What Is The Plastic Packaging Tax And Will It Affect Your Business?

by | Jun 28, 2022

Not sure if the plastic packing tax is something to worry about? Want to know how it will affect your business? Concerned about complying with the latest legislation? Many business owners are asking the very same questions.

With the government eager to achieve its greener policy goals in the coming years, the plastic packaging tax was born.

In an effort to reduce waste and encourage greener choices in the corporate world, the plastic packaging tax was introduced on 1st April 2022. It may have been awkward timing, but it’s no April Fool’s joke. It’s an important tax to be aware of.

In this article, we’ll walk you through what this plastic packaging tax is and how it affects your business.

What Is The Plastic Packaging Tax?

The plastic packaging tax wasn’t a surprise – in fact, it was first planned out in 2018. This is a key piece of the legislature within the government’s sustainability planning.

Even though it’s a flagship scheme for greener living and trading, few businesses actually know the details of the tax because they haven’t caught up with it yet.

So what exactly is it a tax on?

As you might guess, it’s a tax on the manufacture or import of plastic packaging that contains less than 30% recycled content. If the tax applies to you, it’s charged at a rate of £200 per metric tonne of packaging.

The tax is applied quarterly and businesses are required to file a special tax return for it. Unlike VAT, this tax is charged to the importer or manufacturer, not passed onto the customer.

It’s important to remember that other taxes remain chargeable, like VAT, and manufacturers or importers may well increase their prices to accommodate the extra cost.

We may begrudge taxes in general, but this one is attempting to make businesses more transparent with customers and innovative with eco-friendly packaging.

But what about further down the line?

Well, exported packaging isn’t subject to this new tax. Even if your customer subsequently exported the packaging, all reliefs, credits and deferments would still apply and you could claim at the time or retrospectively.

So all in all, the plastic packaging tax doesn’t look too difficult for businesses to implement.

What Does It Cover?

If your business is importing or manufacturing plastic packaging that contains less than 30% recycled materials, then this green tax applies to you.

On the other hand, if you’re importing or manufacturing plastic packaging that contains more than 30% recycled materials, then the tax does not apply to you. There is a middle area that’s caused some confusion though, and that’s the material ratio.

You might be importing or manufacturing plastic packaging that is made up of mixed components, like cardboard and plastic. How does the tax work in this case?

The government advises that, if the weight of the plastic component is higher than the other component (whatever it is) then your packaging does indeed still fall under the tax.

On top of that, there’s an allowed threshold of up to 10 metric tonnes of plastic packaging (with less than 30% recycled material). So the tax wouldn’t apply until you met and exceeded this amount of manufacturing and importing.

But the bottom line you should be taking from this is whether the tax applies to you at all.

If you’re not in the business of manufacturing or importing plastic packaging at all, then you don’t need to worry!

If you’re simply using (and NOT importing) plastic packaging in a small business, then this tax isn’t for you. For example, an independent coffee shop that uses plastic coffee cups shouldn’t be concerned about paying the plastic packaging tax.

This scheme is targeted ONLY at manufacturers and importers of largely unrecycled plastic packaging.

What Does This Mean For Your Business?

If this tax does apply to your business, don’t panic. Gov.uk states are some clear actions you need to take to make sure you’re paying this tax appropriately.

This tax covers four tax periods, which you can’t choose. They include:

  • 1 April to 30 June
  • 1 July to 30 September
  • 1 October to 31 December
  • 1 January to 31 March

Simply submit your tax return and payment before the last working day of the month following each of the accounting periods above.

Before you can submit your plastic packaging tax returns, you’ll first need to register with the HMRC. Once you’ve done that you’ll receive a unique taxpayer reference number that you will use to file and pay this tax.

To be safe, you should be keeping records of your plastic packaging import and manufacture, specifically:

  • Weight details for components of your plastic packaging
  • Evidence to prove the recycled content
  • Evidence of any exemptions
  • Details of export plastic packaging if applicable

Keeping records even if you’re below the 10 metric tonne threshold is a good idea, just in case you become liable in the future.

What Action You Can Take…

Staying on top of new environmental legislation like this can be stressful and similar schemes are likely to crop up again. You can cut out the worry and find a legal professional to help ensure your business is always compliant.

But don’t worry! We can help. Visit LegalDrop to find your ideal legal support without fuss and with more control.

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