UK plastic packaging tax: How to become compliant

The UK plastic packaging tax takes effect from 1 April 2022. Any business that imports non-recycled plastic could be affected. 

The tax is effective when less than 30% recycled plastic is used to manufacture the packaging. The plastic packaging tax rate is  £200 per metric ton of plastic packaging, and relates to both importing and manufacturing. Importantly, any business that manufactures or imports 10 or more tons of plastic packaging per year needs to register for the tax. 

What kinds of plastic packaging is subject to the tax?

You need to register if you manufacture or import more than 10 tons of plastic, if that plastic is subject to the tax. According to HMRC, plastic, for the purposes of the tax, refers to “a polymer material to which additives or substances may have been added.” Plastic that falls within the scope of the tax is”designed to be used in the supply chain from the manufacturer to the user or consumer. It is used for the containment, protection, handling, delivery, or presentation of goods.”

Consult a tax specialist if you are uncertain whether plastic that you import or manufacture falls within the ambit of the tax.

How to prepare for the plastic packaging tax

HMRC has issued practical steps to take in order to become compliant with the new plastic packaging tax. 

Once you have determined if your business needs to register for the tax, you need to determine the quantity of plastic you import or manufacture. 

You must register for the tax from 1 April 2022, providing all required information. According to HMRC, the requirement to show plastic packaging tax has been paid on invoices will be delayed. However, authorities recommend that businesses disclose the tax to customers and  “work with them to try and increase the amount of recycled plastic they use wherever possible.”

Is the plastic packaging tax charged the same as VAT?

Unlike VAT, which is passed down throughout the supply chain, the plastic packaging tax is only paid once. Importers and manufacturers can choose to increase their prices but, as HMRC explains, that is a purely commercial decision. VAT continues to be payable on the total price of the plastic supplies.  

For assistance optimising your VAT throughout your value chain, get in touch with VAT IT, the global VAT compliance and recovery specialist.