Plastic Packaging Tax – Is your business ready?

Posted on: June 16th, 2021

Did you know that from April 2022, the Government is introducing a tax for plastic packaging in the UK and that this may increase your plastic supply costs and ultimately the price of products?

The new tax will impact UK manufacturers of plastic packaging, importers of plastic packaging and consumers who buy plastic packaging or goods in plastic packaging in the UK.

The tax is being introduced in order to provide an economic incentive for businesses to use recycled material in plastic packaging. Similar to the carrier bag charge, the idea is that by introducing this tax, it will change behaviour by increasing demand for the material which in turn will stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill, incineration or, worse, from ending up in the environment.

You may need to act in order to ensure you are compliant and to consider whether your own contract terms need amendment to reflect the obligations and additional costs.  If you act on other parties’ terms you may soon start to see additional provisions added to commercial contracts.

Some key facts about the tax

  • The tax will apply to plastic packaging manufactured in, or imported into the UK, that does not contain at least 30% recycled plastic.
  • Imported plastic packaging will be liable to the tax.
  • Where plastic does not meet the 30% recycled content test, then a levy of £200 per tonne of non-qualifying plastic will be charged to the producer or importer.
  • There will be an exemption for manufacturers and importers of less than 10 tonnes of plastic packaging per year.
  • 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: (a) there is reasonable grounds to believe that in the next 30 days, the threshold of 10,000 tonnes will be surpassed; and (b) the threshold of 10,000 tonnes was surpassed in the previous 12 months.

What you should be doing now

In the run up to 2022, businesses should engage with supply chains and ascertain whether any of their plastic packaging does not meet the 30% test as, if not, the additional costs of the tax will be incurred.  Any additional cost will need to be absorbed somehow, either through increased prices to consumers or by the distributor or manufacturer.

By agreement, liability for the tax can be placed on other entities in the supply chain and not just the manufacturer or importer. Contracts with your supply chain will need to be clear about whether the tax is being passed on by the supplier to the customer by making sure that prices are stated to clearly be ‘ex PPT’ or ‘inc PPT’. The legislation will also allow HMRC to impose liability on any business in the packaging supply chain where that business knows ‘or ought to know’ that the manufacturer or importer has not paid their plastic packaging tax.

Information on the recycled content of plastic packaging is likely to be known only by the manufacturer. It is imperative that businesses speak with plastic manufacturers as soon as possible to check and verify the information so that they are not inadvertently exposed to liability.

The Government expects business customers to take ‘reasonable steps’ to verify that payment has been made and we expect guidance on what constitutes adequate due diligence.

If you need any further advice on the Plastic Packaging Tax, or any commercial advice in general, please do get in touch.