Behind the scenes, a Plastic Packaging Tax has been going up, along with other costs that will start happening next month, like the price increase for National Insurance and rising energy prices.
We’re here to tell you what it is and if you should worry about it or not.
What is the tax on plastic packaging?
The tax on plastic packaging is called the “Plastic Packaging Tax.” If you have made or imported ten tonnes or more of finished plastic packaging components in the last 12 months or in the next 30 days, you must register. From April 1, 2022, until March 30, 2023, the 12-month threshold will be worked out in a different way.
PPT only applies to people who make or export plastic packaging parts that are made of at least 30% recycled plastic. But recycled plastic shouldn’t be used for anything other than packaging, which is allowed by other laws and is necessary for food safety.
Which packaging is subject to Plastic Packaging Tax?
Let’s talk for a moment about what plastic is. Plastic is a polymer that may have had other chemicals or additives added to it, like calcium or colors. This doesn’t apply to polymers made from cellulose that haven’t been changed chemically.
When figuring out how much plastic is in your package, these additives are taken into account. For tax purposes, a component of plastic packaging that is made of more plastic by weight than other materials (like the ones listed above) is considered plastic packaging. You need to keep track of what’s in your plastic packaging, so you can prove what’s in it.
Two types of packaging are taxed: packaging that is part of the supply chain and packaging that is used by a single consumer. If there are many parts to the packaging, PPT must be thought about for each one. A few examples of different parts are bottles, caps, labels, trays, cartons, and plastic windows.
When the finished plastic packaging component is made in the UK or when the finished plastic packaging is brought into the UK, the packaging is taxed.
You have to weigh the packaging you make and ship overseas. You need to know:
- Weight of the packaging component recorded in metric values — this must be shown in kilograms on your return
- Percentage of recycled plastic content
You may also have to demonstrate that a packaging component isn’t plastic.
When do I need to register for the tax?
If you have to pay the Plastic Packaging Tax, you must sign up within 30 days. Be aware that once you are required to register, you will be responsible for paying tax on all chargeable parts.
If you don’t have to register, you must keep records that show you import or make less than ten tonnes of finished plastic packaging, including filled packaging, each year.
How do I register for Plastic Packaging Tax?
If you’re liable, you’ll be able to register from April 1, 2022.
To register, you may need to provide the following information:
- The type of business you run
- Your businesses address and contact details
- The date your business became liable for Plastic Packaging Tax
- An estimate of how much-finished plastic packaging you expect to manufacture or import in the next 12 months
- A customer reference number, which could be your:
- Corporation Tax Unique Tax Reference
- Self-Assessment Unique Tax Reference
- Company Reference number
- Charity Registration number
- National Insurance number
- Temporary National Insurance number
Even if you don’t have any of the listed reference numbers and your business isn’t in the UK, you can still sign up for the tax. You’ll get a registration number after you sign up.
The April 2022 deadline for having to show that the Plastic Packaging Tax has been paid by adding a statement to your invoice will be pushed back. The government says that more information about including a Plastic Packaging Tax statement with invoices will be released in due time. Sign up on the government website to get updates.
Which records and accounts do I need to keep and for how long?
You must keep accounts and records to back up the information you put on your quarterly tax returns. You have to show what you did and explain how you got the numbers you did. You must keep records to show when at least 30% of your packaging is made from recycled plastic or when you don’t have to pay the tax.
Your accounts and records must:
- Be kept for at least six years from the end of the accounting period in writing (this can be done electronically)
- Record weight in tonnes, kilograms, and grams
Where relevant, your accounts must include:
The records must be either a document:
- Used for any other tax or duty
- Which clearly identifies the components to be exported, such as a sales contract or order
The records must:
- Be dated at or before the time of production or import
- Include details that allow the plastic packaging components you intend to export to be identified
- Include the weight of the plastic packaging components which you intend to export
You should keep a record of all documents you intend to use to complete your Plastic Packaging Tax return or claim any credits or exemptions.
Will this affect my tax return?
You’ll still have to file a quarterly tax return, but you’ll need to add some extra information to it.
List any packaging parts you’ve already said were meant for direct export on a previous tax return.
- Will now be supplied within the UK
- Have not been exported within 12 months from the date of manufacture
Do not include:
- Packaging manufactured to be rail, aircraft, and ship goods stores (unless customs formalities are cleared and they are formally imported as no longer for use as goods stores)
- Plastic packaging components are permanently set aside for a non-packaging use
Will I have to raise my prices?
If you pay the Plastic Packaging Tax on plastic packaging parts that you made or imported, you can raise the price of the packaging to cover the cost of the tax. Even though it’s your choice, doing so can irritate your customers and make them go somewhere else to shop. Think about the pros and cons before moving forward.
The plastic packaging tax only needs to be paid once, when the package is finished or brought into the country. It is not a separate fee that moves through the supply chain like VAT. VAT rules say that VAT will still have to be paid on the full price you charge for the things you sell.
If you raise the price of your plastic packaging because of the Plastic Packaging Tax, you will have to pay VAT on the whole new price.
The government website has more detailed information on Plastic Packaging Tax, how to measure your plastic packaging and how to keep your records.
