Plastic Fan-tax-tic:The Plastic Packaging Tax
The Plastic Packaging Tax (the PPT) came into force on 1 April 2022 and imposes a tax on plastic packaging manufactured in or imported into the UK. The rules governing PPT are set out in the Plastic Packaging Tax (General) Regulations 2022 (the PPT Regulations).
In this article, we will explain the key provisions of the Regulations and why they are important.
What is the PPT?
PPT is a tax that will be imposed on businesses importing or manufacturing 10 tonnes+ of finished plastic packaging components (PPC) within a 30-day period or have already imported or manufactured 10 tonnes in the previous 12 months.
What are the costs?
The PPT will apply retrospectively to imports made during the 2022/23 tax year at a rate of £200 per tonne. From 1 April 2023 the rate increased to £210.82 per tonne in line with the Consumer Price Index (CPI) and will be adjusted every year meaning companies should budget for inflation and annual changes.
What packaging counts?
Not all packaging is equal in terms of the PPT and it will only apply where there is (1) PPC, (2) the PPC is 'finished' and (3) the packaging does not contain at least 30% recycled plastic.
What is a PPC?
Regulation 4 and 5 set out how to determine whether a packaging component is a PPC. Regulation 4 defines all the substances other than plastic which may be present in the packaging i.e. steel, glass, paper, cardboard etc.
Regulation 5 then sets out the calculation:
- measure the weight of plastic;
- measure the weight of every alternative substance, as set out in regulation 4; and,
- compare! If it contains more plastic according to weight than any other single substance then this will be a PPC.
When is a PPC 'finished'?
A PPC is finished where it has undergone its last 'substantial modification'. A 'substantial modification' under Regulation 8 is one which changes the nature of the packaging component i.e. shape, structure, thickness and weight.
How to work out what percentage is recycled?
Regulation 6 and 7 set out the process:
- work out the weight of the recycled plastic;
- divide the weight calculated at step one by the total weight of the plastic in the PPC; and
- if the percentage is lower than 30% then this will be subject to PPT.
Are there any exemptions to the PPT even if the packaging does not contain 30% recycled material?
There are four types of packing which will be exempt from PPT:
- packaging used in packaging medicinal products;
- packaging permanently set aside for non-packaging use;
- packaging used as transport packaging to import multiple goods safely into the UK; and
- packaging used in aircraft, ship and rail goods storage.
Packaging is subject to PPT – what happens now?
The business must register for PPT where the 10 tonnes threshold is breached.
The deadline for registration is:
- where the business expects to import or manufacture 10 tonnes+ of plastic packaging in the following 30 days, registration is required within 30 days; and
- where a business has manufactured or imported 10 tonnes+ of plastic packaging in a 12 month period, they must register by the first day of the subsequent month.
HMRC has published guidance on how to register.
Do you need to record any information about PPT?
Once a business is registered for PPT, it must keep accounts and records on PPT. The records must be kept for at least 6 years from the end of the relevant accounting period and record weight in tonnes, kilograms and grams.
Further guidance on the specific accounts and records required has been published by HMRC.
Are there any reliefs from PPT?
Tax reliefs can be claimed where a business:
- exports the packaging in the same accounting period;
- intends to export packaging in the next 12 months;
- has paid tax on packaging but later exported or converted the packaging; or
- has evidence another business has exported or converted the packaging.
How to ensure compliance with PPT Regulations?
Due diligence checks for PPT should be carried out where a business manufactures PPC, imports PPC or buys PPC. These will reduce the risk of being involved in a supply chain where PPT goes unpaid. If checks are not undertaken and records are not kept, then a business who contracts with a supplier who has not paid PPT may be held jointly and severally liable (or secondarily liable).
How will this affect the construction industry?
The PPT will affect all plastic packaging. According to Plastics Europe, the construction sector is responsible for around 20% of plastic consumption and vast quantities of plastic packaging is used to transport/import construction materials. The PPT will impose additional costs on the use of this plastic and encourages those working in the construction industry to use packaging that contains recycled elements.
It is often difficult to avoid using plastic packaging as it is the only material available to protect items being imported but those working in the construction sector should be mindful of the increased costs and the push to use more recycled materials.
Challenging the construction industry on sustainability
'We can’t just consume our way to a more sustainable world' (Jenifer Nini) - the PPT is the Government's way of incentivising a reduction in plastic consumption, increasing recycling, and promoting sustainability. Few will argue with the admirable intent of the legislation; this is yet another challenge to the industry of the many they are facing in the next decade.
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