HMRC Plastic Packaging Tax legislation – which products are affected?

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.

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 1^st April 2022.

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

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.

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.

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.

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.

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.

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 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 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.

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.

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.

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.

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