Green taxes are driving retail innovation

03 August 2022

The introduction of the 5p charge for all single-use plastic carrier bags is almost a decade old already, and for the most part, this has had a positive impact on changing consumer behaviour and reducing plastic waste. Following the success of that scheme, the government has introduced the Plastic Packaging Tax (PPT), which is driving wider change in the use of plastics across a product’s life cycle.

What is it?

On 1 April 2022, the government introduced Plastic Packaging Tax (PPT) – a new tax on all plastic packaging which doesn’t contain at least 30% recycled materials. This is intended to act as an incentive to drive a demand for recyclable material, and divert unnecessary waste away from landfill and incineration.

The tax covers plastic packaging produced in, or imported into, the UK that does not meet the 30% recycled plastic test, and taxes it at £200 per tonne per annum. There is an HMRC tax registration threshold of 10 tonnes of plastic packaging produced in or imported into the UK per annum (to exempt small producers/importers).

Who will it affect?

It will affect producers and importers of plastic packaging, their business customers and any consumers who buy goods in plastic packaging – and we can help them.

This will, of course, impact manufacturers. However, in today’s world, manufacturers are also retailers, selling to customers directly. This also impacts traditional retailers who are directly importing large volumes of goods wrapped predominantly in plastic - read more on the PPT.

Innovative responses

Companies have begun to change behaviours as a result of both wanting to become greener and the imposition of plastic packaging tax. Retailers are having to review their whole supply chain in an attempt not to incur additional expenses which may then have to be passed on to customers.

This has driven innovation to a new level within the packaging, material science and manufacturing fields. As well as mitigating the cost of PPT in the short term, there are also longer-term benefits, including the potential to reduce the amount of packaging used within the sector as a whole and, hence, lower direct costs.

There are, of course, costs to innovation, but many companies will be able to make research and development (R&D) relief claims, to help reduce those costs where their projects qualify. Successful packaging claims that we have assisted with include:

  • Development of biodegradable alternative materials for both plastic and paper

A new material was developed from black seaweed, with material properties very similar in quality and characteristics to both plastic and paper. The material not only reduced the overall amount of plastic/paper used in packaging, but was also compostable within a home setting, and can biodegrade in 4-6 weeks. The material is already being used by food and beverage retailers, and within a B2C setting.

  • Transparent, wood-based film packaging for food, pharmaceuticals and medical devices

A film capable of replacing oil-based plastic has recently been developed. It consists of 40-60% renewable raw materials, and can be printed with text and images, as well as widely recycled in the same manner as general plastic waste. The material is available in differing grades – with further work being undertaken to allow for extrusion and compatibility with a wide range of other manufacturing techniques.

  • Compostable packaging to reduce the impact of packaging on the environment

Reducing plastic in waste management regimes is a key consideration within retail. Renewable packaging manufactured from sugar cane, vegetable starches and other resources that can be converted into chemicals and polymers using conversion processes similar to those of traditional polyethylene has allowed for a reduction in businesses’ plastic footprints.

 Patent it!

Patent Box claims can potentially be made where companies have been involved in the development of new materials and new production processes for developing such materials. For retailers, this may be where the new materials/packaging serve a function in the product sold - for example, fruit packaging which improves the shelf life of fruit sold.

Help with funding your project

BDO has a team of R&D experts, who are not only tax professionals, but are also scientists, material scientists, engineers and software experts. We have experience in helping clients make R&D claims in the packaging arena, both as retailers or retail sector supporters. For help and advice on your project, please contact Eyad Hamouieh, Radeep Mathew, or James Rolfe.