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Plastic packaging tax – 5 steps to get your business ready

06 April 2021

From April 2022, all businesses trading in the UK that use more than 10 tonnes of plastic packaging a year may need to register for and pay the Plastic Packaging tax at £200 per ton. Here are five key steps you should consider to get your business ready.

Check if your business will be affected?

If the goods you sell and or produce use high volumes of plastic packaging on route to the consumer it is quite likely that your business will be affected by the new tax. Even if you are a multinational business not manufacturing in the UK, if you are the importer bringing packaged goods into the UK, the tax may apply.

Of course, plastic packaging is very light weight, but where it makes up the majority of the packaging by weight (for example food wrappings and packaging for many other small retail goods), it has to be counted towards the business’s annual 10 tonnes lower limit for registration. Most businesses will never have had to consider the overall weight of packaging they use in a year before or the weight of each different type of material use. But now is the time to start assessing this with your packaging department or suppliers so that you can come to a realistic assessment of whether or not your business will need to register by April 2022: failure to register carries financial penalties.

Review your current packaging needs and materials?

The whole purpose of the tax is to encourage businesses to use less virgin plastic: packaging that contains 30% or more recycled plastic does not need to be counted when it comes to registering for and paying the tax. So could you switch to less environmentally damaging packaging?

There are now many different packaging options available to businesses and it may now be cost effective to move away from using virgin plastic. That will clearly depend on the products you produce and or sell so reviewing your packaging needs against currently available packaging solutions is an essential task. Retailers may also choose to move away from suppliers whose goods are packaged in virgin plastic to reduce their expose to the new tax, for example, bags made of 100% recycled polythene are already available and their cost will come down over time. However, it may be more difficult for food manufacturers due to potential contamination issues.

Consider new packaging solutions

If there are no current packaging solutions that work acceptably without the exclusive use of virgin plastic, it may be time to research new packaging solutions that are both greener and more cost-effective overall. Projects to develop innovative packaging using new materials are likely to qualify for R&D tax relief – helping to reduce the initial cost of moving to new packaging and the new capital allowance ‘super deduction’ could help to reduce the upfront cost of acquiring any new packaging machinery required.

Engage with your suppliers – what are they doing on PPT?

Businesses that don’t package goods in-house will want to start to work with their suppliers to manage the potential costs of the new tax. Depending on your commercial leverage with suppliers, it may be possible to encourage or request or even demand that they switch to PPT compliant plastic or other environmentally responsible packaging before April 2022 to reduce your exposure to the new levy.

Design your monitoring, control and reporting processes

For many large businesses, the reality is that the PPT will bring new administrative requirements. Even if you use the most environmentally sensitive packaging possible, there will still be a need to document this on an ongoing basis so that you can prove to HMRC that there is no need for you to register for the PPT.

Inevitably, for some businesses it will not be possible to change supply chains and packaging materials completely by April 2022 so they will need to register for the PPT. So to correctly report on the weight of materials used and pay the right amount of tax, such businesses will need to keep precise records of the weight of virgin plastic used for each item sold so that plastic volumes can be calculated for PPT returns. So updating stock control systems to capture and report on this data will be essential to ensure a robust audit trail is available if HMRC requests it. Contact Chris Morgan to discuss further.

We are here to help

In the run up to April 2022, we can help you get to grips with the PPT through external reviews and impact assessments, staff training and business assurance reports about your PPT exposure as well as advice and support on R&D claims as you develop new packaging solutions.

For help and advice please contact Chris Morgan or Lyndon Firth.

To contact a member of our R&D team visit our team page.

Read how the Plastic Packaging tax will work