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GET YOUR HEAD AROUND THE PLASTIC PACKAGING TAX
Plastic Packaging Tax FAQs
What is the UK Plastic Packaging Tax and why is it being introduced?
The Plastic Packaging Tax (PPT) is an environmental tax designed to provide a financial incentive for businesses to use recycled plastic in the manufacture of plastic packaging. The Government’s intention is that by taxing virgin plastic materials it will create more demand for recycled material and therefore more businesses will invest in the recycling infrastructure.
What products will be taxed?
Any plastic packaging product that contains less than 30% recycled content by weight will be liable for the tax. There are a few exemptions and exclusions to this that are addressed separately.
How much is the tax?
The tax is currently set at £200/tonne. This will be under review so if recycled content becomes more expensive than virgin material the rate of the tax will increase. This will make sure recycled content is the cheaper option.
When will the tax be introduced?
The tax will be introduced on 1st April 2022.
Who is liable for the tax?
Manufactures in the UK placing virgin products into the UK market from 1st April 2022 will be liable for the tax.
People importing virgin product into the UK after the 1st April 2022 will be liable for the tax.
The person who carries out the last substantial modification to a product after 1st April 2022 will be liable for the tax. The last substantial modification is usually the last process before packing and filling activities.
There is a 10 tonne de-minimis on the tax so businesses who manufacture or import less than 10 tonnes of packaging in a 12-month period will not be liable for the tax. Businesses should still record the amount of packaging that they manufacture or import to prove, if requested, that they are under the 10 tonne threshold.
If the business is buying packaging to use within the UK, they will not pay the tax directly. However, they should expect the price of plastic packaging to rise if they buy products that have been made of imported after the 1st April.
How is an ‘importer’ defined?
For imported plastic packaging, the person on whose behalf the goods are imported will be the taxable person. This is usually the consignee on customs documents.
When does the tax charge arise?
The business that must account for the tax is the one that ‘finishes’ the packaging component or imports the ‘finished’ packaging component. A component is ‘finished’ when it has undergone its last substantial modification. The last substantial modification is the last manufacturing process that makes a significant change to the packaging component, as it alters the shape, structure, thickness, or weight of the component. Examples include extrusion, moulding and printing.
Certain processes are excluded from being substantial modification, these are blowing from a preform, cutting, labelling, and sealing. (This is not an exhaustive list.) A substantial modification may take place as part of the same process as the filling of the packaging however, the last substantial modification for the purpose of PPT would be the one before this final process.
Is the tax chargeable on imported plastic components, which are to be used for the production of the final plastic packaging (against which the tax will be levied)?
If the plastic packaging component will be finished in the UK, the tax does not need to be accounted for at import as it will not be a finished plastic packaging component. The tax will become payable once it is finished packaging.
What is a last substantial modification?
The last substantial modification is where the products characteristics are altered by changing the: shape, structure, thickness, or weight of a product.
Examples of manufacturing processes that are the last substantial modification include: extrusion, moulding, layering & laminating, forming & printing.
Examples of processes that are not last substantial modification include: blowing, cutting, labelling & sealing.
If I buy virgin material to sell on to a customer, will they be taxed the PPT?
Your customer will not need to pay the tax to HMRC, but it is likely that the cost of the initial PPT paid will be passed on throughout the supply chain. Your customer will only be liable for the PPT if they are classed as the last substantial modifier of the product and carry out some of the last substantial modifications such as: printing, extruding, moulding, layering & laminating, or forming.
What is the 10 tonne de-minimis?
Businesses who import or manufacture less than 10 tonnes of packaging in a 12- month period are not liable for the tax. The 10 tonne de-minimis is like a threshold. The 10 tonne de-minimis is applied to a business as defined by the ‘Connected Persons’ definition in the Corporation Tax Act 2010. This clarifies that a business cannot be devolved into groups so that the 10 tonne applies to each group. The 10 tonne limit is applied to the whole business entity.
Do I need to register for the PPT?
If you are a business that manufactures or imports 10 or more tonnes of plastic packaging over a 12-month period, you will need to register for the tax. This is regardless of whether you will have to pay any tax. This includes importers of packaging which already contains goods, such as plastic bottles filled with drinks. Where the packaging you import already contains other goods, the tax only applies to the plastic packaging itself.
If you are a business that needs to register for the tax, you will need to pay Plastic Packaging Tax on any packaging that contains less than 30% recycled plastic. The tax will be charged at £200 per tonne. For example, if you manufacture 10 tonnes of plastic packaging, and 1 tonne contains less than 30% recycled plastic, you will need to pay £200.
How is the Plastic Packaging Tax applied to multi-material products?
If you have multiple materials in a product the product will be treated as plastic if plastic is the heaviest material. The PPT will then be applied to the whole weight of the product. E.g.: If your product is 4g plastic, 2g paper this will be treated as 6g plastic and PPT will be liable on the 6g of the entire product weight.
If your product is easily separated into components, the PPT will only apply to the plastic element of the product. The government is also likely to introduce an “easily separable test” which means if the product can be easily separated by hand into separate components than the PPT will only apply on the plastic component.
So, how much recycled content do I need in a multi-material product?
You only need to have 30% recycled content in the plastic element of the product to ensure it is not eligible for the tax. If your product was 4g plastic and 2g paper, you would only need to have 30% recycled content in the plastic element (1.2g).
Do we need to account for all components?
Yes, all components need to be accounted for. A packaging component is defined as a product that is designed to be suitable for use, whether alone or in combination with other products, in the containment, protection, handling, delivery or presentation of goods at any stage in the supply chain of the goods, from the producer of the goods to the consumer or user. It does not matter why a component within this definition is produced or imported (for example, whether it’s for use in the supply chain of the goods, or for use by a consumer).
What is classed as recycled content?
Both pre-consumer and post-consumer waste can be classed as recycled content. Post-consumer is waste collected from the end user that is recycled, such as the plastics we recycle through our household kerbside recycling collections. Preconsumer is material that is recovered from the manufacturing process. Scrap or regrind recovered and reused during the manufacturing process will not be considered as recycled content. It must be reprocessed using a mechanical or chemical process back to its raw form to be classed as recycled content for the purpose of the tax.
How do I prove there is recycled content in my product?
There are no plans to introduce any official certification, however the UK Government advise that due diligence should be applied to understand the material make-up of the stock you are buying to minimise the risk of being involved in a supply chain where the Plastic Packaging Tax due goes unpaid.
To prove that there is recycled content in a product a business needs to evidence the recycled content in a product through detailed documentation. This can include, but is not limited to: specification sheets, purchase orders, invoices and, certificates of conformity.
All plastic products are assumed to be liable for the tax unless it can be shown that they contain recycled content.
Will the PPT be passed on through the supply chain?
We are assuming that the PPT will be passed on throughout the supply chain and we are expecting this to be included in the unit cost. Users of the packaging will not pay the tax directly.
Do we need to state on invoices to our customers that the PPT has been charged/paid?
The requirement for this has been delayed from 1st April 2022 to allow businesses time to assess and amend their invoicing systems accordingly. HMRC are encouraging businesses to provide this information on invoices voluntarily where possible, however it is not yet a legal requirement.
Will our suppliers make it clear on invoices the amount of PPT that has been passed on to us?
Initially, the requirement to state that the tax has been paid and the amount was something that HMRC were looking to implement from 1st April 2022. After considering the investment and changes needed by business to change their invoicing systems HMRC have delayed this, and so it is not required from 1st April. They are however encouraging businesses to go ahead with specifying this on invoicing where they can. It will therefore be down to the individual supplier as to whether the PPT is included on their invoices until such point as it becomes a mandatory requirement.
Is PPT due on samples?
Yes, the PPT relates to when a product is finished and not when it is sold, so the PPT applies on samples that are manufactured or imported into the UK.
What if we export the goods?
The PPT on any goods that have been exported outside of the UK within a 12-month period can be claimed from HMRC. Only the person paying the tax to HMRC can claim it back directly from them. If you know in advance that goods will be exported within 12 months, you can defer the PPT on a product, therefore not needing to claim the PPT back.
How long do you have to claim back PPT on exported products?
You can submit a claim for the PPT within 2 years from the date of manufacture or importation into the UK if your packaging is exported outside the UK. Remember, the goods must be exported within 12 months from manufacture or import for you to claim it back.
How does my supplier know if I am the last substantial modifier of a product?
PPT is due when the last substantial modification of a product has been made. A supplier will not necessarily know that you are the last substantial modifier unless you tell them beforehand. If they know you are the last substantial modifier, they will not pay the PPT, and you will pay it after the last substantial modification. If your supplier has already paid the PPT and you become liable for it as the last substantial modifier, required to pay this to HMRC, you can claim back the original PPT charged from your supplier. The supplier will then claim this back from HMRC and credit you. It is in your interest to work with your suppliers so that you only pay the tax once and when it is due. If you carry out the last substantial modification you may be altering the weight of a product so the PPT due could change.
How long can I claim for PPT as the last substantial modifier?
You have 2 years from the date of manufacture or import to make a claim as the last substantial modifier.
How do we pay the PPT?
From 1st April 2022 businesses that need to register for the tax will be required to submit quarterly returns to HRMC for all the plastic packaging that they have manufactured or imported, along with the details of any packaging that is exempt or excluded.
What records do I need to keep?
You must keep accounts showing how you’ve worked out each entry on your quarterly tax return. Where relevant, your accounts must include:
- a breakdown of the weight of plastic packaging components finished or imported in each period
- the weight of plastic packaging exported in the period on which the tax was deferred
- a breakdown of the weight of any plastic packaging for which a credit is claimed if the packaging has been:-
- converted into new packaging components
- any adjustments or corrections made to previous accounting periods — you must include the date and the accounting period they relate to
- You must keep accounts by reference to each ‘product line’ that you produce or import. A ‘product line’ is a group of plastic packaging components produced to the same specification.
- You must keep your accounts in writing (including electronic form) for 6 years from the end of the accounting period they relate to.
Plastic packaging components are not chargeable for the Plastic Packaging Tax when they contain at least 30% recycled plastic as a proportion of the total weight of plastic. If you want to claim this exemption, you must have records that:
- show how you’ve worked out the percentage of recycled plastic
- provide sufficient supporting evidence that recycled plastic was used
- show which dates the evidence relates to, such as the dates that the components were finished or imported
- show which plastic packaging component the percentage relates to, including product lines or production runs
- are an accurate reflection of the proportion of recycled plastic contained in the output materials of that recycling process
- confirm the source of the recycled plastic
For example, sufficient evidence could be the product specification showing the recycled content of a plastic packaging components and details of any due diligence checks you’ve done.
If the specifications or the materials used to make a plastic packaging component change, you must keep separate evidence for each specification.
If we buy the same product from the same supplier, do we need evidence for every production run or is it ok to do it less regularly, e.g., once a year
You will need to re-weigh and re-calculate the recycled plastic proportion each time the specification changes or when you no longer believe it is accurate. If nothing has changed then you don’t need to do this for each production run.
Is transport packaging liable for the PPT?
Transport or tertiary packaging on imported products is exempt from the tax. Transport packaging used domestically within the UK is not exempt from the tax and will still be taxable where applicable.
What are the current exceptions to the PPT?
There are three categories of products where the tax will not apply as for the purpose of PPT they will fall outside the definition of packaging:
Where the packaging function is secondary to the storage function e.g. First Aid box, CD/DVD cases. However, contents and overwrap would be subject to taxation
Where the packaging is an integral part of the goods e.g., ink cartridge, tea bags or asthma inhaler
Where packaging is designed primarily to be reused for the presentation of goods e.g., Sales display shelf, sales presentation stand
Is food packaging and medical devices exempt from the tax?
There are no exemptions for food packaging or medical devices, even if virgin material must be used by law. Cellulose-based materials that are unmodified, and medicine packaging licensed and approved for the UK will be exempt from the tax.
Can you give me some examples of cellulose based polymers?
Cellulose polymers are sugar cane, and starch-based products. To make it clear if a product is compostable, biodegradable, or oxo-degradable these are NOT cellulose based and are still classed as plastics for the purpose of the tax.
We use reusable packaging such as plastic totes, are these excluded from the tax?
Products that are reusable are still within the scope of the tax if they do not contain 30% or more recycled content. Reuse does not mean they are excluded, however if there is a valid exemption or exclusion then they will not be taxable, but you need to evidence this.
For packaging that is supplied for in-store filling/re-fill models, would the tax be applicable before reuse has been established?
The Plastic Packaging Tax is not charged where the plastic packaging is designed to be reused for the presentation of goods. This is packaging primarily designed to be re-used for the presentation of goods to a consumer or user and have been permanently set aside for this purpose, before or as soon as they have been manufactured or imported. Examples of this are shop display shelves, shop fittings and sales presentation stands.
Are plastic boxes subject to the tax if they are only used by the manufacturer / producer e.g., to move products around the factory and are not supplied to customers?
Yes. This is because it meets the definition of a packaging component: A packaging component is defined as a product that is designed to be suitable for use, whether alone or in combination with other products, in the containment, protection, handling, delivery or presentation of goods at any stage in the supply chain of the goods, from the producer of the goods to the consumer or user. It does not matter why a component within this definition is produced or imported (for example, whether it’s for use in the supply chain of the goods, or for use by a consumer).
What items are exempt from the tax?
There are four types of products which are classed as packaging but will be exempt from the PPT. The first two exemptions do not need to be included in part of the 10 tonne threshold in registering for the tax.
Transport packaging used when importing goods into the UK
Plastic packaging used in aircraft, ship, or railway stores for international journeys
Exemptions 3 and 4 need to be included in assessing if you meet the 10 tonne threshold and therefore need to register, although they will be exempt from the tax
Plastics packaging produced or imported for use in the immediate packaging of human medicine
Components permanently designated or set aside for non-packaging use
Regarding exemptions on plastic packaging for human medicine, does this mean all pharmaceuticals grade medicine and their packaging including transportation packaging are exempt?
Only the immediate packaging of licensed human medicines is exempt from the tax. The exemption for the immediate packaging of human medicines, is for medicines recognised by the Medicines and Healthcare products Regulatory Agency (MHRA)
Is food packaging exempt from PPT?
Even though food packaging for direct food contact must be virgin material by law it is still within the scope of the tax and there is currently no exemption. Therefore, any food packaging that does not contain at least 30% recycled content will be liable for the tax.
Do we need to account for machinery or dispensers that are plastic e.g.: tape guns?
This will not be classed as packaging so outside of the scope of the tax.
Are there any limitations as to what packaging can contain recycled content?
In general, unless there is a legal requirement for packaging to be virgin material (e.g.: direct food contact) you can add recycled content to any product. There are however some products in lower microns that adding recycled content will affect the stability of the bubble when extruded, so it doesn’t always work. As a rule, products under 20 mu may have this issue so you might have to increase the micron to include recycled content. We would always recommend trials or samples when adding recycled content to ensure it does not affect the performance of the product or alter the characteristics of the product too much.