From April 2022, a new tax on plastic packaging will be in place in the UK. Alongside the UK government, the HMRC has published guidance with the aim of helping businesses prepare for the Plastic Packaging Tax (PPT). This post highlights the main takeaways from this guidance providing information on the products that are affected, how much the tax will cost, who is liable to pay the tax and how.
What is the plastic packaging tax?
PPT will be a tax on the plastic packaging manufactured in or imported into the UK, where the plastic used in its manufacture contains less than 30% recycled plastic. Where 30% or more recycled plastic is used, no tax will be due, but the plastic packaging will still need to be accounted for. The tax will be due on finished packaging components. Where plastic packaging components are imported, this will include products that are both empty or pre-filled.
Who is Liable to pay the plastic packaging tax?
PPT will be charged from 1 April 2022 and it is likely that everybody will see its effects. If you are a business that manufactures or imports 10 or more tonnes of plastic packaging over a 12-month period you may be liable to pay the PPT. The tax will be charged for a finished product that has “undergone its last substantial modification” such as extrusion, moulding, forming or printing. If a business is in the UK, it will be liable for PPT if it performs the “last substantial modification before the packing or filling process”. The business that packs or fills the packages will be liable for PPT only if it also “undertakes a substantial modification before the packing of filling process”. Importers will also be liable for PPT if the packaging they import has undergone its last substantial modification.
How much is the tax?
Packaging manufactured in or imported into the UK that does not contain 30% recycled plastic will incur the tax at the rate of £200 per metric tonne.
What packaging is included in the tax?
PPT will be a tax on plastic packaging that contains less than 30% chemically or mechanically recycled plastic. This will also apply to bioplastics, biodegradable, compostable and oxo-degradable plastics. In cases where packaging is made using multiple materials (paper/foil and plastic) if the packaging contains a larger proportion of plastic, the weight of the entire packaging will be considered plastic and will be taxable as such.
PPT will be levied on products “designed to be suitable for use, whether alone or in combination with other products, in the containment, protection, handling, delivery or presentation of goods at any stage in the supply chain of the goods, from the producer of the goods to the consumer or user”. Plastic food trays, film used to protect produce, reusable plastic crates, plastic carrier bags and disposable cups all constitute packaging components liable for the tax. But even plastic packaging that does not fit the definition provided but is designed as single-use consumer packaging will be taxable.
What packaging is exempt from the tax?
There are three main categories of packaging components that are exempt from PPT.
- products where the packaging is not the primary aim of the product but is instead there to store the good. This exemption includes items such as toolboxes, earphone cases and first aid boxes.
- products such as inhalers and room deodorisers, where the packaging is an essential aspect of the product that will be used by the consumer.
- products such as shop fittings and sales display shelves, which are created specifically for presenting products to consumers and will be re-used to this end.
Plastic packaging that is used to transport imported goods, used in aircraft, ship and rail goods stores, used to package medicinal products or that has another permanent use other than packaging will also be exempt from the tax. If the packaging is intended for export and is exported within 12 months, it is also exempt from the tax.
How will the PPT impact businesses?
All manufacturers and importers of plastic packaging will need to register with HMRC regardless of the amount of recycled plastic they use unless they produce or import less than 10 metric tonnes of plastic packaging in any 12-month period. A business must register if at any time after 1 April 2022, it expects to manufacture or import at least ten metric tonnes of plastic packaging in the following 30 days or it has manufactured or imported at least ten metric tonnes of plastic packaging in a 12-month period ending on the last day of a calendar month. Imports that have not cleared customs or are not in free circulation in the UK are not included within these calculations.
Businesses will be subject to increased record-keeping as they will need to maintain records to show:
- The total amount in weight and a breakdown by weight of the materials used to manufacture the plastic packaging (excluding packaging which is used to transport imported goods)
- The data and calculations used to determine if a packaging component is, for the most part, plastic and how much-recycled plastic it contains
- The weight of exempted plastic packaging and the reason for the exemption
- The amount in weight of plastic packaging exported, and therefore the allowed relief from the tax.
Even where the recycled content test is met, businesses will need to register, file, and retain evidence to show that the relevant plastic packaging meets the threshold. Plastic packaging will be assumed not to meet the recycled content test unless it is shown to do so.
Click here to see the latest guidance from the HMRC on the Plastic Packaging Tax
At Foxpak, we are working tirelessly with our material suppliers and manufacturing partners to find a solution to the plastic packaging tax. As a primary packaging supplier to the food and beverage industry, food safety is one of our main concerns. However, it is still unclear how the PPT will align with current EU/UK legislation which specifies that post-consumer recycled (PCR) packaging cannot be in direct contact with food products. Paired with the limited availability and high cost of PCR materials, We will continue to research a commercially sustainable and safe solution to the Plastic Packaging Tax.
If your brand is looking to invest in quality packaging, our team will guide you through the entire process, providing recommendations on increased sustainability, helping to improve efficiencies and adding expert and award-winning value to your end product.
Jane Bevis, Chair of OPRL Ltd, said “We know there’s a huge appetite among consumers to recycle more of this lightweight packaging, with tremendous responses to in-store trials by retailers. So it’s exciting that the long-established major supermarkets’ network of front-of-store collections for PE films is being extended and strengthened and will now encompass a broader range of bags and wrapping. That means from January consumers will be able to take many more types of packaging for recycling at their local supermarket.”
In the world of sustainable packaging, two words come up more often than others; compostable and biodegradable. But what do they mean? By its definition, compostable packaging will break down to natural elements without leaving behind toxic residue. The main difference between compostable and biodegradable packaging is that compostable products require specific conditions in order to break down i.e. specific temperature and moisture settings along with the presence of microorganisms, whereas biodegradable products will break down naturally. As with many sustainability claims, the devil is in the detail. In this particular instance, the detail is time. We have already mentioned that biodegradation is a natural occurrence, in fact, everything from banana skins to toxic batteries will biodegrade eventually. Because the definition of biodegradable packaging does not have a time limit attached to it, consumers assume that it takes much less time to break down than the 1,000 years that is estimated for plastic, however, this isn’t always the case. Compostable packaging, on the other hand, does have a time frame associated with it. In order to claim compostability under the EN13432 standard, packaging materials must break down within 180 days in industrial composting conditions and no more than 365 days in home composting conditions.
Recyclable packaging is packaging that can be reprocessed back to its original form and returned into the manufacturing stream. Traditionally, flexible packaging is made from a blend of different plastic materials which are laminated together making them extremely hard to separate. For this reason, flexible packaging is notoriously difficult to recycle. As the saying goes, reduce, reuse and recycle. When translated into the world of packaging, this would look like the following scenario;
Without sustainable packaging, it’s hard for a brand to maintain its reputation for environmental stewardship. One of the biggest contributing factors to this is the plastic-free movement which has become the forerunner of packaging discussions. But what does it mean? We have already discussed the importance of plastic for the food industry in terms of longevity and protection of the product, but what about packaging for non-food products, fast-moving consumer goods or single-serve portions? Without the requirement of barrier or preservation characteristics, brands are free to choose plastic free-paper packaging, arguably the most sustainable material option. Paper is the most obviously recyclable packaging material, it’s naturally sourced and can easily biodegrade back into nature. The paper recycling stream is one of the most widely available which means we can efficiently and effectively divert waste from landfill. However, paper has some environmental limitations. Paper used in packaging is technically down-cycled at the end of life, not recycled. After initial use, paper is disposed of through dry waste recycling streams, it is separated by type and grade, water and chemicals are added to return it to a pulp form and it’s then remade into recycled paper. This process inevitably weakens the papers natural fibres and results in a newly processed material which contains contaminated fibres that do not meet food-grade standards. This inhibits the new material from being used for the same purpose as the initial material. To overcome this, raw material manufacturers supply the packaging industry with either virgin paper or paper containing a percentage of recycled content that abides by the laws of food safety contact.
According to the UN Food and Agricultural Organization (FAO), An estimated 1.3 billion tonnes, or roughly 30% of global food production, is lost or wasted every year. Generally, when food waste ends up in landfill it produces methane – a potent greenhouse gas which is 21 times more harmful to the environment than carbon dioxide. This methane production accounts for around 10% of the total greenhouse gas emissions per year. Flexible packaging has the ability to extend the shelf life of food products. By integrating specifically chosen barriers to the material laminate, you can extend your product shelf life dramatically. Alongside its resealable features, gas flushing technology and portion control properties, it’s is a great solution to reducing food waste.
Flexible packaging uses less energy to produce compared to traditional rigid packaging options. Due to its flexible nature, it holds more like for like product volume compared to traditional packaging. Less packaging means optimized energy consumption which in turn leads to lower operating costs. At its end of life, traditional flexible packaging is sent for incineration. With the waste-to-energy (WTE) trend becoming a more viable end-of-life option for flexible packaging materials, packaging converters are burning flexible packaging waste to generate energy which can be pumped back into their manufacturing process.
