Simple 5 minute guide to the new plastic packaging tax - from 1st April 2022
The new Plastic packaging tax is only 6 months away, so we’ve read through various Government publications and put together this easy to read quick guide to help our customers unpack what it could mean for them. When a new tax is introduced it’s always good to get a basic understanding of the implications, rather than pull a plastic bag over your head and hope it goes away.
The definition of Plastic
Plastic includes bioplastics, including biodegradable, compostable and oxo-degradable plastics.
The Government objective
It’s always good to start with what the Government are trying to do. The aim of this new tax is to provide an economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging, which will create greater demand for this material. In turn this will stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration, and promote the use of recycled and recyclable, or alternative materials.
Who is likely to be affected
- UK manufacturers and importers of plastic packaging, it is expected to affect 20,000 UK businesses
- Companies that purchase plastic packaging (Manufacturers and importers of less than 10 tonnes a year are exempt)
- Consumers who buy plastic packaging or goods in plastic packaging in the UK. Since the plastic packaging of products is a very small portion of the product cost, it is not expected that prices will rise significantly.
To mitigate against disproportionate administrative burdens in comparison to the tax liability for those who are likely affected, there will be an exemption for manufacturers and importers of less than 10 tonnes of plastic packaging per year.
General description of the new measure coming onto play from April 2022
This is a new tax that will apply to plastic packaging manufactured in, or imported into the UK, that does not contain at least 30% recycled plastic. Plastic packaging is defined as packaging that is predominantly plastic by weight.
It will not apply to any plastic packaging which contains at least 30% recycled plastic, or any packaging which is not predominantly plastic by weight.
Imported plastic packaging will be liable to the tax, whether the packaging is unfilled or filled.
The rate of the tax will be £200 per metric tonne of plastic packaging.
At this time HMRC have not yet published their guidance on how the necessary reporting, but it is expected to create an administrative cost burden across all UK business of around £400,000, and estimated to net the exchequer approximately £235,000,000 per annum.
The environmental impact assessment
The rationale of this tax aims to increase the use of recycled plastic in plastic packaging and it is estimated that as a result of the tax the use of recycled plastic in packaging could increase by around 40%. This is equal to carbon savings of nearly 200,000 tonnes in 2022 to 2023, based on current carbon factors.
Should I register for the tax?
As a business you must notify your liability to register for Plastic Packaging Tax if at any time after 1 April 2022 you expect to manufacture or import 10 tonnes or more of plastic packaging, in the next 30 days or over 12 months. You must notify you liability within 30 days.
Plastic packaging which contains at least 30% recycled plastic, whilst exempt from the tax must still be included in working out if a business must register for the tax.
All businesses that manufacture or import plastic packaging must keep a record of the packaging they manufacture or import, even if you are below the threshold and do not need to notify your liability to register for the tax.
This is so you can demonstrate to HMRC that you do not need to notify your liability to register and to help you understand when you may become liable to notify to register or pay the tax.
The records should show the:
- Total amount in weight, and a breakdown by weight, of the materials used to manufacture plastic packaging, excluding packaging which is used to transport imported goods
- Data and calculations used to determine if a packaging component is, for the most part plastic, and how much recycled plastic it contains
- Weight of exempted plastic packaging and the reason for the exemption
- Amount in weight of plastic packaging exported, and therefore the allowed relief from the tax
These records can be product specifications, contract documentation, sales and purchase invoices and held on business accounting systems.
It is to be noted that the tax is only charged once in the supply chain and you can claim a tax credit for plastic packaging components that you have accounted for and are subsequently converted into a different packaging component. To receive a credit, you must hold records to demonstrate the conversion of the original packaging and the evidence of the tax being accounted for by the converter.
This is just a quick guide to give an overview but for more in depth explanations visit the links below, and look out for detailed guidance to be published later in 2021.
All text adapted and abbreviated from the following Government sources
To discuss alternatives to plastic, phone a friend at Kudos 01923 220055.
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