The Plastic Packaging Tax essential guidance - what you need to do

Introduction

The Plastic Packaging Tax (PPT) came into force in April 2022 with a charge of £200 per tonne on packaging that is predominantly plastic by weight and does not contain at least 30% recycled plastic content. From 1 April 2023 this increases to £210.82 per tonne, because the tax rises annually in line with the Consumer Price Index.

Manufacturers of packaging in the UK and importers of packaging (filled or unfilled) into the UK are directly liable to pay the PPT, but costs are likely to be passed along the supply chain.

There is a ‘de minimis’ for those producers who import or manufacture less than 10 tonnes of plastic packaging in a given 12-month period. Be aware that HMRC recommends that you should keep suitable records of your plastic packaging, even if you are under the threshold to register, as you will need this to evidence that the PPT does not apply to you.

The following article walks you through the steps you need to take to ensure you are complying with the PPT correctly. Each step contains a link to further guidance on the gov.uk website that we strongly advise you to familiarise yourself with.

1. Identify which of your plastic packaging is subject to the PPT

The PPT is charged on separate components of packaging, not the finished item. For instance, a bottle and a cap will be taxed individually. There are several general exemptions and exclusions listed below:

Packaging where the PPT will not be charged:

• Multiple-material packaging where plastic is not the predominant material by weight is exempt from the PPT. However, if plastic is the predominant material by weight, then tax is charged on the whole item.

• Exported plastic packaging.

Packaging that is exempt from PPT:

• Packaging used for the immediate packaging of licensed human medicine. This packaging will still count towards the 10 tonne de minimis.

• Packaging permanently recorded as set aside for non-packaging use. This packaging will still count towards the 10 tonne de minimis.

• Packaging used as transport packaging to import multiple grouped sales units safely into the UK, also known as ‘tertiary’ packaging.

• Packaging used in aircraft, ship and rail goods stores.

Packaging that is excluded from the PPT:

• Packaging used in the long-term storage of goods.

• Packaging that is an integral part of the good.

• Reused packaging for the presentation of goods.

There are also many detailed examples of packaging that is either in or out of scope, available on the link below.

Read the latest gov.uk guidance: Check if your plastic packaging is in scope of the Plastic Packaging Tax

2. Identify if you are liable for the PPT

If you identify that some of your plastic packaging is subject to the tax, you need to accurately calculate the weight to find out if you are liable and need to report.

If there are multiple operators in the manufacturing supply chain in the UK, the liable party will be the business that undertakes the last substantial modification before pack/filling.

The importer is defined as the company on whose behalf the packaging enters the UK, and/or the first company to commercially exploit it.

Read the latest gov.uk guidance: Work out the weight of packaging for Plastic Packaging Tax and Check when you must register for Plastic Packaging Tax

3. Register for the PPT

There are two tests to consider when checking if you need to register - you must look back over the last 12 months and look forward to the next 30 days.

You are liable to register for the PPT if you have imported or manufactured over 10 tonnes of plastic packaging over any given 12-month period.

Equally, if you expect to exceed the 10 tonne threshold in the next 30 days, then you should register too. In this case, you would be liable from the first day you expect to exceed the threshold.

Read the latest gov.uk guidance: How to apply the register tests.

You must register for the PPT within 30 days of becoming liable to do so, and you will need to pay the PPT on all components from the day that you become liable to register.

Please note that because the PPT starts on 1 April 2022, the backward test works differently between 1 April 2022 and 30 March 2023. You will only need to look back to 1 April 2022, until the tax has been operational for a full year in April 2023, as any plastic packaging manufactured or imported in the first quarter of 2022 will not count towards the PPT.

If you meet either of the tests and need to register, you should keep a record of how you worked this out and evidence proving your outcome.

If you do not meet either of the tests and are not required to register, you should keep records to show you manufacture or import less than 10 tonnes per year of finished plastic packaging so you can evidence this if required to do so.

To register, you may need to provide the following information:

• Your business type

• Your businesses address and contact details

• The date your business became liable for Plastic Packaging Tax

• An estimate of how much finished plastic packaging you expect to manufacture or import in the next 12 months

• A customer reference number, which could be your:

• Corporation Tax Unique Tax Reference

• Self Assessment Unique Tax Reference

• Company Reference number

• Charity Registration number

• National Insurance number

• Temporary National Insurance number

Read the latest gov.uk guidance: Register for the PPT

4. Work out the recycled content percentage of your plastic packaging

To work out the percentage of recycled plastic, divide the weight of recycled plastic used by the combined total weight of all plastic used, then multiply the outcome by 100.

You can find out the weight of the non-recycled plastic and recycled plastic in a finished component by using either a material inputs method or a verified specification method (details about these methods can be found on this gov.uk guidance page).

Records must be kept to demonstrate this, and due diligence carried out if using specifications.

Read the latest gov.uk guidance: How to calculate the recycled plastic content of plastic packaging components

5. Work out the weight of your packaging

In order to work out how much PPT is due, you must know the:

• Weight of the packaging component recorded in metric values — this must be shown in kilograms on your return

• Percentage of recycled plastic content

Where waste remains attached to the finished component, you can deduct the weight of the waste from the total, but you must keep evidence and records of this process.

To work out the overall weight of a component, you can use a:

• Individual component method

• Sample component method

• Material inputs method

• Verified specification method. If using this method, alongside keeping appropriate records, you must also carry out due diligence on the specifications provided.

• Bulk weighing method

Records must be kept to demonstrate the method you have used and details of how to use each method can be found in the link below.

Read the latest gov.uk guidance: How to work out the weight of packaging for the PPT

6. Keep records and accounts for the PPT

Accounts must be kept showing how you’ve worked out the figures you submit on your PPT return, and records must show evidence to support these figures. The records and accounts must be kept for at least six years, and be recorded in tonnes, kilograms and grams.

Accounts

You must keep accounts showing how you’ve worked out each entry on your quarterly tax return. Where relevant, your accounts must include:

• 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 keep accounts by reference to each ‘product line’ that you produce or import.

Records

Your records must be kept by reference to each product line and show:

• Evidence of any exemptions from the PPT

• The recycled plastic content, if 30% or more of the plastic used in the component is recycled

Packaging containing over 30% recycled content

If you want to claim this exemption, you must have 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

• 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

For example, sufficient evidence could be the product specification showing the recycled content of a plastic packaging component and details of any due diligence checks you’ve done.

Exporting plastic packaging

If you want to defer payment on packaging you intend to export you must keep records that must either be a document:

• Used for any other tax or duty

• Which clearly identifies the components to be exported, such as a sales contract or order

The records must be dated at or before the time of import/production, include details that identify the plastic packaging, and include the weight of the packaging you intend to export.

If you want to claim a credit on packaging that has been exported, you must keep evidence showing:

• The reason for the claim (either the components were exported or converted into new components)

• The accounting period which you first held this evidence

• Details of the tax you paid on the components, including the amount of tax you paid , the date you paid the tax and how you paid the tax

The evidence must show that the components have been exported, they must be either:

• A document for any other tax or duty

• Another document, such as an export invoice

Read the latest gov.uk guidance: Record keeping and accounts for the PPT

7. Obtain acceptable evidence for the PPT

To show that imported plastic packaging contains at least 30% recycled plastic, you must either:

• Provide evidence from the manufacturer of the plastic packaging

• Prove that you (or a competent third-party) have a robust supply chain audit that can provide this evidence

HMRC have a non-exhaustive list of evidence that will be accepted:

Product specifications may be used to prove the proportion of recycled plastic, the weight of plastic packaging, that the packaging is plastic, and if the packaging is exempt from the PPT.

Contracts may be used to demonstrate the quantity of plastic packaging, the proportion of recycled plastic, the weight of packaging, if the packaging is plastic, and if the packaging is exempt from the PPT.

Product certificates and certificates of conformity may be used to prove the proportion of recycled plastic.

Business accounting systems may be used to show the plastic recycled through the manufacturing process.

Accreditations and international standards could help to show the proportion and source of recycled plastic, the weight of plastic packaging, if the packaging is plastic, and if the packaging is exempt from the PPT.

Quality assurance audits can be used to demonstrate the level of recycled plastic, the weight of plastic packaging, if the packaging is plastic, and if the packaging is exempt from the PPT.

Sales and purchase invoices may be used to demonstrate the quantity of plastic packaging supplied, the weight of any waste, the recycled plastic feedstock, the date of sale, and the tax paid.

Valid evidence for plastic packaging that you intend to export or have exported includes:

• Export declarations

• An invoice or packing list that identifies the goods being exported

• A transport document (such as a bill of lading, airway bill or road consignment note)

• Certified documents by the goods carrier showing the goods were loaded and shipped

• Commercial documents, such as a delivery note or invoice, signed by the consignee certifying the goods were received in a country outside of the UK

• A document authenticated by a customs authority, certifying the goods have left the UK

Read the latest gov.uk guidance: Documents that can be used as evidence for the PPT

8. Make PPT due diligence checks

You should carry out due diligence checks if you manufacture plastic packaging, import plastic packaging or purchase plastic packaging from another business. This is to lessen the risk of the PPT going unpaid in the supply chain and to ensure your business is not held jointly or severally liable.

HMRC has not provided a list of appropriate due diligence checks and assumes businesses will carry out checks that are ‘relevant, reasonable and proportionate’. However, they have stated that these checks must be carried out at least annually to ensure the integrity of your supply chain.

An example of due diligence if you purchase plastic packaging containing less than 30% recycled content might involve requesting confirmation that PPT has been paid by your supplier, obtaining product specifications, or manually weighing and checking packaging samples. If packaging contains over 30% recycled content checks may include ensuring the price you paid is in line with current market conditions, or obtaining copies of certification or audits.

Read the latest gov.uk guidance: How to make due diligence checks for the PPT

9. Submit your PPT returns

If you are liable for the PPT, returns need to be submitted quarterly in line with the standard financial year. Returns must be submitted and the PPT paid no later than the last day of the succeeding month of the quarter in question.

You will need to include on your return:

• The total weight of plastic packaging manufactured in the accounting period in kilograms, including any packaging that was previously intended for export or has not been exported within the 12-month deferral period.

• The total weight of plastic packaging imported into the UK in kilograms, including any packaging that was previously intended for export or has not been exported within the 12-month deferral period.

• The total weight of finished goods not subject to the PPT, for instance, if they contain over 30% recycled content. Exemptions will need to be further reported on in the tax return, more details of which can be found in the link below.

• The total weight of plastic packaging that has been exported, or is due for export, and the value of credits being claimed in pounds sterling.

• The total weight of chargeable plastic packaging components, less deductions. The PPT due will then be automatically calculated. You must also declare that the above information given is true.

Note that some packaging exempt from the PPT does not need to be included on returns, more details of which are found in the link below.

Read the latest gov.uk guidance: Completing your PPT return

10. Read the full government PPT guidance

In addition to the guidance above, we strongly advise you to be familiar with the full official government PPT guidance now, which has been collated on a gov.uk website page, accessible using the link below.

Read the collection of gov.uk guidance you should follow for the PPT

11. Reduce your PPT liabilities

Ecosurety can provide expert support to ensure your business has the right level of detail and accuracy in your packaging data, for both PPT reporting purposes and to enable detailed analysis and insights that can drive strategic decisions.

We can model your PPT costs with access to sophisticated dashboards that will help you drill into your data, identify key cost drivers and explore scenario models. This will enable you to efficiently find opportunities to mitigate the impact of the PPT and enhance your environmental credentials. Simply contact us to find out more.