HMRC has published further guidance with the aim of helping businesses prepare for the Plastic Packaging Tax (PPT) that will be in place from 1 April 2022.
PPT will be a tax on packaging that contains less than 30% chemically or mechanically recycled plastic, and will also be chargeable for bioplastics, biodegradable, compostable and oxo-degradable plastics.
All businesses that manufacture or import 10 or more tonnes of plastic packaging over a 12-month period must register for PPT, even if their packaging contains the set amount of recycled plastic or is exempt from the tax for other reasons. The report provides details on which businesses need to notify their liability to register by 30 April 2022, and more information on how to do this will be made available later in the year.
The tax will also be chargeable for packaging made with multiple materials where the packaging contains a larger proportion of plastic than the other materials. In this case, the entire packaging will be weighed as plastic and will be taxable as such.
Packaging manufactured in, or imported into, the UK, will incur the tax at the rate of £200 per metric tonne of plastic packaging. This will include items such as drinks in plastic bottles where the goods being imported are in plastic packaging.
The tax will be charged for a finished product that has “undergone its last substantial modification” such as extrusion, moulding, forming or printing. If a business is in the UK, it will be liable for PPT if it performs the “last substantial modification before the packing or filling process”.
The business who packs or fills the packages will be liable for PPT only if it also “undertake[s] a substantial modification before the packing of filling process”. Importers will also be liable for PPT if the packaging they import has undergone its last substantial modification.
According to the guidance, PPT will be levied on products “designed to be suitable for use, whether alone or in combination with other products, in the containment, protection, handling, delivery or presentation of goods at any stage in the supply chain of the goods, from the producer of the goods to the consumer or user”.
Plastic food trays, film used to protect produce, reusable plastic crates, plastic carrier bags and disposable cups all constitute packaging components liable for the tax. But even plastic packaging that does not fit the definition provided but is designed as single use consumer packaging will be taxable.
Packaging components that are not subject to PPT are split into three categories. Firstly, products where the packaging is not the primary aim of the product, but is instead there to store the good. This exemption includes items such as toolboxes, earphone cases and first aid boxes.
The second category of products exempt from the tax are products such as inhalers and room deodorisers, where the packaging is an essential aspect of the product that will be used by the consumer. Finally, the third category covers products such as shop fittings and sales display shelfs, which are created specifically for presenting products to consumers and will be re-used to this end.
Plastic packaging that is used to transport imported goods, used in aircraft, ship and rail goods stores, used to package medicinal products or that has another permanent use other than packaging will also be exempt from the tax. However, all of the exempt types of packaging should be factored in when calculating whether the 10-ton threshold is met. If packaging is intended for export and is exported within 12 months, then it is exempt from the tax.
All plastic packaging manufacturers and importers should keep records of the packaging they manufacture or import in order to be able to know and prove whether or not they need to notify that they are liable to register for the tax.