Plastic packaging tax is a new tax that comes into effect from 1 April 2021. The tax has a green agenda – its aim is to reduce the amount of plastic packaging that does not contain at least 30% recycled plastic.
Liability
The tax applies to packaging that it predominantly plastic by weight and which does not contain at least 30% recycled plastic by weight. It is levied on those who manufacture or import plastic packaging. The tax arises when the packaging component is finished, or where it is imported, when it is imported.
However, to ensure that the administrative burden is not disproportionate, it only applies to those who manufacture or import at least 10 tonnes of plastic packaging within the scope of the tax each year. Guidance on what constitutes plastic packaging for the purposes of the tax can be found on the Gov.uk website (see https://www.gov.uk/guidance/work-out-which-packaging-is-subject-to-plastic-packaging-tax).
Where the tax applies, it is charged at the rate of £200 per tonne.
Registering
Manufacturers and importers who are liable for the tax will need to register with HMRC from 1 April 2022. This can be done online. A business must register when they have manufactured or imported 10 or more tonnes of plastic packaging within the scope of the tax, or if they plan to do so in the next 30 days. Therefore, when determining whether a liability to register arises, it is necessary to look both backwards and forwards. As the tax only applies from 1 April 2022, in the first year of the tax, there is no need to look back before 1 April 2022.
Where the threshold of 10 tonnes in the previous 12 months is reached, the liability to register arises from the first day of the month following that in which the threshold was reached. Registration must be done within 30 days.
Example
A business manufactures 4 tonnes of plastic packaging containing less than 30% recycled plastic each month. By 30 June 2022, they have manufactured 12 tonnes of packaging since 1 April 2022. As the 10-tonne threshold has been exceeded on 30 June 2022, the liability to register arises on 1 July 2022. The business must register by 30 July 2022.
Where a business expects to exceed the 10-tonne threshold in the next 30 days, the requirement to register arises from the date that the business expects to be liable to register. Again, the business must register within 30 days.
Example
A business normally manufactures 2 tonnes of plastic packaging a month. On 4 May 2022 it receives an order for 15 tonnes of plastic packaging that contains less than 30% recycled plastic. The liability to register arises on 4 May 2022 and the business must register by 2 June 2022.
Planning Tips
The tax is payable by the manufacturer or importer, not by the end-user. However, depending on price sensitivity, they may be able to pass the cost on. As the tax only applies where the plastic packaging does not contain at least 30% recycled plastic, increasing the recycled element to at least 30% will remove liability of the tax. Likewise, moving away from plastic packaging so that the 10-tonne threshold is not breached will also take a business outside the tax, increasing its green credentials in the process.
Partner note: Finance Act 2021, Pt. 2 (ss. 42—85; Schs. 9—15).