Plastic Packaging Tax – what does it mean for my small business?

By Anna Jordan on Small Business UK - Advice and Ideas for UK Small Businesses and SMEs

Among other costs that are coming into effect next month, such as the National Insurance price rise and climbing energy costs, a Plastic Packaging Tax has been creeping up in the background.

We’re here to tell you a bit about what it is and whether you need to worry about it.

What is Plastic Packaging Tax?

Plastic Packaging Tax (PPT) is as it sounds – a levy on plastic packaging. You need to register if you’ve manufactured or imported ten or more tonnes of finished plastic packaging components within the last 12 months or you’ll do so in the next 30 days. From April 1, 2022 to March 30, 2023 the 12-month threshold will be worked out differently.

PPT only applies to manufacturers and importers of plastic packaging components which contains 30 per cent or less recycled plastic. However, packaging should only contain recycled plastic where it is permitted under other regulations and food safety standards.

For PPT, all plastic is assumed to be virgin (not recycled) unless there’s evidence that recycled plastic has been used.

>See also: How much national insurance hike will cost your business

Which packaging is subject to Plastic Packaging Tax?

Let’s talk a bit about what plastic is. Plastic is a polymer material to which additives (e.g. calcium or dyes) or substances may have been added. This doesn’t include cellulose-based polymers which have not been chemically modified. 

When you assess the amount of plastic in your packaging, these additives count. If a plastic packaging component is made up of multiple materials but contains more plastic by weight – including the aforementioned additives – it will be classed as plastic packaging for tax purposes. You need to keep a record to show what substances are in your plastic packaging.

Two types of packaging subject to tax: packaging designed to be used in the supply chain or for single use by the consumer. If packaging is made up of several components, you must account for PPT on each component. Examples of different components include bottles, caps and labels or trays, boxes and plastic windows.

Packaging is chargeable when the plastic packaging component is finished if this takes place in the UK, or when finished plastic packaging is imported.

You must weigh the packaging you manufacture and export. 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

You may also have to demonstrate that a packaging component isn’t plastic.

When do I need to register for the tax?

You must register for Plastic Packaging Tax within 30 days of becoming liable for it. Be aware that you must pay the tax on all of the chargeable components from the day you’re liable to register.

If you’re not required to register, you should keep records demonstrating that you manufacture or import less than ten tonnes per year of finished plastic packaging, including filled packaging.

How do I register for Plastic Packaging Tax?

If you’re liable, you’ll be able to register from April 1, 2022.

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

• The type of business you run
• 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

If you’re a non-UK business with no UK establishment and do not have any of the reference numbers listed, you can still register for the tax. After registering you’ll be given a registration number.

The requirement to include a statement with your invoice to show that Plastic Packaging Tax has been paid, which was due to commence in April 2022, will be delayed. The government says that more information about including a Plastic Packaging Tax statement with invoices will be published in due course. Register for updates on the government website.

Which records and accounts do I need to keep and for how long?

You must keep accounts and records to support the information you submit in your quarterly tax returns. You’ve got to show your workings and explain how you came to the figures that you did. You must have records to show when your packaging contains at least 30 per cent recycled plastic or when you’re exempt from the tax.

 Your accounts and records must:

• Be kept for at least six years from the end of the accounting period in writing (this can be done electronically)
• Record weight in tonnes, kilograms and grams

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
  
  If you want to defer paying Plastic Packaging Tax for components you intend to export, you must keep records that show you intend to export them.

The records must be either 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 production or import
• Include details which allow the plastic packaging components you intend to export to be identified
• Include the weight of the plastic packaging components which you intend to export

You should keep a record of all documents you intend to use to complete your Plastic Packaging Tax return or claim any credits or exemptions.

Will this affect my tax return?

You’ll have your quarterly tax return as normal, but some extra information will need to be included on it.

List any packaging components you’ve reported on a previous tax return as being intended for direct export but they:

• Will now be supplied within the UK
• Have not been exported within 12 months from the date of manufacture

Do not include:

• Packaging manufactured to be rail, aircraft and ship goods stores (unless customs formalities are cleared and they are formally imported as no longer for use as goods stores)
• Plastic packaging components permanently set aside for a non-packaging use

Will I have to raise my prices?

If you pay Plastic Packaging Tax on plastic packaging components that you have manufactured or imported, you can choose to increase the price you charge for that packaging to help cover the cost of the tax. That’s entirely up to you, but it could frustrate your customers and make them look elsewhere. Weigh up the pros and cons before you go ahead.

Plastic Packaging Tax is only paid once when the packaging component is finished or imported. It is not passed down the supply chain as a separately identifiable charge like VAT. VAT will continue to be payable on the whole price charged for the goods you sell according to VAT rules.

>See also: How to use MTD to get VAT right

If you increase your price of your plastic packaging because of Plastic Packaging Tax, VAT will be payable on the whole of the new price.

The government website has more detailed information on Plastic Packaging Tax, how to measure your plastic packaging and how to keep your records.

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