Plastic Packaging Tax – A Detailed Guide

Plastic Packaging Tax

There is important news for businesses and individuals in the UK who are involved in the production of plastic as well as the consumption of plastic. The UK is going to introduce the Plastic Packaging Tax from April 2022. To learn more about the Plastic Packaging Tax in the UK, effective from April 1, 2022, read on.

What is the Plastic Packaging Tax?

The Plastic Packaging Tax is a new type of tax that will be effective in the UK from April 2022. It is the tax that will apply to plastic packaging that has been imported into the UK or manufactured in the UK.

However, this new tax isn’t applicable to all plastic packaging imported into or manufactured within the UK. It is only applicable to plastic packaging that contains less than 30% recycled plastic. This new tax does not apply to plastic packaging with a minimum of 30% recycled plastic or packages that aren’t primarily plastic by weight. Plastic packaging that has been imported, whether unfilled or filled, will be subject to taxation.

Plastic Packaging Tax: Who will be affected?

The new Plastic Packaging Tax will impact a wide variety of individuals living in the UK. People who will be affected by the new Plastic Packaging Tax effective from April 2022 in the UK have been listed as follows:

  • Importers of plastic packaging in the UK
  • Manufacturers of plastic packaging in the UK
  • The business customers (of plastic packaging) of the importers and manufacturers of plastic packaging in the UK.
  • Consumers within the UK purchase plastic packaging as well as goods that come in plastic packaging.

Since there is an imbalance between the administrative burdens and the tax liability of all the aforementioned categories of individuals, there is another condition for the new Plastic Packaging Tax. To mitigate the imbalance between the administrative burdens and challenges and tax liability, importers and manufacturers that produce less than 10 tonnes of plastic packaging (containing less than 30% recycled plastic) are exempted from paying the new Plastic Packaging Tax.

What is the primary objective of the new Plastic Packaging Tax?

The primary objective of introducing and implementing the new Plastic Packaging Tax from April 1, 2022, is to provide economic incentives for businesses to utilize recycled plastic (instead of using plastic packaging with less than 30% recycled plastic) when manufacturing plastic packaging. If businesses import or produce recycled plastic in the manufacturing process, the demand for recycled plastic as a material will also rise. The greater demand for recycled plastic in turn leads to higher levels of recycling of plastic. The collection as well as diversion of plastic waste, away from incineration or landfills, is another positive outcome of this new tax.

What is the background to this new tax?

A brief explanation of the timeline of events that led to the introduction of this new tax has been listed as follows:

  1. Budget 2017: UK government received 162,000 responses when a call for evidence into charges/ using the tax system, to deal with single-use plastic waste was announced.
  2. Budget 2018: A tax on plastic packaging (containing less than 30% of the plastic that is recycled) was announced.
  3. February 2019: A consultation for seeking input on the proposals was launched.
  4. July 2019: Publication of a summary of responses.
  5. Budget 2020: Key decisions about the tax design and consultation for an in-depth design as well as the implementation of the tax were launched by the HMRC.
  6. November 12, 2020: Publication of the draft (primary legislation for technical consultation) and summary of responses by the UK government.

The Finance Bill of 2021 included the primary legislation which received Royal Assent on June 10, 2021.

What is the current law?

The Finance Act 2021 (part 2) contains the primary legislation. This primary legislation established a plastic packaging tax. This legislation contains the right to amend the meaning of packaging components concerning the tax.

What are the proposed revisions?

The Plastic Packaging Tax Regulations of 2021 removes three product categories from the plastic packaging component meaning. A new category of products has also been proposed to be added to the meaning of the plastic packaging component.

What are the different categories of the impact of the new Plastic Packaging Tax?

Apart from the economic impact (mentioned under the primary objective of the new tax), the other impacts include:

  • Businesses: The impact of this new tax will be significant on businesses but civil society organizations will be unaffected. It has been estimated that approximately 20,000 manufacturers and importers may be impacted by this new tax.
  • Operational impact: HMRC will likely incur £10-20m and £22m in capital costs and staff/ resource costs respectively.
  • Environmental impact: The utilization of recycled plastic in packaging can increase by 40% as a result of this new tax.

The Justice Impact Test for the newly revealed that it will likely have minimal justice impact. Families, individuals, and households will also not be affected by this tax. The economic, environmental, operational, and business impact of this new tax is significant.