The new Plastic Packaging Tax – what you need to know

By Anita Jaynes on 28 July, 2021

Post sponsored by Purple Lime

Local accountancy firm Purple Lime explain the new Plastic Packaging Tax set to come into force in 2022.

In just over a year, the UK government will introduce a new piece of legislation designed to protect our planet and move us towards that target of net zero emissions by 2050. It is called the Plastic Packaging Tax. Due to come into effect in 2022, the tax has been a hot topic in parliament among business owners, particularly those manufacturing and selling products. And because this is a significant change, with a lot of financial and administrative implications for businesses, it’s important that you understand what the tax is, if you are affected by it, and what you need to do to prepare for it, so you are not caught short. Please bear in mind that since we are still a year away some of the fine details of this tax could change, but here’s what we know about the Plastic Packaging Tax so far.

Who’s affected?

The Plastic Packaging Tax will apply to any four core groups:

  • UK producers of plastic packaging
  • Importers of plastic packaging
  • Business customers of producers and importers of plastic packaging
  • Consumers who buy goods in plastic packaging in the UK – since it is expected that the cost will be passed on to consumers who buy goods in plastic packaging

That might seem like a scary prospect at first, but this is part of an environmental policy by the Government, so there is a get-out. The Government have confirmed that the Plastic Packaging Tax will not apply to any plastic packaging which contains at least 30% of recycled plastic, or any packaging that is not predominantly plastic by weight.

However, if you are a business that manufactures or imports over 10 tonnes of plastic packaging in any 12-month period (regardless of % recycled), you will have to register for the tax regardless – even if you never have to actually pay it. This includes any business that imports packaging that already contains goods – the prime example is plastic drinks bottles. There are also currently two key exemptions for the tax, which are:

  • Packaging for human medicines
  • Transit/transport packaging around imported goods

There may be more exemptions added at a later date, but the list is likely to remain very short.

How much will it cost?

The current proposal is that the charge to tax will be £200 per tonne of qualifying packaging produced or imported into the UK. For any part of a tonne, the £200 charge will be apportioned accordingly. The amount of packaging will be measured according to the accounting periods of the business, similar to VAT.

As with many HMRC regulations, self-reporting is expected, with the Government overseeing all submissions and investigations where necessary. Businesses will be required to register with HMRC and submit tax returns for the Plastic Packaging Tax.

What you can do to prepare

Switch to recycled plastic: The most obvious thing you can do in preparation for this new tax is to look at your suppliers and the packaging you are buying. The point behind the tax is to incentivise businesses to switch to more eco-friendly forms of packaging, so we recommend you do just that. Evaluate whether you really need plastic packaging for your products, and if you do, try to find a supplier that can provide some that is at least 30% recycled. This means you will not need to pay the tax, and your business becomes more eco-friendly at the same time.

Track: We recommend keeping a record of any packaging you manufacture or import, not only so you know how much packaging you are making or buying, but also so that you can keep an eye on your threshold and have a better idea of how much tax you will need to pay. Even if you use packaging that is over 30% recycled plastic, it is still a good idea to keep an eye on the amount you manufacture or buy, since you will be required to register for the tax if you go above that 10-tonne threshold. Keeping accurate records means you can prove to HMRC that you are below that threshold if the taxman comes knocking.

Get your invoices in order: If you are one of the businesses who will have to pay the tax as a manufacturer or importer, you will need to adjust your invoices. A declaration that the Plastic Packaging Tax has been paid should be added to all of your invoices, and it would be a good idea to get that written and ready to go before implementation day.

Of course, the finer details are still being discussed by Parliament, so we do expect some changes. Once this becomes law, more guidance will be made available, likely towards the end of 2021. At Purple Lime, we understand that adding another tax into your business can be stressful, which is why we are on hand to help. We can work with you to understand your business cashflow, recommend changes in advance of the new tax coming in, and guide you through the final stages of registering and then submitting your returns. If you would like to find out more, please get in touch to book your free consultation by emailing hello@purplelime.uk.com, or calling us on 01249 691360.  Visit Purple Lime online at: www.purplelime.uk.com