Plastic Packaging Tax (PPT): 18 months on

The Plastic Packaging Tax (PPT): 18 months on

Plastic Packaging Tax (PPT) first came into effect on 1 April 2022. The overarching aim of the new tax is to encourage the use of recycled materials in plastic packaging and, therefore, help decrease the amount of plastic waste that typically either ends up at landfills or is incinerated.

The tax applies to all plastic packaging that is either manufactured within the UK, or imported into the UK, and does not have at least 30% recycled plastic material.

The rate of tax payable increased on 1 April 2023 to £210.82 per tonne of plastic packaging.

Importance of getting your PPT tax right and key points

Now, 18 months after its initial implementation, PPT should be a business priority.

HMRC typically take a soft approach when new regulations and taxes are implemented to give businesses time to familiarise themselves and make any necessary adjustments as required. However, now that we are 18 months in, HMRC are reviewing whether businesses have considered the new tax and are meeting their compliance obligations and have been issuing reminder letters as well as carrying out on-site compliance visits.

We have highlighted six key considerations.

1. Data collection

There is a requirement to gather comprehensive data on plastic packaging; this data might not be held by your business and therefore requires you to obtain the information from suppliers.

PPT can pose an administrative challenge for businesses. A key point to highlight is that businesses are still required to keep records even if the amount manufactured or imported is less than 10 tonnes a year as they may need to provide evidence to HMRC that they are under the PPT threshold and not liable to register. Businesses will also need to check whether they become liable in the future.

2. Responsibilities

It can be quite a challenge to determine who in the business is responsible for PPT, it often requires a thorough consideration of roles and responsibilities across different departments or teams, and it may require collaboration between different departments, such as tax/financial teams, logistics, IT, and sustainability.

3. Penalties for late registration and late returns

Failure to register could see your business charged with a 'failure to notify' penalty. The penalty is calculated as a percentage of the 'potential lost revenue' which is a percentage of the tax unpaid.

Failure to submit a return on time could see you charged a penalty, for a first-time offence, of £100, with additional penalties for any further late returns.

4. Secondary liability

It is important to understand the implications of a liability for unpaid PPT arising which is due from another person should you be involved in the supply chain of plastic packaging components.

A business can be jointly and severally (or secondarily) liable for any unpaid tax, so the business needs to carry out due diligence checks with suppliers and customers (or any business in the supply chain) to identify and document which party is liable to pay the tax.

5. New developments with extended Producer Responsibility (EPR)

The EPR applies to all UK organisations that handle and supply packaging; the policy puts responsibility on such businesses to fund the total cost of managing their product packaging from production to disposal. Businesses will need to collect, record and report data concerning packaging type and recyclability, from 1 January 2023. The first report is due by October 2023. Other aspects of the EPR reforms are being phased in over the next few years, including payment of fees.

6. Chemical recycling and adoption of a mass balance approach

HMRC published a 12-week consultation on allowing a mass balance approach for calculating the recycled content in packaging made from chemically recycled plastic waste for the purposes of the PPT.

The consultation explores the case for allowing a mass balance approach, the different mass balance models, and the use of certification schemes to track recycled content through the plastics value chain.

The government is committed to working with industry and interested parties, with the aim of developing an approach that maintains the integrity of the tax and contributes to its environmental objectives.

This consultation was open for responses until 10 October 2023.

Plastic packaging tax - how we can help

It is crucial for businesses that have not yet contemplated PPT or EPR to initiate consideration and stay ahead of the tax and policy which are continuously being developed.

We can provide the advice you need to guide you through all the considerations to bear in mind when trying to establish whether PPT applies to your business. For instance:

• Support: We can support you to understand the new tax and how it impacts your business.

• Advice: We can provide advice on whether the plastic packaging products that your business imports or manufactures fall within the scope of the tax

• Registration: We can confirm whether PPT registration is required

• Compliance: We can also advise on the necessary steps you must take to comply with the tax, for example, what data is needed to be collected for compliance and when and how the quarterly returns should be completed and submitted.