The UK government aims to eliminate avoidable plastic waste by the end of 2042. It is part of its 25-year environmental plan that outlines numerous objectives to become more environmentally conscious.

They estimate that 5 million tonnes of plastic are used on our shores annually, with almost half of that coming from packaging.

In order to combat this plastic waste, the government recently introduced a new tax called the Plastic Packaging Tax, which has impacted tens of thousands of companies.

There’s still some confusion around what it is, how it works, and who it applies to. In this article, we will help clarify how the new tax impacts companies and consumers in the UK.

The new Plastic Packaging Tax (PPT) is a tax on plastic packaging that’s either produced in or imported into the UK and does not consist of at least 30% recycled material. The tax came into effect on 1 April 2022 and is the first of its kind as part of the UK government’s environmental strategy to increase the demand for more recycled plastic.

This is done to divert plastic waste away from landfills or incineration, which is harmful to the environment. By putting a monetary cost on companies that don’t comply, the PPT will incentivise companies to utilise more recycled plastic in their packaging. This will reduce overall waste whilst fostering the growth of the UK’s recycling industry.

PPT is set at £200 per metric tonne of plastic packaging that contains less than 30% of recycled plastic. If you produce or import a large amount of packaging, this may result in a costly charge.

The Plastic Packaging Tax applies to all industries and sectors in the UK. In one way or another, plastic packaging is used in the vast majority of industries. As such, tens of thousands of companies across many sectors will be impacted by this new tax.

It is expected that PPT will significantly affect businesses in the following sectors:

  • Packaging manufacturers – Businesses that manufacture plastic packaging will certainly be impacted
  • Food and beverage – Many food and beverage producers use plastic packaging to seal and wrap their products
  • Retailers – High-street and local stores tend to import plastic packaging for things such as plastic bags, bin liners, water bottles, etc., and thus will be impacted heavily
  • Consumer goods – It is common for phones, household appliances, electronics, and other goods to be wrapped in plastic packaging
  • Cosmetics – Cosmetics are often packaged in plastic and thus, will be subject to PPT
  • Transport - Plastic is used heavily in the transport industry. Examples of this are bubble wrap, pallet wraps, and plastic involved in the packing or filling process

Plastic Packaging Tax does not apply to all plastic products, only those with a ‘plastic packaging component’ and are considered ‘finished’. But what does this mean?

Plastic packaging components

The definition of plastic components casts a wide net and involves a whole host of products. Packaging with plastic components is defined as those that are intended to be used for the holding, handling, protection, delivery, or presentation of consumer goods at any stage of the supply chain.

In other words, it encompasses almost all uses of plastic, all the way from its production to consumption by the end consumer. Examples of this are plastic bottles used to carry water, trays used in microwaveable meals, and disposable plates and cutlery.

But, it also applies to slightly obscure products such as coat hangers and even includes the use of reusable and refillable items like plastic crates and boxes.

As long as the plastic packaging satisfies the definition, regardless of where it’s being used in the supply chain, PPT will apply.

‘Finished’ products

HM Revenue & Customs (HMRC) defines finished products as those where the last significant modification is made.

The last significant modification is the last stage in the manufacturing process which makes a substantial change to the plastic packaging. This could be in terms of the packaging’s shape, weight, structure, and thickness.

Examples include moulding, layering, laminating, forming, and extrusion.

For certain types of packaging, the last significant modification will be the stage before it’s filled with a product.

It should be noted that not all modifications to the structure and shape of plastic are considered the last substantial one.

For instance, this includes actions such as cutting a plastic tray or film out of a large sheet, adding labels to a bottle, or sealing.

It’s the companies that perform the last substantial modification that will be charged with the PPT.

For packaging that is imported into the UK with the final product already inside, the Plastic Packaging Tax still applies even though no additional substantial modifications to the plastic have been made.

Although PPT covers a wide array of products, there are some cases where PPT will not apply.

One of the main examples is plastic packaging manufactured or imported for the immediate packaging of medicine to be consumed by humans. A medicinal product is defined as:

  • Has properties that help treat or prevent diseases
  • A pharmacological, immunologic, and metabolic substance that restores, corrects, or modifies the physiological function
  • Products used for a medical diagnosis

Medicines that are used on animals, such as those by vets, are not exempt.

Another plastic use exempt from PPT is transport packaging for imported products. Examples include packaging used to secure the safe transit of goods and international trade. Thus, if the plastic packaging is solely used within trade and transit and has no other uses, it will be exempt.

Additionally, packaging used in aircraft, ships, and rail stores will be exempt from PPT. Regarding plastic packaging used for long-term storage, products such as glasses cases or printer ink cartridges are considered a storage function where the packaging is a key part of the product itself. As such, they are exempt from PPT.

Also, exported goods will be exempt, provided they are exported within a 12-month timescale.

However, it should be noted that if you are manufacturing or importing over 10 tonnes of plastic packaging, you will still need to register with HMRC, even if it falls under an exempt category.

Companies that produce or import 10 or more tonnes of plastic packaging over a 12-month cycle will have to register with HMRC.

Even if the plastic packaging contains 30% or more recycled plastic or falls under the exempted category, if the 10-tonne threshold has been exceeded, you will have to register and report to HMRC.

This is done so that HMRC can monitor the amount of plastic you are manufacturing or importing, regardless of whether it is taxable.

Additionally, suppose you have not yet manufactured or imported 10 or more tonnes of plastic packaging but think you will by the end of the 12 months. In that case, you will be required to register.

Regardless of whether you exceed the threshold or not, it’s important to keep records and reports of the amount of plastic packaging being used in your operations since this can be used as proof.

Group registration

If a company is part of a group, each company will be treated as a separate entity. This means that each company will get a 10-tonne limit. But, all members in the group will be liable for each other’s taxes.

To consolidate paperwork for the entire group in one place, a UK-established representative company can be appointed to submit the necessary documents, returns, manage members, and payments payable on the group’s behalf.

A company that is part of a group but is an overseas business without a UK establishment, or is a charitable and incorporated organisation, will not have to register.

First and foremost, you will need the total amount of plastic packaging in weight. You will also need a classification of all materials used in the manufacturing or importing of the plastic packaging, which will also need to be outlined by weight.

A common way to show this is by keeping lab reports of the plastic manufacturing process. If you are importing it, you can ask the manufacturer for reports.

If your company uses plastic packaging that is exempt from PPT, you must have records of the weight of said packaging and why it is exempt from PPT.

You will also be required to have records of the weight of exported plastic packaging to show how much tax relief you are eligible for.

You must keep all records for six years after the end of the accounting period. You can see the full list of records you are required to keep on the UK government website.

Suppose that a plastic packaging component is made up of:

  • 5 grams of recycled plastic
  • 4 grams of polyethene
  • 3 grams of recycled cardboard

First, you would calculate how much recycled plastic is used in the packaging. To do so, you would divide the total weight of recycled plastic by the total weight of all plastics in the packaging and then multiply by 100 to calculate it as a percentage.

In this case, 55.5% recycled plastic is in this packaging [5 grams of recycled plastic ÷ (5 grams of recycled + 4 grams of polyethene)].

Since more than 30% of recycled plastic is in this packaging, it is not liable for Plastic Packaging Tax.

Let’s take a look at an example where PPT applies.

Suppose that a plastic packaging component is made up of:

  • 2 grams of recycled plastic
  • 7 grams of polyethene
  • 5 grams of cardboard

Using the same calculation, we find that the packaging only contains 22.2% of recycled plastic [2 grams of recycled plastic ÷ (2 grams of recycled + 7 grams of polyethene)].

Since less than 30% of recycled plastic is in this packaging, PPT would be applied to the whole packaging component.

It is believed that this tax will not impact customers. Naturally, some companies may transfer some of the costs to the end consumer in order to recuperate some money. However, plastic packaging makes a small percentage of the total cost of goods sold and, thus, should be negligible to the end consumer.