‘Plastic packaging’ is defined as packaging that is predominantly plastic by weight. Most new plastic polymers will fall within the rules and the tax will be levied on all forms of packaging where the heaviest component is plastic.
Plastic Packaging Tax (PPT) is likely to be applicable to businesses that manufacture or import plastic used for packaging either for their own or their customer’s use. PPT will take effect from 1 April 2022.
PPT is an environmental tax designed to encourage the use of recycled instead of new plastic material within packaging and, in turn, stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfills or incineration. PPT will focus on the materials used in the delivery of goods to consumers and other end users to a negative effect in that, unless a sufficient level of recycled plastic is used, tax will be payable.
The UK Government has estimated that the use of recycled plastic in packaging could increase by around 40% as a result of this tax (equal to nearly 200,000 tonnes of carbon in 2022 to 2023).
A levy of £200 per tonne will be charged against the producer or importer selling on most new ‘finished plastic packaging’ in the UK. PPT runs alongside, rather than as a replacement to the current Packaging Recovery Note (PRN) System. Hence, the tax will be additional to any PRN obligations businesses might incur. Imported plastic packaging will be liable to the tax, whether the packaging is unfilled or filled, and will have to be paid by the business who controls the goods once allowed through customs.
There will, however, be an exemption for manufactures and importers of less than 10 tonnes of plastic packaging a year. Certain plastic polymers will also be excluded from the tax, such as cellulose-based polymers that have not been chemically modified. Furthermore, and perhaps most crucially, PPT will not be applied if the packaging is comprised of at least 30% recycled plastic. All forms of recycled plastic will count towards the 30% test for recycled plastic content.
‘Plastic packaging’ is defined as packaging that is predominantly plastic by weight. Most new plastic polymers will fall within the rules and the tax will be levied on all forms of packaging where the heaviest component is plastic.
A component is ‘finished’ if it has gone through its last substantial modification, or in cases where the last substantial modification occurs when the component is packed or filled, its last substantial modification before being packed or filled.
If your business is required to register and pay PPT, compliance and administrative requirements for PPT are going to be significant.
Businesses should consider undertaking assessments now to determine whether or not they will need to register for PPT; and if they are, how best to manage the significant compliance obligations that will be imposed and train relevant staff. It may also identify whether or not any packaging efficiencies can be achieved, such as using recycled plastic or through the development of new packaging solutions, which could potentially be eligible for R&D claims.
At S&W we can help your business carry out a PPT assessment and ensure you are ready for the changes from April 2022. Please contact one of our VAT advisors for assistance with the impact of these new rules on your business.
DISCLAIMER
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. Clients should always seek appropriate tax advice before making decisions. HMRC Tax Year 2022/23.
Ref: NTGH61221114
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.
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