What is the new Plastic Packaging Tax in 2022, and how does it affect me?
In this article, you will learn what the new plastic packaging tax (PPT) is, who it affects, and how it will affect businesses. Additionally, we will discuss some options that you may be able to use to reduce the impact of the tax.
What is Plastic Packaging Tax?
PPT is set to come into effect from the 1st April 2022 and is a tax designed to provide a financial incentive to businesses to reduce their use of newly produced plastics in favor of recycled alternatives. According to gov.uk, the tax applies to any business that has manufactured 10+ tonnes of finished plastic packaging components within the last 12 months or will do so in the next 30 days. The tax also only applies to plastic packaging components containing less than 30% recycled plastic.
The tax liability for PPT is £200/tonne and applies to packaging with 50% or more plastic content. There are a number of exemptions available provided certain conditions are met, more details can be found on these on the government website; however two key examples are: primary packaging for licensed human medicine and packaging that is an integral part of the goods.
Below is some more detail regarding what the tax applies to and at what point it should be applied.
- Finished Plastic Packaging Components
PPT only applies to finished plastic packaging components. This means components that have undergone their last substantial modification. However, in cases where the last substantial modification comes during the packing process, the last substantial modification is considered the one before that one.
- Not all processes are considered substantial modifications
It should be noted that not all manufacturing processes are considered substantial modifications. In fact, a substantial modification is broadly defined as the last manufacturing process in which changes are made to the nature of the packaging component. Such changes can include manipulations to the shape, structure, weight, and thickness of the packaging.
How will this tax affect industries?
Who Pay’s Plastic Packaging Tax?
One issue arising from this new tax is determining who is responsible for paying this new liability. The short answer to this is that the business that manufactures or imports the packaging is the one liable for the tax.
Financial Impact
It is difficult to predict the financial impact of PPT, as there are many different variables that could affect different organizations within different industries. Despite this, certain conclusions can be drawn which at least give some indication as to the potential financial impact of this new tax.
Low cost, low margin, commodity items that require plastic packaging will bare the most noticeable impact, because tax will be a higher proportion of the finished cost of the product. Ultimately this cost will to some extent pass down to the consumer.
Production Factors
Another variable to consider when it comes to PPT is that certain packaging methods may need to be adjusted to suit the recycled content materials. For example, in some cases, there is no guarantee that an alternative packaging will function in the exact same way or provide the same flexibility or durability. This could be both a costly and challenging issue to solve for businesses and is something that may need to be planned for.
Administrative Burden
For many one of the biggest impacts could in fact be the administrative burden of a potentially complex tax. Companies are required to register for the tax if they surpass the 10 tonne threshold and need to keep detailed records to verify the quantity of plastic packaging they use, the PPT status of the packaging and whether the tax has been applied.
There are also various exemptions that can be taken advantage of to reduce the tax burden, however some of these require more cumbersome administration and record keeping. For example, you can reclaim the PPT on packaging that is used on exported goods, provided the goods are exported within 12 months. However, you must have records to prove the qualifying export and then apply to reduce the PPT accordingly. Depending on how many companies in the supply chain this can become complex.
How To Move To Reduce the Impact of the Tax
When it comes to using reducing the impact of the tax, there are a number of options available to you and your business.
Reducing Plastic Weight
Cutting down on the amount of plastic used for a packaging component is, of course, one option, and has its own environmental benefits too. The key to this is to utilise a high performance material to maximise the down-gauging potential without compromising the pack integrity or critical performance levels. There is particular scope to take advantage of this by moving from rigid plastic containers and bottles to lighter-weight flexible packaging pouches. The weight reduction per pack can be very considerable, and there are also other potential benefits for your brand.
Moving To Recycled Plastic
While this isn’t a simple solution for every business, moving to a plastic or polymer that uses at least 30% or more qualifying pre-consumer or post-consumer recycled plastic in its construction will allow your business to avoid paying PPT. This may be tricky, especially if your business is in the food industry, as there is very limited availability of qualifying recycled content that is suitable for primary food packaging. However, if you do have access to this, it is the solution that the government are seeking to encourage.
Moving To Alternative Packaging Materials
The other option to avoid having to pay PPT is to use alternative plastic-free or low-plastic flexible packaging instead. These include using materials such as recyclable paper and compostable cellulose, which have become increasingly popular in recent years, and many of which also have other strong sustainability benefits too.
The Use Of Sustainable/Recycled Packaging
In the end, PPT will promote innovation. It will also serve as one of many tools for mitigating global pollution. There are, however, several factors that need to be addressed and resolved by both businesses and customers, to successfully transition to a more sustainable way of living and conducting business.
For more information about how PPT could affect you or your business, feel free to speak to our team. They will be happy to assist you.