Mar 29 2022

Plastic Packaging Tax FAQs Answered

From April 2022, a new tax will come into effect on all products that are not composed of at least 30% recycled plastic. This includes all packaging that is manufactured or imported into the United Kingdom. Plastic packaging is defined as packaging that has plastic as its main component, or where plastic is the heaviest element. The Government introduced this new tax as an economic incentive for businesses to use recycled material and in turn, create a greater demand for recycled packaging. This is hoped to increase levels of recycling and collection of plastic waste diverting it from landfills, incineration, and export. We recently wrote a blog about the plastic tax, explaining its general rules and the types of products that will be affected. However, since posting this blog we have seen several questions arise and that is why we have created this article. Where you will find the answers to the most commonly asked questions regarding the new regulations.

Q1. How is the 30% calculated?

The 30% of plastic is calculated using a mass balance equation. This sum is the total plastic recycled content divided by total plastic weight. This same equation will be applied to plastic products that have more than 1 component. 30% is currently the only threshold for the plastic tax, there is no reward for exceeding 30% or for getting close to it. The only figure that matters for the Government and tax charge is if the amount of plastic is above or below 30%.

Q2. How does the reporting work and how is the tax paid?

Companies that are liable for the plastic tax will need to report quarterly throughout the year on the weight (in tonnes) of plastic packaging manufactured or imported by the business into the United Kingdom. Each company will further have to record what proportion of this plastic packaging has 30% recycled content and what does not. HMRC can then calculate the tax based on what has been handled each quarter.

Q3. What counts as PCR (Post-Consumer Recycled) plastic?

Post-Consumer Recycled plastic refers to material that has been collected, sorted, and processed from roadside collections. This includes both household and commercial collections that have been transported to Material Recovery Facilities (MRF) before being sorted mechanically or by hand.

Post-process or Pre-Consumer Recycled materials are substances that are recycled and reused after the manufacturing process. This can include the offcuts, test batches, and shavings of packaging. Recycling post-process material allows businesses to have a high level of control over the material type, consistency and eliminates contamination. This form of recycled plastic is unfortunately not recognised by the new tax. The only way that pre-consumer waste could contribute toward the 30% threshold is if it is processed by a re-processing facility. However, for now only post-consumer recycled plastic will be a part of the 30 per cent.

Q4. Are there any situations where the tax could be counted twice?

A lot of individuals have expressed their concerns regarding Extended Producer Responsibility (EPR) and the new plastic tax. EPR is a policy tool that requires producers to be responsible for the packaging they sell on the UK market at the end of its life. This regulation agrees that the people who produce pollution should experience the costs of managing it in order to prevent damage to human health or the environment. In terms of paying twice, the plastic packaging tax is looking to incorporate recycled plastic just like the EPR wants businesses to introduce recyclability into the designs of their packaging. Companies need to have recyclable packaging to in turn lower modulated fees under EPR. They also need to further include recycled plastic to avoid the Plastic Packaging Tax. Meaning incorporating both factors would minimise costs under the separate schemes and avoid double payment.

Q5. How do we know who is liable to pay the tax? If a supplier sells a plastic product, do we all share the tax?

It is down to the business that owns the packaging when it is imported into the United Kingdom. If a finished product is imported by a company, then they will pay the tax. If a retailer imports from an overseas manufacturer, then the retailer would be liable as the importer. HMRC will require all processors to identify on each invoice line the tax that has been paid on the product and will configure a fair payment plan of who shall be charged. HMRC will be issuing updated guidance on the requirements for businesses, so if you have any more questions regarding their calculations it might be best to visit the UK Government’s website on the matter.

Q6. How do you prove the percentage of recycled content if importing plastics?

You can find a list of potential evidence types on the Government’s website. Example of items on this list includes Product Specification Contracts Production Certificates, Business Accounting Systems, Accreditation Quality assurance audits, and Sales and purchase invoices. HMRC have recommended to retailers, manufacturers, and importers to submit multiple types of evidence to speed up the process and get your tax bracket sooner.

Q7. How come compostable and biodegradable plastics are not included in the tax?

Within the UK, both compostable and biodegradable plastics or packaging are not deemed suitable for the recycling infrastructure. During the manufacturing process of these materials, carbon emissions may be lower however, when it comes to end-of-life management there are risks of cross-contamination throughout the organic sector – for example in the anaerobic digesting or composting processes – and in the mechanical recycling of traditional plastics. That is why these forms of plastic packaging are included in the tax along with other policies.

Q8. Considering that pharmaceutical packaging can be exempt, would secondary packaging, such as plastic packaging used for the security of the goods, be included?

Plastic packaging used to protect imports is exempt from the tax. Transportation packaging used to ship a product within or outside of the UK would not be eligible for the exemption.

Q9. How is the tax calculated if an object has multiple components?

It is assumed that it would be calculated based on the plastic within the individual components combined however, how these components are defined is still unclear. It is expected that features such as the objects being ‘separable by hand’ are quite important to the tax calculation. Therefore, with this ideology, separate plastic components will be classified individually.

Q10. What does the new plastic tax mean for my business?

The introduction of this plastic packaging tax is worrying for many businesses due to other inflations joining higher plastic prices and companies not wanting to increase their product prices to cover expenses. Half of consumers within the United Kingdom are willing to pay more for recycled plastics due to the shift in the appreciation of buying from more sustainable businesses. This is a positive in the fact that due to this attitude, customers might not mind a slight price increase due to the tax.

Here at Davpack, we have already begun with the introduction of recycled plastic into our lines, such as with our bubble wrap packaging. We also offer an eco-packaging range for you to buy from to help make businesses more sustainable. Don’t forget to read our previous blog to find more information on the tax and what we are doing to help make this transition to recycled plastic easier! If you need any other help, do not hesitate to contact our customer services team at cs@davpack.co.uk or call 01332 821200.

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Rick Stanford

Rick has been a salesman in the packaging supplies business for more than thirty years. Now semi-retired, he divides his time between tending his allotment in north Devon, getting depressed at the continuing travails of his home-town football club Macclesfield Town, and sharing his considerable experience and knowledge with the readers of the Davpack blog. Davpack

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