The U.K. is due to implement a plastic packaging tax (PPT) with effect from April 1, 2022. The tax will apply to businesses that manufacture or import certain finished plastic packaging materials. It will apply to both U.K. and overseas-based organizations.
The tax is expected to have a significant impact across a broad range of sectors including, but not limited to, manufacturing, consumer goods, retail, food and beverage, pharmaceutical, and cosmetics.
The U.K. government has yet to provide final confirmation that the tax will go ahead as planned, but the primary legislation required to enact it is in law and further legislation is expected shortly. The U.K. tax authority, HM Revenue & Customs (HMRC), has also issued guidance explaining the likely mechanics of the tax, which organizations can use to begin their preparations for the tax’s introduction.
How the Tax Is Expected to Operate
By way of brief summary, the tax appears likely to apply to finished plastic packaging manufactured in, or imported into, the U.K., where the plastic used is less than 30% recycled when measured by weight. The rate of tax will be 200 pounds ($270) per metric tonne and is payable by the producer/importer. It should be noted that if the person on whose behalf plastic packaging is imported into the U.K. does not account for the tax, HMRC may have powers to collect the tax from others in the supply chain.
Registration for PPT and record-keeping obligations start from the moment 10 or more tonnes of plastic packaging is imported or manufactured. It is expected that registration will be required even if an organization has no tax to pay (because it is below the 30% recycled content threshold).
Preparing for the New Tax
Businesses will need to consider their packaging strategy in the buildup to the tax taking effect. Some questions to ask should include the following.
Seven Questions to Ask
- Have you assessed your supply chains to determine which entities may be impacted across your corporate group?
- Specifically, will the product you manufacture/import be subject to PPT or does it qualify for exemption?
- Will contracts allow your suppliers to pass the cost of this tax on to you? Can you pass it on to your customers? Are contractual changes needed?
- Have you modeled the financial effect of the tax on your pricing/margins?
- Do your existing systems and processes capture all the information needed to comply with the PPT compliance requirements, even if to demonstrate you have no PPT to pay?
- From a governance perspective, what changes to your processes and controls are needed and which teams/persons will have responsibility for this tax?
- Will your manufacturing/procurement processes need to change as a result of the introduction of PPT?
Call to Action
PPT is due to take effect from April 1, 2022, which does not leave a lot of time for organizations to complete their preparations, particularly as the final legislative steps required for the tax to be implemented have not yet been completed. The HMRC portal to register and pay PPT is expected to be available on April 1, 2022, the day the tax comes into effect.
PPT will create a need for changes to systems, processes and controls in order to record the data needed to manage compliance, contracts and pricing. Reviewing your supply chains to identify the likely points of impact is the first step.
We recommend action is taken now to assess the likely impact of the tax and to begin the preparatory work required to ensure that the relevant information is available to meet the compliance requirements arising.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Robert Marchant is VAT & Customs Partner at national audit, tax, advisory and risk firm Crowe.
The author may be contacted at: firstname.lastname@example.org