From April 2022, the UK government is proposing to introduce a new tax on plastic packaging manufactured in or imported into the UK containing less than 30% recycled plastic.  Currently, the detailed policy design for the plastics tax is under consultation until 20 August 2020 (the period has just been extended by 3 months due to COVID-19).

Below we will take you through some of the key points of the proposed new tax regime and explain what will and will not fall within its scope.

What is the tax?

For all plastic packaging imported into or manufactured in the UK that does not contain 30% recycled content, the tax is set at a flat rate of £200 per tonne.

The big change compared to the previous policy proposal is that the tax will apply to plastic packaging around goods that are imported into the UK not just imported unfilled packaging.  Packaging which is used to transport imported goods, such as plastic crates and pallet-wrap is, however, excluded.

What will count as plastic?

The proposal is to use a modified version of the definition of “plastics” from the EU Directive on single use plastics.  Essentially all types of plastics are covered, including compostable and bio-plastics.  The only exception is “cellulose based polymers that have not been chemically modified.”

If packaging is made of mixed materials (e.g. plastic coated card), then it depends if plastic is the greatest material by weight.  If it is predominantly composed of plastic, then the whole weight of the packaging is within scope of the tax.  If not, then none of the material is within scope.

What will count as packaging?

Packaging will cover all actual packaging (materials for the containment, protection, handling, delivery and presentation of goods), but also products which are sold to end-users for use as packaging (e.g. cling film).

This is different from the scope of the producer responsibility packaging waste regime, which does not include items sold for use as packaging by the consumer.

What is ‘recycled’ and how do you prove the 30% recycled content?

Recycled is defined by reference to an international standard (ISO) on environmental claims about products.  Under this, recycled plastic is any plastic made from post-consumer plastic waste, and/or pre-consumer plastic waste (but excluding scrap or regrind).  All forms of recycling (except for scrap and regrind) will be covered, including chemical reduction of plastic to its component monomer chemicals and then using that to make ‘new’ plastics.

The 30% recycled content test will be based on a mass balance calculation – the mass of recycled plastic, divided by the mass of all plastic inputs, multiplied by 100.  Importers of packaged goods will likely be reliant upon their overseas packaging suppliers to provide this information.

Who is liable for the tax?

For packaging manufactured in the UK, the manufacture of packaging/converting of material into packaging is the tax point. So the manufacturer/convertor will be liable to pay the tax.  This will often be straightforward, but in some cases there could be multiple manufacturers in the supply chain.  In general, the principal item manufacturer will be responsible for the tax and those undertaking further ancillary processing (e.g. laminating, printing, cutting or forming) will be disregarded.  The consultation provides an example of a manufacturer who produces a film, which the next person in the supply chain prints onto and cuts into labels.  In such a case, the film would be considered to be packaging even before being made into labels, so the film manufacturer would be responsible for the tax.

It can be more complex for imported plastic packaging because of the use of intermediaries such as freight forwarders and agents, but the tax point will be when the packaging is first commercially exploited in the UK – i.e. the moment when it enters free circulation in the UK.

The tax will be accounted for by making quarterly returns, in a similar way to VAT.  It will be based on self-assessment/declaration, but the burden of proof will be on the manufacturer/importer to show that plastic packaging for which the tax has not been paid contains the 30% recycled content if audited by HMRC.

Are there any exemptions?

Some medicine packaging may be exempt for safety reasons, but apart from that there are no proposed packaging-type exemptions in the current consultation.

However, there is a proposed size threshold so that companies that manufacture or import less than 10 tonnes of plastic packaging per year will not be subject to the tax.  The consultation does indicate that companies who are anywhere near this threshold will need to keep this under careful and regular review to make sure they do not exceed the limit.

What should affected companies be doing to prepare?

In brief, there are two main things to think about at the moment:

• whether you wish to raise any issues about the design of the scheme with the government, by responding to the consultation, for example if you think that the tax will disproportionately impact your business because you cannot use a recycled product; and

• reviewing the recycled content of your current packaging products that will be affected by the tax, and if not already 30% recycled, investigating what steps you can take to switch to greater than 30% recycled content. If you are able to make changes, there may still be practical and timing issues that need to be addressed in advance, for example packaging design changes, lead times for sourcing different materials, and pricing issues.