Are you subject to the Plastic Packaging Tax?

The UK introduced a new tax on 1 April 2022 (no joke!) called the Plastic Packaging Tax (“PPT”). Most businesses may feel that they are not affected by this new tax.

However, if you manufacture plastic packaging or import goods that are plastic packaging or are protected by plastic packaging, you may be liable for the tax payment. There is a threshold of 10 tonnes in a rolling 12-month period for the tax to apply and packaging that contains more than 30% recycled plastic may not be caught by PPT (although registration is still required).

However, the definition of “plastic packaging” is wide-ranging and may have items that you would not normally consider plastic packaging, including some packaging used to transport the goods.

PPT return periods

If you are caught by PPT, you will need to submit quarterly returns for set accounting periods for the remainder of 2022-2023 are as follows:

Payment is made via an online PPT account that you will need to sign up for when registering for the tax. Payment methods are Direct Debit, BACS (allow 3 days for the payment to reach HMRC), CHAPS, Debit/Corporate credit card, or faster payment via your bank).

Record keeping

You must keep an account of how you worked out the figures for each PPT return. The information includes:

• a breakdown of the weight of plastic packaging components finished or imported in each period
• the weight of plastic packaging exported in the period on which the tax was deferred
• a breakdown of the weight of any plastic packaging for which a credit is claimed if the packaging has been exported or converted into new packaging components
• any adjustments or corrections made to previous accounting periods — you must include the date and the accounting period they relate to

All the above information must be kept by reference to each “product line” that is produced or imported. A “product line” is a group of plastic packaging components produced to the same specification.

The accounts must be kept for 6 years from the end of the PPT return period. The retention of the account can be manual or digital.

In addition, you must keep records of any exemptions that you have applied and the recycled plastic content of each product line. You may need to ask your suppliers and transporters for this information.

Again, these records must be kept for 6 years from the end of the PPT return period, either in writing or digitally.

Evidence of recycled plastic components

If the recycled plastic content in the packaging is more than 30%, it is not chargeable to PPT. However, you must keep records that:

• show how you’ve worked out the percentage of recycled plastic
• provide sufficient supporting evidence that recycled plastic was used
• show which dates the evidence relates to, such as the dates that the components were finished or imported
• show which plastic packaging component the percentage relates to, including product lines or production runs
• are an accurate reflection of the proportion of recycled plastic contained in the output materials of that recycling process
• confirm the source of the recycled plastic.

You must carry out due diligence checks on the information to reduce the risk of being involved in a supply chain where PPT goes unpaid. Such checks can include:

• requesting confirmation of the tax status of plastic packaging components from your supplier
• getting signed documents from your supplier confirming that the Plastic Packaging Tax has been properly accounted for
• getting product specifications for the packaging components, including the weight and composition of the products
• physically checking the weight of packaging components against your order and any of the product specifications
• checking that the price you pay for packaging components reflects the current market value — if components are offered at a lower market value, you should find out the reason for the low cost
• getting copies of any certifications or audits that have been conducted on your suppliers, or the re-processors of recycled plastic
• conducting physical inspections or audits on your packaging supply chain to prove information given by suppliers or customers
• checking details provided against other sources, such as supplier and customer websites, product specifications, sales and marketing information

Exports of plastic packaging

Payment of PPT can be deferred or cancelled if the plastic packaging is intended for export. Evidence of intent to export must be kept and the records required for this are a document used for any other tax or duty (e.g. commercial invoice) or one that clearly identifies the components to be exported such as a sale contract or purchase order.

The evidence of intent to export must be dated at or before any date of manufacture or import of the goods and must include details for the plastic packaging components intended for export and the weight of these components.

Upon export, sufficient evidence must be retained to show that the goods have been exported and the records need to show the weight of the component(s) exported and the date. Evidence of physical export can be an export declaration, transport document linked to an invoice or purchase order and other written evidence (e.g. correspondence to show the export has been made.

(It is worth noting that the same evidence is usually required to evidence the zero-rating of the export of goods for VAT purposes.)

Invoice details

The requirement to show the amount of PPT paid on the invoice or accompanying statement has been delayed. However, HMRC is “encouraging” businesses to make the payment visible to customers.

VAT and PPT

There is nothing to stop a business increasing prices to include the PPT that has been paid. However, VAT will become payable on the increased price.

International PPT

The UK is not the only country to have introduced or is about to introduce PPT. According to the UN, 195 countries have signed the Paris Agreement to limit their Co2 emissions.

• Italy is due to introduce its PPT on 1 January 2023 at a rate of €450 per tonne of virgin plastic used in the consumption or manufacture of single-use plastics produced for containing, protecting or delivering goods or food products. The tax will be collected at various stages in the supply chain including production, sale, purchase and importation.
• Spain is looking to introduce PPT for businesses from 1 January 2023. The amount will be €450 per tonne, but this will start as an excise tax levied at the point of manufacture or importation rather than sale. It will be levied on non-reusable, non-recycled plastic including packaging designed (not used) for the containment protection, distribution, and presentation of goods.
• Portugal began collecting PPT at a rate of €0.30 per single-use plastic or aluminium packaging for ready-made meals from 1 July 2022.
• Poland – Plans to introduce PPT for packaging for consumer use from 1 January 2023 but the legislation is only in draft
• Slovakia introduced PPT by way of a refundable deposit scheme on 1 January 2022 for single-use cans and plastic bottles at a rate of €0.10 for cans and €0.12 for plastic drinks containers.
• Sweden, France and Belgium have announced plans to introduce PPT with details to follow.

The direction of travel in the EU is very much towards PPT, as the EU Commission agreed its “Green Plan” in 2021 to try and reduce the use of plastics in society.

Further information and advice

If you think PPT applies to your in the UK or EU, please do not hesitate to contact our Indirect Tax Team:

• Ruth Corkin – Principal – ruth.corkin@hhlp.co.uk
• Graeme Fox – Tax Manager – graeme.fox@hhllp.co.uk
• Cara Morton – Tax Semi Senior – cara.morton@hhllp.co.uk
• Sarah Bennett – Tax Semi Senior – sarah.bennett@hhllp.co.uk