Plastic Packaging Tax – Should Your UK Business Be Worried?

You may have heard of the new plastic packaging tax introduced in April 2022 but are still confused about what it means for your business.

There have been many changes in rules and regulations these past couple of years, including a National Insurance price rise and a concerning rise in energy costs, so many business owners may not be fully aware of this new tax that has been quietly imposed on the UK businesses.

Most SME business owners are having a tough time right now as they are still recovering from the after-effects of the pandemic, so plastic packaging may be the least of their worries. With concerns over the cost of living crisis and supply chain issues caused by Brexit, it has never been more essential that you have the right business insurance coverage in place to help your business cope with any eventuality.

This guide will explore the implications of the plastic packaging tax and how your business may be affected by its introduction.

What Is The UK Plastic Packaging Tax?

The Plastic Packaging Tax (PPT) is a levy on plastic product packaging of £200 per tonne. PPT only applies to manufacturers and goods importers of plastic packaging with 30 per cent or less recycled plastic.

Plastic packaging should only contain recycled plastic where it is permitted under other regulations and food safety standards. Under PPT rules, all plastic is assumed to be new (virgin), and not recycled; unless there’s evidence that recycled plastic has been used.

If you manufacture or import over ten tonnes of finished plastic packaging components per year, you must register your business for this tax.

What Kinds of Packaging Are Subject to Plastic Packaging Tax?

The new PPT will apply to two types of plastic packaging: packaging designed to be used in the supply chain or for single use by the consumer.

Examples of packaging components include plastic:

  • Film to protect goods, such as film around raw meat
  • Pots designed to handle and deliver products, for example, yoghurt pots
  • Trays used to contain and protect food, such as a ready meal tray

Examples of single-use consumer packaging are:

  • Disposable cups, plates and bowls
  • Gift wrappings such as ribbon and sticky tape
  • Plastic bags

Where you have plastic packaging made up of several components, you are accountable for PPT on each component. So, for example, plastic bottles, plastic caps, labels, strays, boxes and plastic windows in boxes.

Plastic is made from polymer with additives such as dyes and colourings but doesn’t include cellulose-based polymers that have not been modified.

It can be confusing to assess the amount of plastic contained in your packaging because all the additives count. You will need to record what substances are in your plastic packaging.

If you have plastic packaging components made from multiple materials but use more plastic by weight, it will be classed as plastic packaging for PPT purposes. PPT applies when the plastic packaging component is finished in the UK or when finished plastic packaging is imported.

When Do I Need To Register For Plastic Packaging Tax?

You must register for PPT within 30 days of becoming liable for it. Suppose your business doesn’t manufacture or import more than ten tonnes of finished plastic packaging per year. In that case, you should keep a detailed record to demonstrate this, and use it, as proof should your business ever be audited.

You should also be aware that your business must pay PPT on all the chargeable components from the day you’re liable to register.

You must weigh the packaging you manufacture and export. If you manufacture and export packaging, you must know the:

  • Weight of the packaging component recorded in metric values
  • Percentage of recycled plastic content

You should also keep records to demonstrate that a packaging component isn’t made of plastic.

How do I register for Plastic Packaging Tax?

The PPT came into effect on April 1, 2022, so if you meet the criteria for PPT, you should register ASAP. To register, you need to provide the following information:

  • The type of business you run
  • Your companies address and contact details
  • The date your business became liable for Plastic Packaging Tax
  • An estimate of how much finished plastic packaging you expect to manufacture or import in the next 12 months

A customer reference number, which could be your:

  • Charity Registration number
  • Company Reference number
  • Corporation Tax Unique Tax Reference
  • National Insurance number or temporary National Insurance number
  • Self-Assessment Unique Tax Reference

If you operate a non-UK business with no established UK base and don’t have any of the information or reference numbers listed above, you can still register your business for PPT. You will be given a registration number.

Do I Need To Keep A Record Of My Plastic Packaging Tax Payments?

Like every other business in the UK, you will need to keep financial and tax accounts. You must keep records of your PPT payments and keep them stored on file. These details should be easily accessible for inspection for at least six years from the end of the accounting period in writing.

You may need your PPT payment records to support your quarterly tax returns. It will help show HMRC your workings and calculations and how you came to the figures you submitted.

You must keep records that show when your packaging contains at least 30 per cent recycled plastic or when you’re exempt from PPT.

In summary, your PPT accounts and records must:

  • Be kept for at least six years from the end of the accounting period in writing
  • Record weight in tonnes, kilograms and grams

Where relevant, your PPT records must also include a breakdown of the weight of plastic packaging components finished or imported in each period and the weight of plastic packaging exported in the period on which the tax was deferred.

PPT can be an overwhelming topic for many UK business owners to deal with. This is why it can make sense to seek help from a business tax expert or accountant that offers plastic packaging tax consultation services for business owners.

Should I Raise My Prices To Cover Plastic Packaging Tax?

With around 20,000 producers and importers of plastic packaging affected by PPT, it will cause additional costs for a wide range of industries from logistics, manufacturing, freight, transport, haulage and construction.

Many companies feel like they have no choice but to pass on these added costs to consumers through increased prices. The knock-on effect of this would see price rises of some products, like plastic-packaged food, by around 10% to 20%.

Remember that if you decide to increase your prices because of the Plastic Packaging Tax, VAT will be payable on the whole of the new price.

Conclusion

On a positive note, the introduction of the PPT is inspiring many UK businesses to find alternatives to plastic packaging for their products. At the very least, it is encouraging manufacturers to switch to packaging that contains at least 30% recycled materials, as this will be exempt from the tax.

Despite the added costs for businesses and end consumers, PPT is likely to deliver a positive impact on addressing environmental concerns over using plastic product packaging.

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