With the government set to roll out the plastic packaging tax from 1st April, it’s time to consider how your business will be affected and to plan to avoid costs moving forward, since demand for futureproof packaging solutions is likely to surge as businesses move into Q2.
Who will have to pay the tax? Set at a rate of £200 per tonne for all plastic packaging containing less than 30% recycled content, the tax is aimed at importers and manufacturers, though companies who import packaging material before exporting the same product will be required to initially pay the levy, before claiming credit back at the point of export.
Manufacturers and importers of less than 10 tonnes of plastic packaging per year will be exempt from the tax.
What will be taxable? The list of taxable plastic items is currently as follows:
- All UK-manufactured packaging
- All imported primary packaging (packaging that directly surrounds products)
- Packaging for dangerous goods, food grade items and alternative plastics
- Domestically sourced transit packaging (including that for export) and empty transit packaging for UK use (such as plastic pallets, shrink wrap and pallet strapping)
- Medical equipment packaging
- Any packaging that fails quality control or becomes damaged – if it’s made, it’ll still be taxable
Tax Exemptions The list of tax-exempt packaging is as follows:
- Medical contact packaging (packaging that comes in direct contact with a drug, such as blister packs)
- Imported plastic transit packing (material used to facilitate the importation of goods)
- Process waste (material output associated with production runs)
- How will the tax be applied?
- While the tax is to be paid quarterly (from 1st April 2022) by the manufacturer or importer, businesses are at liberty to increase their prices to make up the cost – though there is an expectation that businesses should include a statement about the tax in their invoices.
- Since announcing this cost transparency requirement, the government has since delayed the rollout of the directive, meaning there will be no immediate invoice obligation from 1st April. Nevertheless, this approach enables customers to better understand the financial implications of purchasing packaging that fails to meet the required level of recycled content, creating scope for dialogue around the use of sustainable alternatives.
- Thresholds for identifying accountable parties
- While businesses handling under 10 tonnes of plastic packaging in a 12-month period will not need to register, once the legislation comes into effect, if you’re likely to exceed the threshold within 30 days, you should register on the date you make that assumption.
- Calculations for recycled plastic content can be made using the formula: mass of recycled content / mass of all plastic inputs * 100
Remaining compliant To ensure your business doesn’t incur undue expenses, returns from all packaging handling will need to be filed online on a quarterly basis. Businesses must maintain up-to-date registration details and continue to communicate the added taxation cost to customers, else government fines may be applied.
Visit gov.uk for further information and guidance on if your business needs to register.
How to prevent taxation with the correct packaging choices The primary purpose of the tax is to encourage businesses and their clients to use less plastic, so the most simple and straightforward approach to avoid incurring costs and passing on those expenses to your customers is to integrate plastic alternatives into your packaging – or seek packing solutions that are composed of 30% recycled content.