goods, are also potentially subject to the tax with some exclusions. The exclusions apply to filled packaging components with a primary storage function, such as glasses or DVD cases, and where the packaging is an integral part of the goods, such as printer cartridges or tea bags.

PPT is not charged on plastic packaging, designed to be reused to present goods such as shop fittings or sales stands.

Products are also subject to PPT if they are designed as single-use packaging products for use by a consumer or user in containing any commodity or waste. This means that plastic bags, bin liners, nappy sacks, disposable cups, and such are subject to PPT.

The UK Government has defined plastic packaging as ‘packaging that is predominantly plastic by weight’. This has been broken down into the following categories:

Packaging designed for use in the supply chain

This includes bottle tops/caps, food trays, crates, flexible food pouches and many more examples – all of which are in scope.

Packaging designed as single use for consumers

This includes carrier bags, disposable cups, gift wrapping and more – all of which are in scope.

Categories of plastic packaging which are not covered by the tax include packaging which is primarily designed for storage, such as toolboxes and glasses cases; packaging that is an integral part of the goods, for example inhalers and plug-in air fresheners; and the immediate packaging of licensed human medicinal products.

Who pays the Plastic Packaging Tax?

The responsibility for paying the Plastic Packaging Tax falls predominantly with importers of filled or unfilled plastic packaging and UK manufacturers of plastic packaging.

The tax only applies if the business places more than 10 tonnes of plastic packaging onto the UK market.

The business that completes the ‘last substantial modification’ to the plastic packaging or component is liable for the tax. If the last substantial modification is made at the point where empty packaging is filled with goods/products, then it will be the substantial modification point prior to this.

Care and due diligence will be applied to the tax point. If you believe the Plastic Packaging Tax should have been paid before the packaging reaches your business, you should carry out due diligence checks on who you’re doing business with, to reduce the risk of being involved in a supply chain where Plastic Packaging Tax due goes unpaid.

If you do not do these checks or keep enough records of them, you could be held jointly and severally liable (or secondarily liable) for any unpaid Plastic Packaging Tax.

The checks help protect your business, if any business you trade with either:

avoids, or evades paying Plastic Packaging Tax
does not meet Plastic Packaging Tax requirements.

What are the reporting obligations under the UK Plastics Packaging Tax?

To comply with the UK Plastic Packaging Tax, businesses must submit a return on a quarterly basis. The reporting quarters run as follows:

1 April to 30 June
1 July to 30 September
1 October to 31 December
1 January to 31 March

Each return will request information on the weight of:

chargeable plastic components the business has produced or imported
non-chargeable plastic components 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 exempt as they are used for medicine.

Returns must be submitted and any incumbent tax liability paid by the last working day of the month following the end of the relevant accounting period. Businesses who calculate a nil liability will still be required to submit quarterly returns.

It is not yet known what format the data will need to be provided in. It’s possible that a data table system (similar to that used for the Producer Responsibility Obligations) may be used.

Use our Plastic Packaging Tax Calculator to figure out your estimated liability.

Register for PPT

There are two tests to consider when checking if you need to register – you must look back over the last 12 months and look forward to the next 30 days.

You are liable to register for the PPT if you have imported or manufactured over 10 tonnes of plastic packaging over any given 12-month period.

Equally, if you expect to exceed the 10 tonne threshold in the next 30 days, then you should register too. In this case, you would be liable from the first day you expect to exceed the threshold.

Read the latest gov.uk guidance: How to apply the register tests.

You must register for the PPT within 30 days of becoming liable to do so, and you will need to pay the PPT on all components from the day that you become liable to register.

Read the latest gov.uk guidance: Register for the PPT

At what point does the Plastic Packaging Tax apply?

HMRC defines the plastic components as liable for the tax when ‘finished’. This is when the last substantial modification is made.

For plastic packaging that is imported into the UK and already contains goods or products, the tax applies to the packaging when they are imported, with no additional substantial modifications made.

The last substantial modification is the last manufacturing process that makes a significant change to the nature of the packaging component, as it alters one of the following characteristics of the packaging component:

Shape
Structure
Thickness
Weight

For other packaging, it will be the last substantial modification before the packaging is filled with products. This includes extrusion, moulding, layering, and laminating, forming, and printing. Not all manufacturing processes that change the shape or structure is considered as substantial modification. For example:

Blowing or otherwise forming a packaging component from a preform;
Cutting film to size or cutting formed trays out of a sheet;
Gluing labels to a tub or heating a shrink film label onto a bottle;
Sealing such as attaching a film lid onto a tub.

Who is exempt from the tax, and do they need to take any action?

There are four categories of packaging exempt from the tax. They are products:

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

Exempt packaging which counts toward the 10-tonne threshold for registration:

Plastic packaging used for human medicinal products, and plastic packaging permanently recorded as set aside for non-packaging use, must be included when working out the total weight of packaging manufactured or imported.

Exempt packaging which does not count towards the 10-tonne threshold for registration:

Plastic packaging used for transporting imported goods, and for stores on international aircraft, ship and rail journeys, does not need to be included when working out the total weight of packaging manufactured or imported.

Packaging excluded from the tax

There are three types of products excluded from the tax. These do not need to be included when working out the total weight of packaging manufactured or imported.

They are products which are designed to be:

Used in the long-term storage of goods
An integral part of the goods
Reused for the presentation of goods

It is also worth keeping in mind that plastic components at all stages of production, including containment, movement, handling, delivery and presentation, are all subject to the tax, which can complicate matters when calculating potential outlays.

If you fail to register or register late

HMRC may charge you a ‘failure to notify’ penalty if you do not register for Plastic Packaging Tax or you register late.

The penalty is calculated as a percentage of the ‘potential lost revenue’. This is a percentage of the amount of the Plastic Packaging Tax which is unpaid because of the failure to notify.

When working out the penalty amount, HMRC will consider:

what caused the failure
whether you told us about the failure before we discovered it
how much assistance you gave us

You will not be charged a penalty for a failure to notify if all of these points apply:

you have a reasonable excuse
the failure was not deliberate
you told us without unreasonable delay after your reasonable excuse ended

You can find more information in Compliance checks: penalties for failure to notify — CC/FS11.

In certain circumstances if you do not register when you should and there is evidence of serious non-compliance and you do not have a reasonable excuse, you will be committing an offence.

If convicted, you could face a prison term of up to 12 months (6 months in Northern Ireland). You may also have to pay one or both of:

a fine up to £20,000
3 times the amount of potential tax lost

If you fail to submit a return or it’s late

You must submit your return no later than the last working day of the month following the end of the accounting period. You may be charged a penalty if you do not.

You may be charged a £100 penalty the first time you submit a return late and additional penalties for any further late returns.

If you submit a:

second late return within 12 months of the previous late return ― you’ll be charged a penalty of £200
third late return within 12 months of the previous late return ― you’ll be charged a penalty of £300
fourth late return within 12 months of the previous late return ― you’ll be charged a penalty of £400

If your last late filing penalty was £400, and you submit a late return again within the next 12 months of your most recent late return, you‘ll be charged a £400 penalty.

If you are charged a penalty for submitting a return late, then submit the next 4 returns on time and then submit the next return late, you’ll be charged a £100 penalty again.

What information should businesses be gathering for the tax?

The new tax calls for greater collaboration and transparency within the supply chain. The businesses that manage their data effectively will be able to maintain a clear audit trail and prove, without a doubt, the authenticity of the materials used in their packaging.

The tax 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 are exempt because they meet the required threshold of 30% recycled content
Plastic components that are exempt through current PPT legislation

Once registered for the tax, you’re required to keep the records for at least six years following the end of each accounting period.

In summary, the records are:

Weight details of each plastic packaging component
Details of the weight of plastic packaging exported, if applicable
Evidence of recycled content, including how you’ve worked out the percentage of recycled plastic, its source, and what product lines the content is used with
Evidence of why an exemption applies (e.g. packaging for medicine used for human medical products).

Notably, you should keep records even if you are below the threshold because of a rolling 12-month time period, so you could subsequently hit the limit and be liable to keep records and pay tax.

Submit your PPT returns

If you are liable for the PPT, returns need to be submitted quarterly in line with the standard financial year. Returns must be submitted and the PPT paid no later than the last day of the succeeding month of the quarter in question.

Read the latest gov.uk guidance: Completing your PPT return

Plastic Packaging Tax FAQs

When did the Plastic Packaging Tax come into effect?

PPT came into effect on 1 April 2022. Registration thresholds and liability calculations run from this date.

Who does the Plastic Packaging Tax apply to?

Applies when plastic packaging is manufactured in the UK, imported into the UK, or when a business is held secondarily liable to pay.

Who is exempt from the Plastic Packaging Tax?

There are a number of examples where plastic packaging is exempt or outside the scope, including where 30% or more of the plastic is recycled.

What is the cost of the Plastic Packaging Tax?

The value of the tax is currently £210.82 per tonne, effective 1 April 2023.

Do I need to collect packaging data for the Plastic Packaging Tax?

Records and evidence are required whether registered or not.

How will the Plastic Packaging Tax affect my business?

Changes to IT systems may be needed for tax identification, calculation, reports and potentially new PPT invoicing requirements.

What long-term actions would you recommend businesses take (i.e. changing packaging supplier)?

Assess the likely PPT impact on the business

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

Make any required amendments to contracts and pricing

Engage with customers and suppliers

Interrogate existing data collection and reporting

Identify potential gaps in data collection

Implement required system changes

Partner with a specialist

Businesses should look to partner with a packaging data specialist that can consistently deliver a highly efficient and transparent service without the need to scale up to meet the requirements.

Ecoveritas offer global data collection and analysis services that can be combined with compliance, guidance and consultancy support. Our range of tools and expertise help businesses navigate the rules of the new legislation. With support, businesses can continue to operate compliantly, competitively and with complete confidence.

Do you find plastic packaging taxing?

Many businesses are unaware of the Plastic Packaging Tax and their potential liability. If you are liable, your business should prepare for quarterly reporting and payments.

What is Ecoveritas?

The easiest and most comprehensive way to manage environmental data and reporting needs.

What does Ecoveritas do?

Ecoveritas is an environmental compliance data specialist that provides a range of tools and expertise to brands, retailers, and supply chains to minimise the environmental impact of their packaging efficiently.

To meet the complex challenges of managing environmental compliance reporting, Ecoveritas offers a unique combination of consulting, data and software that helps companies around the globe take the next step in their sustainability journey.

Our team takes a fresh approach to the environmental compliance market by adding years of supply chain and technical development expertise to an experienced environmental data team to provide SaaS-based services.

Our mission is to make it easy for companies to understand their obligations, get compliant and respond appropriately through reduction, substitution, and recycling.

Ecoveritas’ services

Extended Producer Responsibility Data Management & Reporting
Plastic packaging tax suppport
Plastic packaging tax reporting
EPR Horizon Scanning
EPR Consulting
Ecoveritas can help you prepare your packaging for EPR and to get ready to record data from 1st January 2023.

Navigating environmental legislation is time-consuming. For businesses operating across numerous countries, the issue is even more complex.

If you are new to PPT, please speak to one of our advisors on +44 (0)1865 721375 to find out how we can help you take the complexity out of environmental compliance!