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HMRC Plastic Packaging Tax legislation – which products are affected?

Matt Dobson: Last Updated 15th March 2022
Posted In: Environment | Guides & Advice
https://www.gwp.co.uk/author/Matt-Dobson/ xx 31179

Plastic Packaging Tax 2022

Will your business’ packaging be affected by the new legislation?

Even if your business will not be directly affected by the upcoming HMRC plastic packaging tax legislation, if it uses certain forms of plastic packaging then you are highly likely to see some impact.

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

And whilst there are a number of 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 be directly liable for the tax
  • Product exemptions
  • Considerations regarding mixed material packs
  • And much more

Please continue reading below, or use the table of contents to find the specific content you are interested in.

Quick Reference / Contents

Introduction

The who, the what, the why, and the when

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

The Plastic Packaging tax, as it is known, is being implemented by the HMRC (revenue and customs). It will take the form of legal legislation. This is different to the Packaging Waste Regulations (which are operated by the Environment Agency), and means sanctions and penalties for noncompliance could potentially be more significant.

In essence, the tax will see a £200 per tonne levy added to all qualifying plastic packaging. The key word here is qualifying, as not all products deemed to be plastic packaging will be included in the scope of the tax.

minimising plastic waste
The Plastic Packaging Tax is being introduced to encourage recycling and minimise plastic waste

The tax has been introduced with the aim of providing a clear economic incentive for businesses to use recycled plastic material in their packaging. With the tax on virgin materials make 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.

And finally, the tax is being introduced from 1st April 2022.

For further general info on the legislation, you can see a beginner’s guide to the UK plastic Packaging Tax here.

01: Who Pays the Tax

Which businesses will be responsible for paying the Plastic Packaging Tax?

Before looking at the packaging products are within the scope of the tax, it is worthwhile to identify the businesses that will potentially be required to pay the tax.

As such, there are three main groups that the new legislation affects.

Firstly, any businesses that imports plastic packaging and / or components used in packaging products will potentially have to pay the tax.

Any business in the UK that manufactures plastic packaging (and again, components used within packaging) may be required to register and pay.

And finally, any business which performs the “last significant modification” to the packaging (including changes to its shape, structure, thickness, weight, or appearance) may also be required to pay the tax. This final point is also used to decide which business will be liable to pay if multiple manufacturers contribute to producing a product.

products affected by hmrc plastic packaging tax
It is important to understand which businesses - and packaging products - are subject to the new tax

Exemptions from the tax

There are a number of exemptions where businesses may qualify for not having to pay the new 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 a 12-month period.

Secondly, if the packaging or component is exported outside of the UK within a 12-month period 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 of these.

02: Plastic Packaging Tax Exemptions

Which products are within the scope of the Plastic Packaging tax legislation?

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 important 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.

This next section covers products which are excluded from the tax, whilst this downloadable PDF also provides a useful “decision tree” on whether your packaging is taxable or not.

Packaging with 30% recycled content

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 cannot include scrap material and / or “regrind” materials that are used within the same process.

Medicinal Products

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

A medicinal product – for the purpose of 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 a physiological function by exerting a pharmacological, immunological, or metabolic action.

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

medicinal plastic packaging
Packaging used for medicinal products are exmpt from the new HMRC Plastic Packaging Tax legislation

Packaging that is directly exported

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.

Alternative Use

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

Packaging filled at point of sale (where packaging function is secondary to storage)

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’s designed to contain are sold
  • as suitable to be re-used 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, CD, DVD and video game cases, board game boxes, and so on.

This also includes products including 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 being part of the supply chain they are deemed as within the scope of the tax.

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

Packaging that is an integral part of the goods

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 consumed, is exempt from the tax.

The definition, as provided by the Government at the time of writing, states “(a) packaging component is an integral part of the goods where both the:

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

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

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

Packaging primarily for reuse in presentation

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 sales display shelves, shop fittings, and sales presentation stands / POS.

Packaging for transporting goods into the UK

Packaging used to transport and handle multiple sales units or grouped packaging (i.e. to 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 transport packaging is used only to transport goods within the UK, or unfilled transport packaging is imported as a standalone item, the tax will apply.

aircraft ship railway store packaging
Packaging used for that transit of items can be exempt (under certain circumstances)

Packaging used in aircraft, ship, or railway stores

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 become subject to the tax.

03: Material Considerations

How is mixed material packaging handled under the regulations?

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 4 grams of plastic, 3 grams of aluminium and 3 grams of cardboard would be considered as plastic packaging. This item would be taxable as a 10-gram product (i.e. at the full weight of the item, not just the plastic component).

Similarly, a packaging item that contained four grams of aluminium, 3 grams of cardboard and 3 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.

mixed material packaging
Mixed material packaging will be tax exempt if the plastic component(s) are not the single greatest element by weight

Bio Plastics, Biodegradable, and Compostable materials

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.

Summary

Mitigating the effects to your business

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 or 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 minimize the environmental impact of your business moving forward. This can even be a significant selling point for new and existing customers alike.

Important Notice

The information on this page is believed to be correct at the time of publication. The content of this article is also subject to change until the Plastic Packaging Tax legislation is fully approved by Parliament.

Please also note that the information provided is intended as a guide only. GWP can accept no responsibility or liability for loss, damage, or any other consequence of reliance on this information, howsoever caused. As all applications and scenarios vary, it is your responsibility or the responsibility of your business to ensure that tax is paid if / where applicable. If in any doubt, please check with your tax advisor.

Further Reading...

About the Author

Matt Dobson

Marketing Manager | GWP Group

Matt has worked in the packaging industry for approximately 10 years, having joined GWP Group as Marketing Executive in 2012. [Read full bio…]

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