Are you ready for the plastics tax?

24th November 2020

A new tax being introduced will have a significant impact on those industries who deal with plastic packaging.

HMRC has published new draft legislation to impose a new plastic packaging tax. The aim of the proposed tax is to reduce plastic waste and encourage greater use of recycled plastic and supports the Government’s commitment to achieving ‘net zero’ carbon emissions by 2050.

The new tax will be more than double the existing landfill tax £94.15 per tonne, starting at £200 per metric tonne of plastic waste[i]. The pricing has clearly been designed to incentivise industry to incorporate recycled plastics into their business.

HMRC state that this will impact “estimated 20,000 producers and importers of plastic packaging[ii]” and the tax is intended to apply irrespective of whether plastic is produced in the UK or imported into the United Kingdom.[iii]

The Government plans to introduce the tax from April 2022 and will apply across the whole of the United Kingdom. This does give business some time to prepare and consider the practical aspect of how they can incorporate more recycled plastic into their supply chains and reduce their tax liability.

Plastic packaging will be caught by the new tax where there is less than 30% recycled plastic “of the total amount of plastic in the component”[iv]. Accordingly, to avoid the tax, businesses will be required to cope with the additional administrative requirement of understanding the composition of plastic used and this could potentially lead to future disputes with HMRC. It should also be noted that the draft proposals provide for an exemption for plastic which is for the purposes of transport packaging[v].

The new plastic tax will place an additional administrative and compliance burden on not only waste operators but many other businesses including retail and manufacturing. However, many businesses have already moved ahead of the legislation.

Given that the tax was originally proposed in the Treasury’s 2018 statement, change has already taken place within the market, for example, a leading soft drinks manufacture launched a 100% recycled bottle in the last month and the momentum for this to become the norm is gaining speed.   Nonetheless, businesses which have not yet acted will now need to ramp up their preparations to avoid significant viability impacts materialising from April 2022 onwards.

To read more about Net Zero please click here.

[i] S4- Plastic Packaging Tax 2020 (Draft)

[ii] https://www.gov.uk/government/publications/introduction-of-plastic-packaging-tax/plastic-packaging-tax

[iii] S2- Plastic Packaging Tax 2020 (Draft)

[iv] S6 (1) Plastic Packaging Tax 2020 (Draft)

[v] S11 (1) Plastic Packaging Tax 2020 (Draft)