DUO’s Zoe Brimelow Explains the Intricacies of the Plastic Packaging Tax

ZOE BRIMELOW, brand director at packaging manufacturer DUO, looks at three key areas in the UK’s Plastic Packaging Tax where further clarity is required.

The arrival of April marks a 12-month countdown until the Plastic Packaging Tax becomes legislation. Although we’re edging closer to a landmark change for the UK, businesses are still significantly short on important details. This ranges from practical elements such as submitting tax returns through to the more contentious area of traceability and, looking ahead, unanswered questions about the near-term future of the Plastic Packaging Tax.

1) Tax returns

March 2021 saw the publication of the government’s policy paper ‘Introduction of the Plastic Packaging Tax from April 2022’. This maintained a level of consistency in terms of explaining what will be liable to the new tax – plastic packaging that does not contain at least 30% recycled plastic – but provided no real information about how affected businesses should submit tax returns.

Previous consultations have covered processes for registration and reporting for the new tax, and a summary of responses as recent as November 2020 noted that some businesses found proposals unclear and required further clarification on the criteria for initial registration. Responses to the consultation also highlighted that businesses were still looking for further information about how straightforward reporting will be to comply with. Although government has indicated more support and guidance will be provided, it’s not announced when the online tax portal for registrations will be open.

Packaging that does not contain at least 30% recycled plastic will be liable to the new tax

Being able to access the portal and analyse what a Plastic Packaging Tax return will look like, would enable companies to adequately prepare self-assessments in plenty of time. They will be able to review their existing processes for recording plastic packaging material outputs and ensure they dovetail with accountancy software and practices to check they are documenting all of the relevant data for a Plastic Packaging Tax return. The new tax may not become legislation until April 2022; however, it will cover plastic packaging manufactured and imported from the start of next year. Businesses really need to be in a position much sooner rather than later to know exactly what information a tax return requires and to be able to test how the new digital tax system works.

2) Traceability and Liability

Plastic packaging with less than 30% recycled plastic content will be taxed at a rate of £200 per tonne. This includes imported packaging, with an exemption for small import quantities, which presents a risky dilemma for businesses. There is no government-backed accreditation scheme in place for approved suppliers of recycled-content plastic packaging and, unfortunately, it is rather easy for scrupulous suppliers to mislead businesses when it comes to the composition of packaging material content.

From April 2022, such instances may prove costly and time-consuming for companies. If a business unwittingly declares itself tax exempt in the belief it is using compliant material, which doesn’t actually meet the 30% recycled content threshold, it could face HMRC penalties. This may well mean a company also has to spend time and resource proving to HMRC that it acted with genuine intentions and was mis-sold packaging material.

Although government has indicated more support and guidance will be provided, it’s not announced when the online tax portal for registrations will be open

It’s reasonable to ask that guidance is forthcoming for companies. If this outlines scenarios that they should beware of to avoid compliance failure and possible penalties, it would assist the implementation of the new system and also protect businesses keen to invest in sustainable solutions.

3) Thinking About the Future

The new Plastic Packaging Tax is designed to provide a clear economic incentive for businesses to use recycled material in the manufacture of plastic packaging. While this policy objective is welcome, it’s leaving many businesses wondering how the tax will align with the introduction of the Extended Producer Responsibility (EPR) scheme, which is due to come into force in 2023.

The EPR is currently open to consultation and the proposals set out aim to create a scheme that incentivises producers in line with the polluter-pays principle. This means that businesses producing and / or using packaging will face new costs to fund disposal or end-of-life options. This is inadvertently leaving many companies considering whether it’s worth incurring the cost of change now to comply with the Plastic Packaging Tax or if it’s more cost-effective to absorb the tax and then make changes when clarity is provided around the EPR. This risks undermining the policy objective of the Plastic Packaging Tax by actually delaying investment in sustainable packaging strategies and materials.

Making strides towards more sustainable practices are absolutely the right way forward and wanted by the vast majority of businesses. Duo has already supported a number of its customers to meet the requirements well in advance of the April 2022 deadline. However, we are at risk of change becoming cumbersome if greater and more timely detail is not provided. The Plastic Packaging Tax provides an opportunity for a stepping-stone to new and more environmentally compliant packaging solutions, which can be realised with clearer direction that provides more answers than it does questions.

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