It was estimated by HMRC that, when the tax came into force in April 2022, 20,000 manufacturers and importers would need to register, however recent information from HMRC suggests that under 1,000 businesses are registered for PPT, which is only 5% of the expected amount.

Originally brought in by the UK government on 1 April 2022, the aim was to tax single use plastic packaging and promote the use of recycled plastics by UK businesses.

PPT applies to any plastic packaging that is manufactured in, or imported into, the UK. PPT is payable by the manufacturer or importer and applies at a rate of £200 per metric tonne. There is an exemption for plastic packaging that contains 30% or more recycled plastic content and it is the business’s obligation to prove where this recycled content threshold has been met. There are also some exemptions that apply to PPT, for example, plastic used for certain medical purposes.

There is a registration threshold which provides relief for some businesses who do not import or manufacture significant volumes of plastic packaging. The threshold is currently set at 10 metric tonnes per year and businesses only need to register for PPT where they exceed this threshold. It is important to note that plastic packaging that falls under an exemption, for example the medical exemption or where it has more than 30% recycled content, still counts towards the registration threshold and needs to be considered, although PPT will not be due on these packaging products.

Although the threshold does provide relief for some businesses, again the onus is on that business to be able to evidence that they have not exceeded the 10 tonne limit. It can hard to gauge this initially as the weight of plastic packaging varies massively depending on the type of plastic used.

HMRC are now contacting businesses to ask them to either register for PPT or confirm that they are not required to do so. This is an interesting approach from HMRC, who seem to be taking a harder line on administering PPT by requiring businesses to confirm in writing that they are not required to register. Businesses therefore need to ensure that they have the evidence to support the decision that they do not need to register for PPT.

This can be especially hard for businesses who are importing products into the UK as the tax is not only applicable on plastic packaging items imported – it also includes any plastic packaging around imported items such as plastic bags, tags, labels etc. This has caused some confusion, with businesses not realising they might be liable to register even if they don’t import or manufacture plastic packaging itself, if the weight of the plastic packaging around items they import exceeds the registration threshold. It can be difficult to obtain data around the weight of packaging on imported goods and therefore hard to evidence whether the total weight of this falls under the threshold.

For those businesses who are required to register for PPT, trying to obtain the weight and material composition of all the different types of plastic packaging around goods is proving to be a mammoth task, as this information is often not held within a central system. It is often necessary to place reliance on suppliers providing the information. Whilst the administration and compliance function for PPT often sits within the tax function of a business, there may be data collected within other parts of the business that could assist with PPT reporting, such as the packaging waste regulations which require businesses to collect data around all types of packaging.

The environmental initiatives in the UK have not ended with PPT and the UK government is implementing Extended Producer Responsibility (EPR) requirements, with effect from 1 January 2023. These rules will affect any business that handles more than 25 tonnes of packaging per year and has an annual turnover of over £1m. As EPR is not limited to plastic, the expectation is that the EPR rules will apply to many more businesses than has been seen with PPT, so understanding the requirements under the EPR rules will be critical.

Organisations must take steps to record data regarding packaging which they handle in the UK from 1 January 2023 to comply with EPR. It is a separate obligation from other packaging legislation, including PPT, and therefore must be considered on its own merits. It is also possible that EPR will give HMRC publicly available information to assess liabilities under other environmental legislation, including PPT.

The EU are also following suit, with Spain implementing their own Plastic Packaging Tax from 1 January 2023. This will vary slightly from UK PPT in terms of the applicable exemptions and how the taxes are administered, however they are also looking at any items manufactured, imported or acquired into the territory. The inclusion of items acquired means any businesses operating within the EU that are responsible for acquiring goods into Spain may also be caught.

The UK’s 10 tonne threshold also feels very generous in comparison to Spain, who have only given a threshold of 5kg per month, which equates to roughly the weight of 50 empty 500ml bottles. This means that even more businesses will be caught under this PPT regime and will be required to register and remit regular returns.

Italy was intending to implement its own PPT from 1 January 2023, however this has been pushed back to 2024, which will be a relief for some businesses. It is expected that other EU states will follow suit by implementing similar regimes to encourage the use of recycled plastics.

Environmental taxes are becoming more prevalent throughout the UK and EU, and businesses need to start looking at the data collection in relation to the use of packaging in their business.

If you would like to discuss further, please contact Richard or Grace at Richard.Holm@rsmuk.com or Grace.Kirk@rsmuk.com.