We know there has been a lot going on over the last year, with a lot of new regulations and advice keeping businesses on their toes. Between Brexit and the pandemic, many businesses have been focussing on the changes happening now. But there is another change on the horizon, and if it applies to your business, then it would be best to start preparing now.
We are talking about the plastic packaging tax which comes into effect in April 2022. From that date, there will be a new tax applied to all manufacture, import and sales of plastic packaging, in a bid to reduce our impact on the environment. While the tax might seem like a small change, there will be some sufficient financial, administrative and business implications for the businesses it will affect, which is why you should be taking some steps to understand it now. Since we are still a year away from the implementation date there are still some details that could change, but to give you an idea of the landscape, here’s everything we know about the plastic packaging tax so far.
Who will be affected?
The plastic packaging tax is aimed mainly at businesses, but its remit does cover other areas too. Specifically, there are 4 core groups that will be subject to the tax:
- UK producers of plastic packaging
- Importers of plastic packaging
- Business customers of producers and importers of plastic packaging
- Consumers who buy goods in plastic packaging in the UK
Of course, like any tax set out by the government, there are exception clauses. The aim of this tax is to encourage businesses manufacturing, selling and using plastic packaging to really think about how much plastic they use, and to switch to a more environmentally friendly alternative. As part of this, the government have already confirmed that the new plastic packaging tax will not apply to any plastic packaging products that contain a minimum of 30% recycled plastic, or any packaging that isn’t predominantly made up of plastic by weight measure.
On the other side, if your business either manufactures or imports over 10 tonnes of plastic packaging in any 12-month period, then you will have to register to pay the plastic tax. Even if your packaging is above that minimum recycled %, and even if you never end up having to pay a penny of the tax, you will still need to be registered through the government portal, and submit reports proving that you do not need to pay anything. This sounds simple, but it is easy to fall foul of the rules – for example, if you are importing packaging that contains goods already (drinks in plastic drinks bottles is the common example), you will still have to pay the tax.
There are, however, two clear exemptions to the plastic packaging tax. They are:
- Packaging for human medicines
- Transit/transport packaging around imported goods
There may be more exemptions added at a later date, but the list is likely to remain very short.
How much will the tax be?
This is a difficult one to commit to, because it is one of the things that may change as we get closer to the deadline. However, right now the proposal is to charge £200 per tonne of qualifying packaging that is produced or imported to the UK. If the amount is less than a tonne, then that £200 will be reduced according to the weight.
Reporting and payment for the tax will follow accounting periods for each business, and business owners will be expected to self-report through HMRC. It is fairly similar to the way VAT is handled. Businesses submit their reports, HMRC oversee, check and investigate if needed, and provide businesses with an amount they need to pay.
Changes you can make now
While we are still just under a year away, there are some big changes you may need to make if you are in one of those 4 core groups. Some of those changes will require you to understand a bit more about the way your business buys and uses plastic packaging, which is why we suggest taking a few simple steps now to make the transition easier. A few suggestions would be:
Track: Knowing how much packaging you manufacture, or import, is going to be critical for this tax, so doing this now gives you a good head start. Keep a written record of all plastic packaging you are making or buying and review it regularly. This will help you keep an eye on your threshold and give you a better idea of roughly how much tax you will be expected to pay. Even if you are using over 30% recycled plastics, this is a good exercise to make sure you don’t go over that 10-tonne limit, and if you do, then you know you need to register. Keeping accurate records means you can prove to HMRC that you are below that threshold if the taxman comes knocking.
Make eco-friendly changes: If you have been on the fence about moving to a more environmentally friendly packaging material, consider this your sign to do it. Even just moving to using 100% recycled plastic will be a positive change to the environment and means you do not have to worry about the new plastic packaging tax. So, take a look at your existing packaging, and decide whether you really need plastic, or if you could opt for something different. Making this change now would ensure you are well clear of needing to pay the tax.
Prepare your invoices: If you do find yourself needing to pay the plastic packaging tax in April, then you will need to make some changes to your invoices. Mainly, you will need to include a declaration that the plastic packaging tax has been paid onto every invoice you raise. So, if you know, or suspect this will be the case, get your statement written up and ready to go in April 2022.
Of course, this is what the tax looks like at the moment – there is still just under a year between now and the implementation deadline, so a lot could change. Once the tax has become law and is being enforced, more detailed guidance will be available. In the meantime, we recommend business owners who might be affected do their research and seek the help of a professional if they are not sure what they need to do. At Purple Lime, we understand that adding another tax into your business can be stressful, which is why we are on hand to help. We can work with you to understand your business cash flow, recommend changes in advance of the new tax coming in, and guide you through the final stages of registering and then submitting your returns. If you would like to find out more, please get in touch to book your free consultation by emailing hello@purplelime.uk.com or calling us on 01249 263 333.