Plastic Packaging Tax (PPT) update – response to consultation on chemically recycled content

HMRC has released its latest response to its consultation on plastic packaging tax (PPT) and chemically recycled content.

In summary, the UK’s PPT regime will see the introduction of a mass balance approach for chemically recycled content which aims to boost the UK’s recycling infrastructure and meet ambitious environmental targets. Pre-consumer recycled content will no longer be relieved.

Currently, virgin plastic and its chemically recycled counterpart are virtually impossible to differentiate when blended together to produce outputs. A mass balance approach will allow recycled feedstock to be allocated and tracked for the purposes of PPT. 

The proposal means that businesses that cannot currently prove the chemically recycled content of their products will be able to demonstrate their product composition to HMRC and claim tax relief for their chemically recycled material under the new proposals.

The proposal aims to provide some certainty for future investors in the sector to support innovation and investment.

There is significant work yet to be done by HMRC, in consultation with affected stakeholders, to develop an operable mass balance method that will work across different technologies. We expect to see further consultation over the course of the next year before any proposed draft legislation is developed.

Included within the response is a proposal to remove the classification of pre-consumer plastic waste as a recycled material for PPT purposes, at the same time that the mass balance method for proving chemically recycled content is introduced.

HMRC describe the use of pre-consumer waste as a “tax loophole” in the response to consultation, suggesting that this material was recycled before the introduction of PPT and that the tax relief is not necessary to support its reuse.

Many packaging manufacturing businesses have invested in plant and equipment to increase the use of pre-consumer waste following the introduction of PPT and will be disappointed by the proposal to remove the relief.

As the change will only be introduced when the mass balance method for chemically recycled content is implemented, and there is significant work left to do for HMRC to develop the mass balance method with stakeholders, it will be some time before the proposals are introduced. This willgive affected parties the opportunity to engage in dialogue with HMRC regarding the impact of the proposed change.

Packaging producers in the pharmaceuticals sector should also note that although the exemption for the packaging of human medicine has not been amended by this consultation, the Government has announced its intention for this exemption to also be phased out in the future. This is as technology develops to allow for the provision of recycled content which will meet regulatory requirements. 

The introduction of an agreed method for chemically recycled content to be relieved from plastic packaging tax will be welcomed by many in the industry who are already using this material but unable to claim the tax relief, and by those looking to invest in infrastructure. However, mass balance is a complex area and there is still much to consider and agree before such a technical approach can be applied.

The proposed removal of pre-consumer waste from the definition of recycled content for PPT will be welcomed by those in the waste sector, but a disappointment for those businesses that have invested further in equipment to increase their reuse of pre-consumer waste. Given that the proposals will take time to develop there is time and opportunity to engage in dialogue with HMRC.

If you have any questions or want to understand how HMRC’s announcement affects your business or how to engage in dialogue with HMRC about the prospective changes, please speak to your usual contact or get in touch with our expert, Jayne Harrold.

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