Single use plastic is widely considered to be a scourge, contributing vast mounds of litter to our oceans and the landscape. As the ban on single use plastic comes into force in England (to be followed shortly by Wales) we look at the Plastic Packaging Tax, how it works and, importantly, its impact since its inception in April 2022.
Single use plastic is in the headlines again. With effect from 1 October 2023, single-use plastic cutlery, balloon sticks, polystyrene cups and food containers are banned from being sold in England. A similar ban comes into force in Wales from the end of October, Scotland having led the way on this with effect from 1 June 2022. In their press release over the weekend, the UK Government highlights the other initiatives it has put in place to combat plastic pollution including the implementation of the PPT. With plastic being high up in the public conversation again, we take a look at the PPT, how it works and its impact since coming into force.
PPT taxes plastic packaging which is either manufactured here in the UK or imported and which does not contain at least 30% recycled plastic. The rate at which the tax applies has been increased in 2023 and is now £210.82 per tonne of plastic packaging placed on the UK market. The tax kicks in at a threshold of 10 tonnes per annum: if you manufacture or import plastic packaging or pack goods into plastic in the UK, then your business will be within the scope of the tax if the amount of plastic your business places on the UK market in any year exceeds 10 tonnes.
There are certain exemptions for plastic packaging which is used in transport stores or containers (road, rail, ship and air containers) for packaging medicinal products or where the packaging is set aside immediately as it is manufactured or imported into the UK for use other than the packaging of goods.
Determining whether the plastic manufactured or imported by the company has been key. ‘Plastic’ is defined widely and includes biodegradable, compostable and oxo-degradable plastics. HMRC has produced a flow chart and guidance to help companies with the identification of the components of the packaging.
Businesses that have imported or manufactured 10 tonnes or more of finished plastic packaging since 1 April 2022 or that expect to import or manufacture ten tonnes or more of finished plastic packaging within 30 days have needed to register for PPT. Tax returns and payment of the tax are to be made quarterly. Data reports are also required quarterly.
Where the 10-tonne threshold is not met and companies are therefore exempt from the tax, they should, in any event, record the amount of plastic imported or manufactured to demonstrate they are outside of the scope of PPT. This is an important supply chain management process which companies in supply chains will use as evidence of compliance with PPT for their own record-keeping requirements. Evidence is required to prove a 30% recycled content, and companies are expected to keep records that show:
Compliance with the rules brings significant administrative burdens. Supply agreements should have been amended to include obligations relating to reporting and the provision of information and companies have sought to establish frameworks for auditing the use of recycled plastic. Capturing the information is important for those companies applying for B Corp certification where sustainable plastic is a factor in the impact assessment process of these applications.
Data published on 17 August 2023 shows that PPT collected for the fiscal year 2022 to 2023 was £276 million and that 4,142 companies are registered for PPT. 39% of the total plastic packaging manufactured in the UK or imported was subject to tax. Of the remainder, 40% contained 30% or more of recycled plastic, 21% was exported or intended for export and less than 1% was exempt because it was used for the packaging of human medicines.
But the question is not really about how much tax has been collected but rather how successful that tax is at driving behaviours that will begin to build a sustainable economy based on the circularity of the product lifecycle. That outcome is a longer-term assessment, and we think the jury is still out on the success of the PPT measured in this way. In fact, the true measure of success will be a reduction in the tax take of PPT as the recycled content of plastic packaging increases or where plastic is removed from the product lifecycle altogether.
This article is for general information only and does not, and is not intended, to amount to legal and tax advice and should not be relied upon as such. If you have any questions relating to your particular circumstances, you should seek independent legal advice.