Is your company ready for the new plastic tax in April?

In the UK alone, we generate a staggering 5 million tonnes of plastic each year. Far too much of it ends up in landfill, or even in our oceans and waterways.

To help tackle this, the government is launching a new plastic packaging tax (PPT) to discourage single-use plastic waste. The tax doesn’t kick in until the 1^st April 2022, but businesses should prepare themselves now.

What will the new plastic packaging tax apply to?

PPT will apply to finished plastic packaging that is made from less than 30% recycled plastic. It may have been manufactured in the UK or been imported. Examples include:

• Ready meal trays
• Bin liners
• Plastic drinks bottles
• Sandwich bags
• Re-usable plastic boxes
• Sticky tape
• Bubble wrap

How much will plastic packaging tax be?

The tax will be £200 per metric tonne of plastic packaging.

Who needs to register and account for plastic packaging tax?

If your business meets the following criteria, then PPT will apply:

• At any time after the 1st April 2022, the manufacture or import of finished plastic packaging is expected to be at least 10 tonnes in the following 30 days - you must register within 30 days of the first day of meeting this condition.
• Your business has manufactured or imported at least 10 tonnes of finished plastic packaging in a 12-month period ending on the last day of a calendar month (e.g. November). The company is then subject to PPT from the first day of the next month (1st December) and will need to register within 30 days (by 31st December).

Regarding the second condition, while PPT is being introduced a business only needs to register for the tax when the amount of plastic packaging is 10 tonnes or more in a 12-month period from the 1st April 2022.

How do I register my business for PPT?

You will be able to register your business for PPT using the government gateway. It isn’t currently set up, but will be by the 1^st April 2022.

My business doesn’t use plastic packaging so I can ignore this, right?

Sadly no. Even if the tax doesn’t apply to your business, you will still need to keep records to prove to HMRC - if asked - that you don’t use plastic packaging.

When does registration for PPT start?

Registration starts on the 1^st April 2022, although businesses should begin a review of their plastic packaging production and/or supply chains now to see how the new tax will affect them.

What records should my business keep for PPT purposes?

Once the tax is in place, HMRC could audit your business at any time. This makes it essential to keep evidence, including:

• Weight (both total and a breakdown) of the materials used to manufacture plastic packaging. However, this excludes packaging used in transporting imported goods.
• Data and calculations used in deciding how much recycled plastic is contained in a piece of packaging. In other words, show how you’ve worked out the plastic content.
• The weight of any plastic that’s exempt from the tax. You should also be able to demonstrate why the plastic packaging is exempt.  
• The weight of any plastic packaging being exported that attracts relief from the tax.

What types of plastic packaging doesn’t count under PPT rules?

When it comes to exemption from the tax, there are four groups to be aware of. They are:

• Packaging used in transporting products into the UK
• Plastic packaging relating to human medicine
• Plastic packaging used in shipping, on aircraft or railway stores for international journeys
• Plastic components that will never be used for any packaging uses.

You can check which plastic packaging is exempt or excluded from Plastic Packaging Tax on the Gov.uk website.

How does PPT work with importing packaging into the UK?

Imported plastic packaging into the UK will still attract PPT. If imported goods are placed into a customs procedure (inward processing or customs warehousing for example), no PPT will need to be paid until the packaging has been moved on for use. Where the packaging is re-exported and no customs procedure has taken place, PPT won’t apply.

If a company is located abroad but imports plastic packaging into the UK, it must register for and pay PPT.

What if my business sells packaging that is subsequently re-exported outside the UK?

Where this is the case, your business can apply to either defer the tax or receive a credit. However, in order to be eligible, the plastic must have been exported within twelve months.

If you don’t know whether the packaging will be exported or not at the time PPT is due, you must still account for it then apply for a credit once you can prove export has occurred. Where this applies, the goods must have been exported within two years.

What should I do next?

The first thing is to go through your packaging supplier contracts with a fine-tooth comb to decide how PPT will affect your business specifically. You should also make sure that contracts will allow you to charge PPT on to your customers from the 1st April 2022.

Furthermore, third party purchasers buying packaging from UK companies could end up jointly liable for PPT if HMRC believes the tax wasn’t paid when it should have been. So it’s in your interest to make sure suppliers can confirm to you that they’ve accounted for PPT and paid their dues correctly.

Has your company innovated recently?

Whether it be a new type of packaging, sustainable waste disposal or any other type of innovation that involved technical or scientific research, you could claim valuable R&D Tax Credits.

A highly generous tax incentive that’s existed since the early 2000s, as much as 33% of eligible R&D expenditure can be claimed back from HMRC. It can mean slashing your Corporation Tax bill, or - if your company made a loss - a lump sum payment.

The best way to claim R&D Tax Credits is never to try and DIY it alone. Find out more on the Tax Cloud website, contact our team or call us on 020 7360 4437. Any company in the UK can apply and with average claims topping £55,000 can yours afford to miss out?

Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud