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Time to get severe about lowering, reusing and recycling

Consistent with the present deal with sustainability, the Authorities launched a brand new tax on plastic packaging (“PPT”) from 1 April 2022.

In a transparent try and incentivise companies to import and manufacture recycled plastics, PPT will apply at a price of £200/tonne on plastic packaging with lower than 30% recycled plastic.  The tax kicks in at a threshold of 10 tonnes each year: in case you manufacture or import plastic packaging or pack items into plastic within the UK, then what you are promoting will likely be throughout the scope of the tax if it doesn’t meet the above standards.

‘Plastic’ is outlined broadly and contains biodegradable, compostable and oxo-degradable plastics.

What do companies must do?

Set up whether or not your plastic packaging is inside scope

Within the overwhelming majority of circumstances, it is going to be clear whether or not or not an merchandise is plastic packaging, however do not forget that the definition is broad and so it’s useful to examine the HMRC flowchart and steerage to help with this – see:

For instance, packaging that’s integral to the products is exempt from the tax as a result of the packaging is important to allow the shopper to make use of the products.  Objects equivalent to water cartridge filters or tea luggage fall into this class.

There are a number of different conditions the place exemptions are granted. A few of these can be found as tax credit if they are often proved later (e.g. the plastic is exported or transformed into a brand new part). In consequence, import/export and logistics firms, specifically, might be able to considerably cut back their publicity with the suitable recording processes.

Register for PPT

Companies which have imported or manufactured 10 tonnes or extra of completed plastic packaging since 1 April 2022 or that anticipate to import or manufacture 10 tonnes or extra of completed plastic packaging within the subsequent 30 days should register for PPT on the earliest date attainable.

If you don’t meet the edge on both of those checks, it’s best to, in any occasion, file the quantity of plastic imported or manufactured to reveal that you’re outdoors of the scope of PPT.  It’s because different companies in your provide chain will need proof of your standing in relation to PPT for their very own record-keeping necessities.

Report plastic utilization

The reporting features of the tax will must be thought-about by the operations/logistics capabilities and finance groups of companies. Strong proof is required to show a 30% recycled content material, and firms are anticipated to maintain information evidencing:

  • the origin and content material of the recycled materials;
  • the date the plastic was manufactured;
  • the proportion of the recycled plastic contained within the output supplies of the recycling course of.

Provide agreements ought to require such proof to be supplied the place acceptable and search to safe the required indemnities.

These necessities might initially be onerous for some companies, however creating a transparent framework for auditing the utilization of recycled plastic must also allow these firms in search of to minimise their use of ‘virgin plastic’ to publicise that truth. Outdoors of the apparent self-reporting alternatives, the sustainable sourcing and recycling of supplies equivalent to plastic are key efficiency indicators within the Mortgage Markets Associations’ Sustainability-Linked Mortgage Ideas. Sustainable plastic use can be factored into the affect assessments of firms making use of for B Corp certification, a rising motion of companies that give equal weighting to folks, the planet and revenue.

As a tax launched to incentivise sustainable and environmentally pleasant practices, the extra the tax will increase client information and aggressive strain on companies to enhance their sustainability credentials, the extra probably it’s to be thought-about successful.

Different concerns

Companies are permitted to go on the price of PPT to prospects.  Any worth enhance, although, may have VAT and company tax implications. Due to this fact, firms ought to think about these projections prematurely of passing the price on, significantly if there are questions on whether or not the corporate will likely be claiming PPT tax credit and/or whether or not the corporate will have the ability to reclaim any extra VAT.

Take recommendation

If it isn’t clear what the implications of PPT will likely be on what you are promoting, or you might be contemplating updating your supplies to cowl your new reporting duties in relation to PPT, it’s value taking skilled recommendation. That is significantly vital as a result of because the tax beds in, the method that HMRC is prone to take to making use of and treating the tax isn’t but clear.

Cathy Bryant

Cathy Bryant is a associate within the Blake Morgan’s company crew specialising in company tax. As a twin certified lawyer, Cathy brings a depth of expertise to her position as an adviser on tax issues in company transactions. Cathy additionally advises on employment taxes – for instance on termination funds made to workers, the appliance of IR35 and different employment associated tax issues. She develops share incentive schemes for employers and advises on the construction and scope of those.