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Introduction of the Plastic Packaging Tax from April 2022 and what it could mean for your eCommerce business…

From 1st April 2022, the UK introduced the Plastic Packaging Tax which applies to all plastic packaging in the UK that contains less than 30% recycled plastic content at a rate of £200 per metric tonne. In this blog, we have broken down the objective of the policy, who is likely to be affected, and the potential impacts on businesses.

From 1st April 2022, the UK introduced the Plastic Packaging Tax which applies to all plastic packaging in the UK that contains less than 30% recycled plastic content at a rate of £200 per metric tonne. In this blog, we have broken down the objective of the policy, who is likely to be affected, and the potential impacts on businesses.



Who is likely to be affected?

UK manufacturers of plastic packaging, importers of plastic packaging, business customers of manufacturers and importers of plastic packaging, and consumers who buy plastic packaging or goods in plastic packaging in the UK.


To mitigate against disproportionate administrative burdens in comparison to the tax liability for those who are likely affected, there will be an exemption for manufacturers and importers of less than 10 tonnes of plastic packaging per year.



General description of the measure

This is a new tax that will apply to plastic packaging manufactured in, or imported into the UK, that does not contain at least 30% recycled plastic. Plastic packaging is packaging that is predominantly plastic by weight.


It will not apply to any plastic packaging which contains at least 30% recycled plastic, or any packaging which is not predominantly plastic by weight.


Imported plastic packaging will be liable to the tax, whether the packaging is unfilled or filled.



Policy objective

The aim of the tax is to provide a clear economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging, which will create greater demand for this material. In turn this will stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration. The tax is aimed at encouraging the use of more sustainable plastic packaging, increasing the use of recycled plastic and helping to reduce plastic waste. 


It is also thought that the regulation of plastics will continue to grow worldwide in the coming years given the current drive on sustainability.



Impact on business including civil society organisations

It is expected that the impact of the new Plastic Packaging Tax on businesses will be significant. There is expected to be no impact on civil society organisations.



The tax is expected to impact on an estimated 20,000 manufacturers and importers of plastic packaging. One-off costs include familiarisation with the new rules, training for staff, registration with HMRC, and developing the required reporting framework to complete tax returns.



Continuing costs could include completing, filing and paying tax returns, keeping appropriate records (including those required to claim the export credit), and amending returns. There will also be new registrations and deregistrations each year. In addition, joint and several liability requirements mean some businesses or civil organisations will need to conduct due diligence on their supply chain or take action following notification of wrongdoing by a taxpayer they are connected with.



These regulations, which ensure the tax is properly targeted, are expected to have a negligible impact on business beyond those set out above. Business experience with HMRC could be negatively impacted as this is a new tax that businesses will need to understand and comply with. However, to support businesses it is said that HMRC will develop clear guidance and other tools to help businesses understand and meet their obligations.


The average annual net increase in continuing administrative burden for businesses is estimated to be £0.4 million. This is largely for costs related to completing returns, but also includes the costs of new registrations after the commencement of the tax.



To conclude...

eCommerce businesses that have not already done so should now assess whether they will be required to register and pay for the PPT. Even where a business is not required to pay, it will still need to consider which steps should be taken to ensure that it is not involved in a supply chain where the tax goes unpaid by someone else. 

Beth Taggart

Author

Beth Taggart

Growth & Partnerships Manager