Plastic Packaging Tax Alert – Prepare for April 2022

A new green tax on plastic packing will come into force in the UK from 1 April 2022. The Plastic Packaging Tax (“PPT”) is targeted at plastic packaging manufactured in or imported to the UK. This will have a significant impact on retail and consumer supply chains affecting an estimated 20,000 UK manufacturers, producers and importers of plastic packaging, as well as their business customers, fulfilment houses and online marketplaces.

What is it?

Introduced in law as part of the Finance Act 2021, the PPT aims to incentivise businesses to use more recycled plastic within packaging and to stimulate increased levels of recycling.

What will be subject to PPT?

The charge to PPT will arise on a chargeable “packaging component”:

(i) that is produced in the UK by, or imported into the UK by (or on behalf of), a person acting in the course of a business;
(ii) that contains more plastic, when measured by weight, than any other single substance contained in it (e.g., metal, glass, cardboard, which weight must also be measured), in which case, the overall component will be treated as entirely plastic for PPT purposes;
(iii) where the plastic used contains less than 30% recycled plastic; and
(iv) that is finished – PPT is due on components when they’re finished, which occurs when they have undergone their last “substantial modification” before being packed or filled.

PPT will be charged at a rate of £200 per metric tonne of the chargeable plastic packaging. For PPT purposes, plastic means a polymer material to which additives or substances may have been added and includes bioplastics (e.g., biodegradable plastics). There are two main types of plastic packaging liable to PPT:

  • products suitable for use in the containment, protection, handling, delivery, or presentation of goods at any stage in the supply chain of the goods, from the producer to the customer or user. Examples include plastic ready meal trays, film sold to consumers to protect goods, yoghurt and soup pots, shrink wrap around canned goods and labels used in the presentation of goods to describe the contents. The tax will also apply to imported products (including by overseas sellers) irrespective of whether the packaging is filled or unfilled, such as drinks plastic bottles; and
  • single-use consumer packaging suitable for use by consumers (rather than in the supply chain) in performing a ”packaging-type” function in respect of goods, commodities or waste. This will bring plastic bags, bin liners, nappy sacks, disposable cups and party cups into the charge.

Who is liable?

PPT will be payable by:

  • the producer/business who performs the last ”substantial modification” in the UK on a component before the packing or filling process. ”Substantial modification” is a chargeable manufacturing process which significantly changes the nature of the packaging component and its key features, being its shape, thickness, weight or structure, and it can incorporate other non-chargeable processes carried out at the same time. Examples are extrusion, moulding, forming (i.e., when a sheet of plastic is shaped into packaging such as tubs and trays), layering and laminating, and printing. Disregarded processes include cutting (e.g., cutting film to size), blowing or otherwise forming a packaging component from a preform, sealing (for example attaching a film lid onto a tub), and labelling e.g., gluing a label to a tub (although the label may also be a packaging component which should be considered for PPT purposes);
  • the importer (wherever established) of ‘finished’ plastic packaging components which are formally customs cleared into the UK (subject to future rules which may treat an import as occurring at another point). The importer will usually be the consignee on the import documentation, unless the consignee can demonstrate that they are acting on behalf of another business/principal who actually controls the goods and should otherwise be liable to PPT;
  • Other parties "acting in the course of a related business” – they can become secondarily liable, or jointly and severally liable, when a taxpayer fails to pay the PPT and when the party knew or ought to have known that such PPT was unpaid. This could affect fulfilment businesses involved in transporting and storing chargeable plastic packaging and operators of online marketplaces. These businesses will need to conduct due diligence on their supply chains to ensure they are not at risk of challenge that they ought to have known that the PPT was unpaid and ensure they act on becoming aware of wrongdoing by a taxpayer. Based on the latest draft legislation published 4 November, HMRC may take into account several factors when issuing liability notices, such as the parties’ connected or contractual relationship, whether evidence was sought from the defaulting taxpayer on PPT compliance and assessed for reliability with reasonable care, the sufficiency of due diligence checks, whether any contract terms seek to ensure compliance with PPT payment obligations, the reasons for the other party’s possession of the chargeable components and their intended use, condition and value, the party’s conduct and cooperation with HMRC. Further HMRC guidance on PPT due diligence requirements is expected.

Penalties will apply for failing to comply with a relevant PPT requirement e.g., keeping records and payment, being an initial fixed £500 penalty plus a daily £40 penalty for continuing failures to comply, together with interest on late payments. Severe criminal penalties can arise in cases of fraudulent evasion of PPT and for misstatements and false documents and conduct involving such offences.

Are there any exclusions, exemptions or reliefs?

Yes, but these are limited. They include:

  • a de minimis threshold for businesses manufacturing or importing less than 10 metric tonnes of plastic packaging in a given year. These businesses will not need to register for PPT but will still need keep some records to demonstrate that they fall below this threshold.
  • exempt packaging categories – these relate to (i) plastic packaging for use in the immediate packaging of licensed human medicinal products, (ii) components permanently recorded as set aside for a non-packaging use e.g. film that will be used to coat whiteboards, (iii) transport packaging used in international deliveries to the UK, for example, to secure the safe transit of goods on import to the UK such as pallet wrap (this exemption does not apply to normal packaging used to protect or contain goods but to additional packaging added for the import process); and (iv) packaging used in aircraft, ship or rail goods stores for international journeys to the UK (until the packaging is subsequently removed from stores and released into the UK). Plastic packaging used only to transport goods within the UK will still be chargeable, as will unfilled transport plastic packaging imported as an item in its own right. Although exempt, packaging within (i) and (ii) will count towards the 10-tonne limit.
  • excluded product categories - these relate to packaging which do not typically contribute to plastic pollution and which do not count towards the 10-tonne limit. These include components (i) with a primary long term storage function; (ii) which are an integral part of the goods sold to a consumer, meaning the goods cannot be used or consumed without it; or (iii) primarily designed to be reused in the presentation of goods to consumers and permanently set aside for that use. HMRC lists several possible examples of these excluded categories such as toolboxes, first aid boxes, glasses cases, DVD and video game cases, water cartridge filters, printer or toner cartridges, inhalers, tea bags, dental floss cases, sales display shelves, shop fittings, and sales presentation stands. Other plastic packaging which is in place when the product is purchased and does not stay in place while the product is used, such as a film wrap on a CD case, will still be subject to PPT.
  • where a plastic packaging product is intended for export - a business can defer paying PPT for up to 12 months from the point of manufacture or import and the PPT charge will be cancelled if the goods are exported within that 12-month period (supported by records on weight and export evidence). A PPT credit may also be available (within a 2-year claim period) to prevent the tax being charged twice on the same packaging, for example, where it can be shown that the charged packaging has been subsequently exported from the UK further down the supply chain or subsequently converted into a different packaging component bearing PPT. Overpaid PPT may be repaid.

Secondary legislation with further details on PPT requirements has been published for a technical consultation which opened on 4 November 2021 and will close on 1 December. In addition, in October’s Autumn Statement, additional technical changes to the primary legislation were announced (published this month in the draft Finance (No. 2) Bill), including administrative measures for PPT group registrations, giving flexibility to HMRC to amend provisions relating to the timing of an import which is linked to when PPT becomes chargeable, and ensuring businesses who do not have to register for PPT do not have to pay PPT, by not being treated as acting in the course of a business for PPT purposes.

How to prepare?

It is essential that affected businesses start now to prepare for the PPT despite the fact that the legislation and HMRC guidance are still being finalised. Key action points include:

  • Familiarisation with the new PPT rules and training for staff
  • Supply chain review to identify the material used within packaging and consider changes to packaging in order to contain more recycled plastic above the 30% threshold.
  • Contract review and consider price adjustments for PPT – should prices be inclusive or exclusive of PPT? – as well as information requirements for matters such as tax credit claims or to demonstrate a robust supply chain audit. The legislation allows for price adjustments in existing contracts if PPT later becomes chargeable or there is a change in the PPT chargeable.
  • Registration with HMRC for PPT if the business (including a non-resident taxpayer) has produced or imported finished plastic packaging components (including filled packaging) in the UK above the 10 tonnes limit over the previous 12 months (starting from 1 April 2022 for the first year of PPT), which should be checked monthly. Registration will be required within 30 days of becoming liable to do so, even if all the packaging manufactured or imported contains more than 30% recycled plastic. PPT will be payable from the date the business becomes liable to register. The online service to register and pay will be available from April 2022. Businesses will also need to notify in future if they expect to exceed the 10-tonne threshold in a 30-day period post 1 April 2022. As above, some exempt packaging will still need to be included in the calculation towards the 10-tonne limit.
  • Prepare for PPT compliance in completing filing and correcting quarterly tax returns and paying PPT on time.
  • Adapt record keeping systems, accounts and processes to make sure the business can provide HMRC with the right information and evidence needed to establish if PPT is payable and how much. Plastic packaging will be assumed to not meet the recycled content test unless it can be shown that it does. For each quarterly return, records will need to show the total amount in weight and a breakdown by weight of the materials contained in the relevant plastic packaging manufactured in or imported to the UK, for example, production certificates and certificates of conformity or accreditations, as well as data and calculations used to determine if a packaging component is, for the most part plastic, and the proportions of recycled plastic content, which in certain circumstances may be calculated based on an indicative component of a production run or within a product line, and (where applicable) the weight of exempted, exported or converted plastic packaging qualifying for deferral relief or a tax credit. The legislation requires HMRC to provide guidance on what will amount to sufficient evidence of recycled plastic content, and also allows HMRC to assess the weight of packaging components to the best of their judgement and substitute their determination for any measurement or calculation of weight made.
  • Be ready for business customers, and other businesses such as import agents, fulfilment houses or marketplaces to require information about the types and quantities of material supplied within packaging and/or to seek reassurance and contractual protections related to their suppliers’ PPT preparations and obligations
  • Plan for future changes to B2B invoicing software – although HMRC has recently delayed the mandatory requirement for businesses liable to PPT to include a statement in their B2B invoices of their PPT payments, further information is to follow and meanwhile, businesses are encouraged to voluntarily disclose PPT payments to their business customers.
  • Non-UK based businesses who import may need to look at appointing a UK-based representative for PPT compliance purposes – the legislation includes powers to make this obligatory.
  • Consider PPT group registration (where available) - groups of companies under the same control and with at least one UK established company can appoint a UK established and resident representative member to register the group for PPT, submit group quarterly returns and pay PPT for group members. Special rules will also apply for business transfers as a going concern where the transferor’s PPT registration and duties, liabilities and rights existing at the point of transfer may transfer to a transferee.

Initial PPT guidance has been published by HMRC, with further guidance to follow (latest 4 November) at: and Until the legislation is approved by Parliament, HMRC’s guidance will be subject to change and will continue to be updated.

We are here to help you navigate your PPT obligations – if you require assistance please contact: Zoe Feller and Caroline Brown

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