The new plastic packaging tax

16 Nov 2020

R&D Tax Credits

Plastic packaging tax is a new tax which will take effect from April 2022. The UK government hopes that this new tax will “provide a clear economic incentive for businesses to use recycled material in the production of plastic packaging” and it is hoped that the knock-on effect will be increased levels of recycling of plastic waste and therefore less going to landfill or for incineration.

This article provides a general summary of the new plastic packaging tax. HMRC has consulted on the design of the new tax (the most recent consultation closed on 20 August 2020). Our summary is based upon the current position suggested by HMRC, but this could still change subject to the outcome of this consultation.

The new tax will apply to UK producers and importers of plastic packaging containing less than 30% recycled plastic, with the tax charged at a flat rate of £200 per tonne.

The UK government has stated that it will keep the level of this 30% threshold and flat rate of £200 per tonne under review to ensure that the tax remains effective in increasing the use of recycled plastic.

The new tax will clearly have an impact on UK-based manufacturers of plastic packaging.

It will also impact on those who import plastic packaging into the UK for commercial use (both filled and unfilled packaging). In these circumstances, the taxpayer would normally be the person on whose behalf the plastic packaging is first commercially used in the UK.

However, it has been suggested that joint and several liability could apply across the supply chain if the tax is not correctly accounted for, which could increase the scope of the new tax.

It has been proposed that packaging for these purposes would include all actual packaging, including products which will be sold to end users as packaging (eg cling film). However, the new tax should not apply to mixed material packaging which is not mainly plastic by weight.

It is proposed that the following would be exempt from the new tax (or receive a credit for any tax already paid):

  • Businesses that manufacture or import less than 10 tonnes of plastic packaging within a 12-month period.
  • Certain plastic packaging used to transport goods imported into the UK (eg plastic crates or pallet wrap).
  • Plastic packaging that is manufactured in the UK, or imported into the UK, to be exported directly to overseas customers.
  • Packaging of certain medicines.

Where the new tax applies, taxpayers will be required to register with HM Revenue & Customs (HMRC) and account for any tax due. The tax will be accounted for through quarterly tax returns. Tax will be self-assessed but the burden of proof will be with the taxpayer to demonstrate, for example, that plastic packaging not subject to tax contains at least 30% of recycled plastic should HMRC enquire. Penalties will be levied for failing to comply with the new tax, including failure to register with HMRC, failure to file returns and failure to pay the tax.

An estimated 20,000 businesses manufacturing and importing plastic packaging are expected to be impacted by the new tax. It is only expected to impact individual consumers if businesses pass on the charge and, in those circumstances, it is expected that the cost to individual consumers would be small anyway, as plastic packaging usually makes up only a very small amount of the total cost of goods.

It is important that businesses review their current packaging products to determine whether they think they might fall within the scope of this new tax. Businesses should also keep up to date with news developments following the recent consultation and review any detailed guidance published by HMRC. If businesses conclude that their current packaging products could fall within this new tax, they may wish to take steps to switch to products which have greater than 30% recycled plastic.