UK Plastic Packaging Tax FAQs

With the countdown to the introduction of the UK Plastic Packaging Tax (‘PPT’) now entering its final stages, ecoveritas is redoubling its efforts to help businesses prepare for this pending regulatory change. In this blog, we give you the answers to some of the most frequently asked questions we receive from organisations across the UK.

What steps should we be taking now in advance of the introduction of the UK Plastic Packaging Tax on April 1, 2022?

The UK Plastic Packaging Tax will create a requirement for additional systems and processes to collate the data needed to demonstrate compliance and to determine liabilities. Implementing these new operational aspects to your organisation will take time and you should be addressing this now if you haven’t already.

In our experience, many organisations have started their journey but have not involved all the key stakeholders or necessary data points. The actions you should currently be undertaking include:

  • assessing the likely impact of PPT on your business
  • assessing supply chains to determine what’s affected and who is the responsible party
  • making any required amendments to contracts and pricing
  • engaging with customers and suppliers
  • reviewing existing data collection and reporting capabilities to identify any gaps that need closing in order to comply with the PPT reporting obligations
  • implementing the required changes to systems to enable necessary data collection and reporting requirements to be met.

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.

We only use plastic with more than 30% recycled content, how does the UK Plastic Packaging Tax affect us?

All businesses in the UK that manufacture or import more than ten tonnes of plastic packaging or components over a twelve-month period must register for the Plastic Packaging Tax.

If you make or import plastic packaging or components that have more than 30% recycled content, there will be no tax liability, but you must still register under the scheme. You will also need to submit returns as well as provide evidence that proves you are using plastic material with over 30% recycled content.

What if I fail to comply with UK Plastic Packaging Tax?

Not complying with the Plastic Packaging Tax can lead to both civil and criminal penalties. These penalties can apply for failing to register, failing to file returns and failing to pay any liability.

Where an organisation fails to fulfil any of these obligations, there is a £500 fixed penalty. There is a further daily penalty of £40 for every day, after the first, on which the organisation continues to default.

The only defence against these penalties is a reasonable excuse for the failure. Reasons such as insufficient funds or cashflow difficulties do not qualify. There is however an

appeals process for disputing penalties where a business believes this is justified or warranted.

To prevent organisations from artificially splitting their operations so that they come under the ten tonne per year registration threshold and avoid paying the tax, there are also anti-avoidance and anti-fragmentation measures in place.

Where HMRC determines that such avoidance is happening, it can issue a direction to those businesses it sees as complicit, so they are treated as single taxable entity.

Additionally, it’s important to note that companies are responsible for carrying out due diligence checks on other companies that they do business with. This will lessen the risk of being involved in a supply chain where Plastic Packaging Tax goes unpaid. Companies should keep records of the due diligence checks they carry out, otherwise they could be held jointly and severally liable (or secondarily liable) for any unpaid Plastic Packaging Tax.

What will happen to the revenue raised by the UK Plastic Packaging Tax?

According to government figures, the UK Plastic Packaging Tax will generate approximately £235M in revenue in its first year. It’s highly likely that some of this revenue will go towards covering the one-off outlays involved in implementing the new tax such as investing in the relevant technology and systems.

It is estimated that these set-up costs could be in the region of £42M leaving a balance of circa £193M. At this time, there is no definitive explanation as to how this remaining revenue will be spent.

Arguably, it would make sense for it to be used to fund research and development to help more businesses transition away from single use plastic packaging or plastic packaging with a zero or low level of recycled polymer content.

Alternatively, it could be used to fund grants to help businesses explore and adopt closed loop recycling systems that keep plastic material in use and out of landfill.

Given the tax is expected to generate up to £905M by 2026, it could play a vital role in helping the government to achieve its target of eliminating ‘avoidable’ plastic waste by 2042 and in moving the UK towards a more circular economy.

How does our organisation cope with the cost of the UK Plastic Packaging Tax?

The strains of BREXIT and the COVID-19 pandemic has created a world of economic uncertainty. This has been compounded by global raw material scarcity and subsequent price rises.

Against this backdrop, the margins of most businesses are under pressure like never before and the introduction of a new tax will, for many, be a cause for concern. If you’re wondering how to absorb or mitigate this additional liability, there are a few options at your disposal.

First, you can look to pass on the cost of the packaging tax by increasing the price of your goods. This could however impact your sales and overall commercial performance, and especially if your competitors have a smaller tax burden meaning they do not have to make the same price rises.

Secondly, you could look at increasing the amount of packaging you employ that utilises more than 30% recycled content. It is important to remember that packaging with more 30% recycled content still counts towards the ten-tonne threshold under which organisations are exempt.

The third and final option is to consider adopting new innovations in packaging and packaging materials to reduce the amount of plastic involved. Brands that have already started to make these changes, such as Coca-Cola, Mattel and The Co-op, are now discovering there are potential cost-savings in their manufacturing processes as a result, as well as increased environmental benefits.

Ultimately, the UK Plastic Packaging Tax is a positive force for change. Currently, it might entail some short-term pain, but it will encourage greater use of packaging that’s optimised for the circular economy, leading to longer term environmental and societal gains.

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