What is the new “plastic packaging tax”?

Brython Edwards explains.

In a world where we are all increasingly conscious of our own environmental impact, it will come as no surprise to hear the words “plastic packaging tax” looming on the horizon. Originally announced as part of The Budget back in 2018, with a proposed commencement date of 1st April 2022, the new tax on plastic is an attempt to make UK businesses consider adopting greener packaging practices.

With less than a year to go until this new legislation comes into force, many will be understandably concerned and wondering what exactly this new “plastic packaging tax” is – and how it could affect their businesses.

The plastic packaging tax is targeting UK based producers of plastic packaging and UK based importers of plastic packaging. As the proposed tax is an indirect tax, the business customers of the aforementioned importers and manufacturers, and even potentially the end consumers who buy goods in plastic packaging in the UK, could also be affected by the new legislation.

Who will the plastic packaging tax affect?

The tax is expected to impact on up to an estimated 20,000 producers and importers of plastic packaging, and it is expected that the impact on businesses and their practices will be significant. The idea behind the introduction of the tax is to significantly increase the amount of plastic packaging in circulation that has greater than 30% recycled plastic, which will help to divert plastics from landfill or incineration. The manufacture of new plastic packaging has a much larger environmental impact than the manufacture of packaging which uses recycled materials, leaving a carbon footprint 4 times greater.

The new plastic packaging tax is expected to be a step towards meeting the government’s pledge to slash emissions by 78% by 2035, and eventually net zero by 2050.

But what exactly do HMRC mean when they say “plastic packaging”?

The criteria for whether something is classed as plastic packaging is based on what proportion of the weight of the product is plastic. For example, let us look at the contents of your standard meal deal from the supermarket. The sandwich wrapper, mostly cardboard but with a plastic window, would not qualify as a plastic product. The bottle of your favourite drink however, mostly plastic with the exception of the label, would definitely qualify as a plastic product. Whilst this may be a simple example, it is helpful to illustrate what types of product may fall foul of the new legislation.

Keeping this definition in mind, we can now look at which types of plastic packaging the government is targeting, as well as the overall aims of the new legislation. The tax has been designed to target any plastic produced in the UK that does not contain at least 30% recycled plastic. The tax also applies to imported plastic packaging that does not meet the at least 30% recycled content threshold. The tax applies whether the packaging is filled or unfilled. It is crucial to note that any plastic which is made of at least 30% recycled content is exempt from the new legislation.

The plastic packaging tax was part of the 2021 Finance Bill, which is currently making its way through the House of Lords. The overall impact of the legislation will depend on the design of the tax, which is as yet to be finalised.

What do we know about the plastic packaging tax?

However, some of the key features of the tax are already known. The tax rate is currently set at £200 per tonne for packaging which fails to meet the 30% threshold of recycled plastic content. Importers and manufacturers who import 10 tonnes or more per annum will be required to register.

For those who fall below the levels set out above there is good news – if you only produce or import small amounts, exemptions will apply to mitigate against the disproportionate administrative burden of complying with the new law. There are also exemptions from the tax for any package which is not predominantly plastic by weight, regardless of whether the plastic component of that packaging meets the 30% recycled content threshold.

In line with other taxes, there will of course be civil and criminal penalties for failing to comply with the tax, such as penalties for failure to register, failure to file returns and failure to pay the tax.

Details such as how the tax will be collected, how it will be recovered, and how the tax laws will be enforced, as well as how the tax will be relieved on exports, are yet to be announced – though we can expect to hear regarding these sooner rather than later.

Next steps

Contact us if you are concerned about you or your business’ exposure to the new plastic packaging tax, or if you wish to discuss any of the issues raised above in further detail.