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May 11, 2021
2021-5538

UK issues guidance on new Plastic Packaging Tax

Executive summary

On 10 May 2021, the United Kingdom (UK) Government issued Guidance that explains how businesses that manufacture or import plastic packaging, should now prepare for the new Plastic Packaging Tax.

The UK Plastic Packaging Tax will take effect from 1 April 2022. It will apply to plastic packaging manufactured in, or imported into, the UK where the plastic used in its manufacture is less than 30% recycled. The tax will also include imported packaging that already contains goods. The rate of the tax will be £200 per metric tonne of plastic packaging.

The Government has explained that the tax aims to encourage the use of recycled plastic, rather than new plastic, within plastic packaging. It is hoped that this, in turn, it will stimulate increased levels of recycling and the collection of plastic waste, diverting plastic away from landfill or incineration.

Detailed discussion 

Registration

If a business manufactures or imports 10 or more tonnes of plastic packaging over a 12-month period, it will need to register for Plastics Packaging Tax. This requirement applies regardless of whether the business will have to pay any tax. This requirement also applies to importers of packaging that already contains goods, such as plastic bottles filled with drinks. However, where imported packaging already contains other goods, the tax only applies to the plastic packaging itself.

Record keeping

Businesses will need to keep records of the packaging they manufacture or import. The guidance sets out the information needed to establish how much tax the business needs to pay, or to confirm that it has nothing to pay. For the purposes of the tax, it is assumed that plastic packaging does not meet the recycled content test unless it can be shown that it does.

Other considerations

The Guidance also covers the following:

  • Consideration for the use of more recycled plastic – how to make changes to the packaging the business manufactures or imports
  • Invoicing and statements that Plastic Packaging Tax has been paid on the packaging concerned
  • Imports
  • Exporting goods that are liable for the tax

Additional guidance on the application of the tax is available as follows:

Implications

The primary legislation for the Plastic Packaging Tax is currently before Parliament and it is not yet law. It is expected that secondary legislation will be introduced later in the year. Until the primary and secondary legislation become law, the contents of this policy paper may be subject to change and more guidance is expected later in the year. However, affected businesses should consider the impact of these new obligations now, in particular the introduction of new record keeping and invoicing requirements which may require changes to systems and invoicing software, and possible changes that would increase the use of recycled materials.

One of the key issues that businesses face is to understand where the tax “sits” in an organization. How will the liable plastic be identified and who will be responsible for calculating the tax due? In some cases, systems may be able to be configured to identify plastic use and the values for tax purposes. This, in combination with supplier (and customer) negotiation to ensure the tax is clearly identified, will make administering the tax simpler. However, the changes need to be considered now and stakeholders engaged to agree responsibilities and requirements in good time.

Plastic Taxes elsewhere?

Given environmental concerns and the need to raise revenue, it is not surprising that plastic taxes are also being considered, and in some cases introduced, elsewhere around the globe. Italy and Spain will be implementing a plastic tax in the coming months and other countries are set to follow.

Businesses with operations outside the UK will therefore need to consider the impact of these taxes in other countries where they manufacture and use plastics.

Our recent webcast set out the issues to consider regarding plastic and packaging taxes.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United Kingdom), London

 
 

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