The Plastic Packaging Tax – what do you need to do?

The UK is going green with a new tax on plastic packaging. To encourage businesses to make the transition into using recycled plastic packaging, the UK Government is introducing the Plastic Packaging Tax, effective from 1^st April 2022.

What is the plastic packaging tax?

The plastic packaging tax (PPT) is an environmental tax designed to reduce the amount of plastic packaging imported and used in the UK. It will apply to all packaging manufactured or imported that doesn’t contain at least 30% recycled plastic.

A £200 tax rate will be applied to each metric tonne of plastic packaging made or used in the UK per quarter. Although, businesses that import or produce less than 10 tonnes of plastic packaging during a year will be exempt from the tax.

What types of packaging are included in the tax?

The tax extends to most single use plastic packaging items including:

• Plastic bottles containing liquids
• Plastic bags
• Doggy bags
• Nappy sacks
• Bin liners
• Disposable plastic cups
• Single use plastic straws

What types of packaging are exempt from the tax?

Certain types of packaging are exempt from the tax. Exemptions apply when

• The plastic packaging contains at least 30% of recycled plastic
• It’s used in the immediate packaging of human medical products
• It is transport packaging for imported goods
• The packaging is used for storage purposes including glasses cases and equipment for transport storage
• It’s permanently set aside at production or importation for a non-packaging function

How do I register for the Plastic Packaging Tax?

There are two tests to help you check whether you need to register for the new tax. These tests identify packaging that is subject to the PPT tax and work out the weight of each packaging component.

Looking back over the last 12 months, you must register if you’ve manufactured or imported 10 tonnes or more of finished plastic packaging. You must also register if you will manufacture or import 10 tonnes or more of finished plastic packaging within the next 30 days. You must register for the Plastic Packaging Tax within 30 days of becoming liable for it.

What records do I need to keep?

You’ll need to keep thorough records so you can calculate your tax responsibilities accurately. Even if you are exempt from the Plastic Packaging Tax you should keep records. This is because the accounting period is a rolling 12-month time period, so you could hit the limit and be liable to pay the tax.

When recording your plastic packaging amounts, all weight measurements should be recorded in kilograms (kg). You’ll need to record the following details (taken from sage.com)

• The total weight of chargeable plastic packaging components manufactured in the UK. You’ll need to keep track of this per quarter
• The total weight of finished plastic packaging imported into the UK in the accounting period
• The total weight of finished plastic packaging components not subject to the tax
• The total weight of finished plastic packaging components manufactured or imported for use in the immediate packaging for licensed human medicines (this type of packaging is exempt from the tax)
• The total weight of chargeable plastic packaging components manufactured or imported in this accounting period, which have been exported directly by you during this accounting period and are due to be exported directly by you within the next 12 months.
• The total weight of any finished plastic packaging components that contain at least 30% recycled plastic content.
• The total value of taxed plastic packaging components for which a credit is being claimed (values should be listed in pound sterling).
• The total weight of plastic packaging components that are subject to the tax after deducting, which is to say:
• The total weight of finished plastic packaging components not subject to the tax.
• Deferral of the tax liability of packaging components intended for direct export.
• Tax credits claimed for the accounting period.
• Tax due for this period (again, listed in pound sterling).
• A declaration that all the information provided is true and correct. If an exemption applies, you’ll need evidence to show why – for example, if the packaging is used for a human medical product. You can find examples of documents that can be used as evidence in the guidelines from HMRC.

How to prepare for the new tax

Planning ahead will make it much easier to navigate the new legislation around plastic packaging. Here are some of the ways you can prepare for 1^st April

• Educate yourself on the new tax. The tax uses complex legislation and calculations. Read as much information and advice about PPT to make sure you’re not caught out. HMRC has published draft legislation and explanatory notes to help business owners.
• Do a test run. If you have the resources, you can try applying the new legislation to a previous period to help you work through the different processes in your Sage 50 accounting software.
• Use recycled materials. To help reduce your tax bill switch to recycled plastic wherever you can.
• Talk to your suppliers. Ask your suppliers if they have plans to make any changes before the new tax is introduced. You might also need to switch suppliers and doing this sooner rather than later will minimise any disruption to your business.