HMRC Plastic Packaging Tax legislation – which products are affected?

Even if your business will not be directly affected by the HMRC’s Plastic Packaging Tax legislation, if it uses specific forms of plastic packaging, then you are highly likely to see some form of impact.

Suppliers potentially passing on some or all of the additional costs imposed by the tax. Demand for (and therefore prices) is possibly increasing for packaging with recycled content, and businesses are scrambling to ensure a consistent supply and costs. All of this could directly or indirectly affect your business.

Whilst there are several ways to reduce the impact or avoid the tax on plastic packaging, the first step is to see if the products you use will be within the scope of the tax.

As such, this guide covers:

• A brief overview of whether your business will directly be liable for the tax.
• Any product exemptions.
• Considerations regarding mixed material packs.
• And much more!

Before jumping into the details of which businesses and products are affected, it is helpful to provide a bit of background information on the new legislation.

The Plastic Packaging Tax, as it is known, was introduced from 1^st April 2022, and has been implemented by the HMRC (Revenue and Customs). It will take the form of legal legislation. This is different to the Packaging Waste Regulations (which have now been replaced with the Extended Producer Responsibility legislation), and means sanctions and penalties for non-compliance could potentially be more significant.

In essence, the tax will see a £223.69 per tonne levy added to all qualifying plastic packaging. The keyword here is qualifying, as not all products deemed to be plastic packaging will be included in the scope of the tax.

The tax has been introduced to provide a clear economic incentive for businesses to use recycled plastic material in their packaging. With the tax on virgin materials making them less cost-effective, and the demand for recycled material leading to increased investment in the required infrastructure,  ultimately, it should help reduce plastic waste being sent to landfill and/or being exported.

For further information on this legislation, you can see our beginner’s guide to the Plastic Packaging Tax here.

There are several exemptions where businesses may qualify for not having to pay the tax.

Firstly, the tax is only paid by businesses that import or manufacture more than ten metric tonnes of plastic packaging (whether within the scope of the tax or not) in 12 months.

Secondly, if the packaging or component is exported outside of the UK within 12 months from manufacture, then this is exempt from the tax.

Thirdly and finally, there is a separate list of exempt packaging and products which do not qualify under the tax. Please see the following section for more details.

For single-use packaging, the government website indicates that:

For the purposes of the Plastic Packaging Tax, single-use consumer packaging is any single-use product that is designed to be used by a consumer or domestic user in performing one or more of the following functions in respect of goods or waste:

• Containment
• Protection
• Handling
• Presentation
• Delivery

These products would be use by the consumer rather than in the supply chain.

Even if your business will not be paying the Plastic Packaging Tax directly – and this will cover the vast majority of end users of plastic packaging – you may still feel the impact of the tax.

Put simply, some plastic packaging manufacturers may choose to pass on some or all of the additional costs to their customers.

As such, it is essential to ascertain which of the plastic packaging products you use will be within the scope of the tax. These are the products you may see price increases on.

Download our guide for a useful “decision tree” on whether your packaging is taxable or not.

Any plastic packaging that contains at least 30% recycled plastic content will be exempt under the new legislation.

This can include both pre-consumer and post-consumer plastics that are recovered for recycling, but can’t include scrap materials and/or “regrind” materials that are used within the same process.

Plastic packaging that is used in the immediate packaging (e.g., in direct contact with) medicinal products is exempt from the Plastic Packaging Tax.

A medicinal product – for the legislation – is defined as having properties for preventing or treating disease in human beings, or that may be used by or administered to human beings with a view to restoring, correcting, or modifying physiological function by exerting a pharmacological, immunological, or metabolic action.

It must be noted, however, that veterinary medicines are not exempt.

Any plastic packaging that is intended for export can have the payment of the tax deferred for up to 12 months. If the packaging is subsequently exported within this period, then the liability for the Plastic Packaging Tax is cancelled altogether.

Any plastic packaging or component that is permanently set aside at production or importation for a non-packaging function is exempt from the tax.

Plastic packaging that performs a secondary function – in this case, the ongoing storage of additional items – is exempt from the tax

The government definition of this is “Plastic packaging with the primary use of storing goods long-term”. This packaging is designed:

• As suitable to be filled when the goods it is intended to contain are sold.
• As suitable to be reused for the storage of the same or similar goods.
• So that its packaging function is secondary to its storage function.

This covers products including but not limited to toolboxes, first aid boxes, earphone cases, glasses cases, CDs, DVDs, video game cases, board game boxes, and so on.

This also includes products like protective cases that may include foam inserts (although not single-trip foams).

HMRC have confirmed that it does not extend to products such as tote boxes, returnable containers, and picking bins; however, as part of the supply chain, they are deemed as within the scope of the tax.

Any packaging that is designed to be an integral part of the product, is necessary to use the goods, and/or is discarded once the goods inside are used or by consumers, is exempt from the tax.

The definition, as provided by the government at the time of writing, states that a packaging component is an integral part of the goods where both the:

• Consumers cannot reasonably use goods without the component.
• Component is expected to be discarded once the goods (of which it is a part) are used, consumed, or discarded.

The exception to this is if the item is sold individually or empty as a packaging product.

Products that meet these criteria include printer or toner cartridges, tea bags, room deodorisers, lighters, water cartridge filters, perforated rice bags, etc.

Plastic items designed to be “used and reused” for the presentation of goods and which have been permanently set aside for this purpose before or as soon as being manufactured, are exempt.

This includes items such as display shelves, shop fittings, and sales presentation stands and POS.

Packaging used to transport and handle multiple sales units or grouped packaging (e.g., prevent damage during transit), as well as road, rail, ship, and air containers being used for delivery of goods into the UK, are exempt.

However, where plastic transit packaging is used only to transport goods within the UK, or unfilled transit packaging is imported as a standalone item, the tax will apply.

Packaging components which are used in aircraft, ship, or railway stores for international shipping are not subject to the tax.

However, upon being released from the stores into the UK, they will then become subject to the tax.

Although there are fairly clear guidelines with regards to which products are exempt from the Plastic Packaging Tax, one potentially complicating factor is when packaging is made up of multiple, varied materials.

If the products are not exempt under the criteria set out in the previous section, then, in essence, the product will qualify for the tax if it contains more plastic by weight than any other material.

For example, a 10-gram packaging component that consists of four grams of plastic, three grams of aluminium, and three grams of cardboard would be considered as plastic packaging. This item would be taxable as a 10-gram product (e.g., at the full weight of the item, not just the plastic component).

Similarly, a packaging item that contained four grams of aluminium, three grams of cardboard and three grams of plastic would be classed as 10 grams of aluminium. It would therefore not be within the scope of the tax.

It is important to note here that two or more materials would only be considered a single component where they are manufactured together. Foam being glued into a box, for example, would be considered two separate components for the tax.

The past few years has seen a number of biodegradable, compostable, and bio-based plastics launched onto the market.

Despite their supposed environmental benefits, these materials are also within the scope of the new Plastic Packaging Tax legislation.

Whilst your business may not have to directly pay the new Plastic Packaging Tax, if you use any of the products which fall under the scope of the legislation, then you are likely to see price increases as some of all of the costs are passed on.

However, this provides an excellent opportunity to review your packaging use, and potentially move to more sustainable options (either using recycled content, or different materials entirely).

This should allow you to not only mitigate any price rises, but help to minimise the environmental impact of your business moving forward. This can even be a significant selling point or new and existing customers alike.