Start date for the PPT tax approaching
The charge for single-use carrier bags, for example, has led to a reduction in the number supplied by major supermarkets to customers from 7.6bn in 2014 to 564m in 2020 according to government figures. As a development of this idea, the plastic packaging tax was announced in the 2018 Budget to provide an economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging, to create a greater demand for recycled material, and therefore to increase both the value and level of recycling of plastics and a reduction in the use of landfill or incineration for disposal.
This is a limited measure (as it only applies to packaging rather than plastic products more generally) but is a step in the right direction, with the government considering plans for banning other single-use plastics.
The tax will take effect from 1 April 2022, so those likely to be affected should already be completing their plans for dealing with its impact. These will include a review of supply chains, review of products manufactured or imported to see if PPT applies to them, possible supply chain or production changes to come within exemptions, any amendment to the pricing of products, and information systems and responsibility for compliance. What follows is a summary of the framework for the tax.
This tax will be charged to UK manufacturers and importers of plastic packaging. It is envisaged that PPT costs will in some cases be passed on to customers and end-users within relevant supply chains.
The tax is payable on two types of packaging:
A plastic packaging component is a product that is designed to be suitable for use in the supply chain, from manufacturers of the goods to the user or consumer. It must do one or more of the following functions:
Single-use packaging by the consumer refers to products that are designed as single-use packaging for use by a consumer or user in containing any commodity or waste. For example:
PPT will be charged on imports and production of *finished plastic packaging that is:
It is probably reasonable to suppose that this 30% will progressively become higher just as the scope of the charge for single-use carrier bags has broadened.
*A packaging component is ‘finished’ when the component has undergone its last substantial modification; or the last substantial modification prior to the packing/filling process of the packaging.
The tax charge is £200 per metric tonne of plastic packaging (imported or manufactured) and is applied when the packaging has undergone its last substantial modification. However, if plastic packaging is exported within a 12-month period, then the liability is cancelled. The latter sits rather oddly if the objective is to reduce plastic pollution generally. Again, we might expect the rate to increase over time.
A business is required to register for PPT, from 1 April 2022, if it manufactured or imported 10 tonnes of plastic packaging within the last 12 months or if it plans to breach this threshold in the next 30 days. Businesses need to register for the tax even if the packaging used contains over 30% recycled plastic or if the PPT liability is expected to be nil. If necessary, registration is required by 30 April 2022 for those to whom the obligations apply from 1 April 2022.
A group of companies can elect to appoint a representative member to register and pay the tax charge for the entire group.
Importers and manufacturers that deal with less than 10 tonnes of plastic packaging over a 12-month period are exempt and do not need to register. It should be noted that HMRC will require accurate records to be kept proving exemptions.
The following products are exempt from PPT as they are not defined as packaging components:
Further exemptions do apply and are published online as part of HMRC PPT guidance.
If you have any queries on PPT, feel free to get in touch with your usual Indirect Tax team contact, or use the form below.
The first couple of months of 2022 have provided interesting times for business. As we emerge from the pandemic, we are beginning to see the outline of how the world has changed as a result, and we are all trying to work out how much is temporary and how much is permanent.
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