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Time to get serious about reducing, reusing and recycling

In line with the present give attention to sustainability, the Government launched a brand new tax on plastic packaging (“PPT”) from 1 April 2022.

In a transparent try to incentivise companies to import and manufacture recycled plastics, PPT will apply at a price of £200/tonne on plastic packaging with lower than 30% recycled plastic.  The tax kicks in at a threshold of 10 tonnes every year: for those who manufacture or import plastic packaging or pack items into plastic within the UK, then what you are promoting can be inside the scope of the tax if it doesn’t meet the above standards.

‘Plastic’ is outlined broadly and consists of biodegradable, compostable and oxo-degradable plastics.

What do companies want to do?

Establish whether or not your plastic packaging is inside scope

In the overwhelming majority of circumstances, it is going to be clear whether or not or not an merchandise is plastic packaging, however do not forget that the definition is broad and so it’s useful to examine the HMRC flowchart and steerage to help with this – see:

For instance, packaging that’s integral to the products is exempt from the tax as a result of the packaging is critical to allow the client to use the products.  Items similar to water cartridge filters or tea baggage fall into this class.

There are a number of different conditions the place exemptions are granted. Some of those can be found as tax credit if they are often proved later (e.g. the plastic is exported or transformed into a brand new element). As a consequence, import/export and logistics corporations, particularly, could have the option to considerably scale back their publicity with the suitable recording processes.

Register for PPT

Businesses which have imported or manufactured 10 tonnes or extra of completed plastic packaging since 1 April 2022 or that count on to import or manufacture 10 tonnes or extra of completed plastic packaging within the subsequent 30 days should register for PPT on the earliest date potential.

If you don’t meet the edge on both of those checks, you must, in any occasion, document the quantity of plastic imported or manufactured to show that you’re exterior of the scope of PPT.  This is as a result of different companies in your provide chain will need proof of your standing in relation to PPT for their very own record-keeping necessities.

Record plastic utilization

The reporting points of the tax will want to be thought-about by the operations/logistics capabilities and finance groups of companies. Robust proof is required to show a 30% recycled content material, and corporations are anticipated to preserve information evidencing:

  • the origin and content material of the recycled materials;
  • the date the plastic was manufactured;
  • the proportion of the recycled plastic contained within the output supplies of the recycling course of.

Supply agreements ought to require such proof to be supplied the place acceptable and search to safe the mandatory indemnities.

These necessities could initially be onerous for some companies, however creating a transparent framework for auditing the utilization of recycled plastic also needs to allow these corporations looking for to minimise their use of ‘virgin plastic’ to publicise that truth. Outside of the plain self-reporting alternatives, the sustainable sourcing and recycling of supplies similar to plastic are key efficiency indicators within the Loan Markets Associations’ Sustainability-Linked Loan Principles. Sustainable plastic use can be factored into the impression assessments of corporations making use of for B Corp certification, a rising motion of companies that give equal weighting to folks, the planet and revenue.

As a tax launched to incentivise sustainable and environmentally pleasant practices, the extra the tax will increase shopper information and aggressive stress on companies to enhance their sustainability credentials, the extra doubtless it’s to be thought-about a hit.

Other concerns

Businesses are permitted to go on the price of PPT to prospects.  Any value improve, although, could have VAT and company tax implications. Therefore, corporations ought to contemplate these projections prematurely of passing the associated fee on, notably if there are questions about whether or not the corporate can be claiming PPT tax credit and/or whether or not the corporate can be in a position to reclaim any extra VAT.

Take recommendation

If it’s not clear what the implications of PPT can be on what you are promoting, or you might be contemplating updating your supplies to cowl your new reporting tasks in relation to PPT, it’s price taking skilled recommendation. This is especially vital as a result of because the tax beds in, the strategy that HMRC is probably going to take to making use of and treating the tax will not be but clear.

Cathy Bryant

Cathy Bryant is a associate within the Blake Morgan’s company crew specialising in company tax. As a twin certified lawyer, Cathy brings a depth of expertise to her position as an adviser on tax issues in company transactions. Cathy additionally advises on employment taxes – for instance on termination funds made to staff, the applying of IR35 and different employment associated tax issues. She develops share incentive schemes for employers and advises on the construction and scope of those.