What is Plastic Packaging Tax? Who does it apply to? Are small businesses subject to Plastic Packaging Tax?

At a glance

  • Plastic Packaging Tax is due to take effect from 2022.
  • The tax will be £200 per tonne (apportionment for part thereof).
  • The tax applies to plastic packaging manufactured in or imported into the UK containing less than 30% recycled plastic.
  • It applies to business who manufacture or import plastic packaging component or imports packaged goods into the UK.
  • 'Small operators’ who manufacture or import less than 10 tonnes of plastic packaging in a 12-month period are exempted from the charge. 

Overview

In March 2020 the government published a consultation 'Plastic Packaging Tax policy designthat provides useful definitions, as well as details of the measure. The policy paper confirms how the tax will be applied.

Definitions include:

  • Plastic: a material consisting of a polymer within the meaning of Article 3(5) of Regulation (EC) No 1907/2006, to which additives or other substances may have been added, with the exception of cellulose-based polymers that have not been chemically modified.
  • Packaging: all products made of any materials of any nature to be used for the containment, protection, handling, delivery and presentation of goods, from raw materials to processed goods, from the producer to the user or the consumer. Non-returnable items used for the same purposes shall also be considered to constitute packaging.

Items which are designed for longer term and likely repeated storage by consumers, such as plastic storage boxes, will be excluded from the new tax.

  • Recycled plastic: the government will apply the same definition as the International Organization for Standardization (ISO) standard 14021:2016 when developing the definition for defining recycled plastic. This definition includes both ‘post-consumer’ waste and ‘pre-consumer’ waste (with the exception of scrap and regrind).

What is the charge to tax?

The charge to tax will be £200 per tonne of qualifying plastic packaging produced or imported into the UK.  For any part of a tonne, the £200 charge will be apportioned. The amount of packaging will be measured with reference to accounting periods.

Who does it apply to?

Following feedback from the previous consultation, the government announced in the 2020 Budget that it will: 

  • Extend the scope of Plastic Packaging Tax to imported filled plastic packaging that does not contain at least 30% recycled plastic content, rather than just imports of unfilled plastic packaging.
  • Exempt businesses that manufacture or import less than 10 tonnes of plastic packaging in a 12-month period from the requirement to pay the tax. This will ensure the administrative burden and cost of collecting the tax are not disproportionate to the environmental harms the tax seeks to address.

Further exemptions, confirmed by the policy paper, are available where the packaging:

  • Is used for the immediate packaging of licensed human medicines.
  • Is used for transport packaging for imported goods.
  • Is exported (unless as transport packaging for exported goods).

Care and due diligence will be required when there is a supply chain involved to establish who will be liable to the tax.

Reporting

Businesses will be required to register with HMRC. The taxpayer will have 30 days ("the notification period") to notify HMRC of the need to register. The notification period starts when:

  • There is reasonable grounds to believe that in the next 30 days, the threshold of 10,000 tonnes will be surpassed.
  • The threshold of 10,000 tonnes was surpassed in the previous 12 months.

Opportunity

The new tax complements the reformed Packaging Producer Responsibility Regulations. It is hoped that all businesses, including small operators will be encouraged to reconsider and redesign packaging, making it less difficult to recycle.

Any advance in science or technology in doing this may qualify for R&D relief.

Background to Plastic Tax

The first launch of plastic tax was in October 2015, when large retailers in England were required to charge a minimum of 5p for single use carrier bags. Since then, the 2018 Budget announced its intention to introduce a new tax on businesses that produce or import plastic packaging which uses insufficient recycled content.

In July 2019, the Treasury published responses to its consultation on the proposed Plastic Packaging Tax. 

The tax is aimed at packaging producers and not end-users. 

Key features of the proposals:

  • This is a tax on unrecyclable plastic packaging content.
  • It appears unlikely to be applied to small producers.
  • Exporters may be given credit on the basis that the government does not wish to stifle business activity. However this is under consideration as there is also no desire to encourage environmentally unfriendly policies.

Links

Plastic Packaging Tax policy design
Consultation following the 2020 Budget

Research and Development (R&D) Zone  
Explore our R & D resources to see what relief you can claim, with worked examples and reporting templates.

External links

Draft legislation

Consultation: Plastic Packaging Tax policy design

Plastic Packing Tax: a summary of responses

Plastic Packaging Consultation (closed)

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