Plastic Packaging Tax UK: What’s coming and what we know

Plastic Packaging Tax UK: What’s coming and what we know

From April 2022, a new tax on plastic packaging will be in place in the UK. In this blog, we explore the aims of the tax, the affected products, how much is it, what manufacturers can do to comply, and how Stephenson and its customers are affected?

The aim of the plastic tax

Many of us make efforts to reduce our plastic usage in one way or another, but the UK government has now taken steps to target manufacturers and importers of plastic packaging by introducing a new plastic packaging tax (PPT); not for revenue increasing purposes but rather reducing the use of single-use plastic and increasing plastic recycling.

According to HMRC, Plastic Tax is applicable on all products where plastic is the main component by weight, where there is less than 30% recycled content used in its production. The tax is priced at £200 per tonne. Tax can be deferred for 12 months and claimed back for items that are exported (not for those that stay in the UK), but needs to be arranged with suppliers who will agree to work on this, as it can become an administrative challenge.

Here at Stephenson, we are looking at alternatives to single-use plastic altogether rather than completely focusing on the tax itself.

HMRC is still working on building the process and information resources around the plastic tax that impacts manufacturers and consumers.

Which packaging will be affected by Plastic Packaging Tax (PPT)?

PPT will be levied on plastic packaging that contains less than 30% recycled plastic. Imports of products in plastic packaging, such as drinks in plastic bottles, will also be included.

Rather surprisingly, given the environmental aims of PPT, “greener” plastics, such as biodegradable and compostable plastics, will still incur PPT (although this is currently being reviewed by the government) and the definition of “recycled plastic” does not include organic recycling.

For these purposes, recycled plastic is plastic that has been reprocessed from recovered material by means of a chemical or manufacturing process, other than organic recycling, in order to be used for its original purpose or for other purposes.

The Tax will not be chargeable on plastic packaging where:

• Packaging has 30%or more recycled plastic content

• Packaging is made of multiple materials of which plastic is not proportionately the heaviest when measured by weight

• Less than 10 tonnes of plastic packaging are manufactured and/or imported by a business annually

• It is manufactured or imported for use as immediate packaging of human medicines

• It is in use as transport packaging to import products into the UK or

• It is exported, filled or unfilled unless it is in use as transport packaging to export products out of the UK

The Tax will be paid by reference to accounting periods determined in accordance with regulations by HM Revenue and Customs (HMRC).

The liability for this Tax can be deferred for 12 months where Chargeable Plastic Packaging is intended for direct export (deferral starting from the day the Chargeable Plastic Packaging is manufactured or imported). The liability will be cancelled if the Chargeable Plastic Packaging is exported before the end of the deferral period.

Is your business eligible for the plastic packaging tax (or might be indirectly impacted?) Find out below.

What is the PPT's Impact on Stephenson and our customers

We are not directly liable for the tax for any of our packaging lines. This is because we are not an importer or manufacturer of plastic components. However, as our raw material and packaging suppliers are either distributors (therefore importers) or manufacturers, they will be liable. They will likely pass on a price increase to cover it, while we must ensure our suppliers are paying the taxes.

What are we doing now?

There are 2 main steps we are taking right now:

1. Establishing the volume of plastic packaging in our raw materials

Any imported raw materials, which are packaged in single plastic, incur the plastic tax. However, we have established a total volume to be very low. Again, we may experience higher raw material costs, if we import them in plastic drums for example. We have to ensure our suppliers are paying the taxes and also report our imports to HMRC on a quarterly basis.

2.  Evaluating options for our own packaging

Our packaging comes from a UK based supplier and the plastic packaging we currently use contains less than 30% recycled plastic content, so it will be taxable at £200 per tonne.

At Stephenson, we are likely to experience a price increase incurring from the packaging supplier, as the tax increase, however, we are also looking at timely and alternative solutions with Anthesis to improve our packaging and minimize the impact to our customers. So what’s next?

What’s next?

As a part of our sustainability plan, we are challenging our suppliers and looking into options to increase our recycled plastic packaging content. Also, we are working with our supplier base and Anthesis to assess the complexity of claiming back the tax, associated with export from the UK.

In 3 weeks, we will have a bit more robust answer of what our plastic packaging future looks like. Make sure you subscribe to receive updates from us.

If you have any ideas on how to use packaging and technology or if you have any questions about the Plastic Packaging Tax specific to the Stephenson products, feel free to contact us.