In recent years, there’s been a noticeable push towards sustainability in business which isn’t about to slow down anytime soon.
So-called “green taxes” are set to increase by 40% under the current government according to think tank The Taxpayers’ Alliance, bringing in an estimated £16.7 billion a year by 2024.
Along with taxes on carbon emissions, fuel and the use of landfills, the government has recently introduced the plastic packaging tax.
This new tax is likely to affect businesses of all kinds, so it’s a good idea to familiarise yourself with it.
Here’s our guide to the new tax and what it means for you and your business.
What is the plastic packaging tax?
The plastic packaging tax was first announced in the 2018 Budget, but didn’t come into effect until April 2022.
It’s designed to encourage sustainability by penalising the import or manufacture of non-recycled plastics, by affixing a tax on finished plastic packaging that contain less than 30% recycled plastic.
Does the tax apply to me?
The plastic packaging tax is likely to apply to a wide range of businesses, whether directly or indirectly through the supply chain.
You will be directly subject to the scope of the tax if you meet both of the following criteria:
- you import or manufacture plastic packaging that contains less than 30% recycled plastic
- you import or manufacture more than ten tonnes of packaging in a twelve-month period.
For the purposes of the law, plastic packaging is defined as packaging that’s more than 50% plastic by weight.
The tax only applies to ‘finished’ products. This means that they have undergone their last major modification.
Anything that changes the shape, thickness, structure or weight of a product is considered a major modification.
There are a few exceptions. Four types of packaging are exempt, no matter how much recycled plastic they contain:
- plastic used for the immediate packaging of medical products
- plastic packaging for transporting imported goods
- plastic used to package ship, aircraft or railway parts.
- plastic components that will be permanently used for processes other than packaging.
How much will it cost me?
The tax is charged at a flat rate of £200 per metric tonne. This is relatively low compared to other plastic taxes.
The EU currently charges a tax of €800 per metric tonne on non-recycled plastic packaging. Remember that you may have to factor in both taxes if you operate in Europe.
Speaking of cost also raises the question of who actually pays the tax. In the first instance, it will be importers and manufacturers.
However, it will likely filter through the supply chain as costs are passed on, eventually to the end user.
What steps do I need to take?
If directly affected, the first thing you should do is register for the tax. You need to do this if you have imported ten tonnes of plastic packaging in the last twelve months, or plan to do so in the next 30 days.
Even if the plastic contains more than 30% recycled material, you still need to register.
The registration deadline has already passed, so you should do this as soon as possible. You can register online here.
You will also need to submit quarterly plastic packaging tax returns to HMRC. These are divided into the following periods:
- 1 April to 30 June
- 1 July to 30 September
- 1 October to 31 December
- 1 January to 31 March.
Returns must be submitted and payments made by the last working day of the month following the end of the accounting period.
In order to complete your return properly, you will need to provide evidence of any transactions related to plastic packaging.
Try to keep detailed records of the weight and plastic content of everything you make, buy or sell, as well as evidence of any products that are exempt. This could be challenging to implement.
What long term changes can I make?
Adjusting to the new tax will take time. As well as filing returns and paying what you owe, there are bigger changes to consider:
- switching to more sustainable materials
- negotiating with suppliers and customers to share the costs fairly
- updating contracts to reflect the cost of the tax
- overhauling your records to include details of plastic content.
This is a lot to think about, so you may need some professional help.
If you’re struggling to understand the plastic packaging tax, or need advice on reducing its impact, don’t hesitate to get in touch.