The Plastics Tax takes effect on 1 April 2022. In our recent ‘Plastic Tax for Dummies’ webinar we were inundated with customers’ queries about the tax. If you missed it, and whilst we wait for the release of the final legislation, we’ve summarised the key questions and answers in this our second blog on the tax.
You can read more about what the tax is and who pays it here.
If you want help to reduce your liability for the Plastic Tax contact Lindum Packaging on 01469 574480 or email us at firstname.lastname@example.org
- The tax will come into effect from 1st April 2022
- The tax will be charged at £200 per metric tonne
- It applies to importers or manufacturers of more than 10 tonnes of plastic packaging
- Bio-based, biodegradable, compostable and oxo-degradable plastics are all in scope of the tax.
Q: Is the 12 month an annual 12 month, or a rolling 12 months?
A: From the guidance, it is a rolling 12 months. In the current information for business guidance, in section 5 (which can be found here) it states: “manufacture or import 10 or more tonnes of plastic packaging over a 12-month period.” There is also further information on completing your tax return, with accounting period dates in here.
Q: As an acting UK agent for a Chinese manufacturer, who is liable to pay the tax, the manufacturer in China or my customer importing the goods?
A: The parties who will be liable are those who either manufacture in or import into the UK, therefore the customer importing the goods in the UK will be liable – not the Chinese company.
However, with regards to imported plastic packaging components evidence from the manufacturer is critical – with details of recycled content needed from the overseas manufacturer. As noted in the guidance: “For imported packaging, you will need to provide from the manufacturer of the packaging or evidence that you or a competent third-party has a robust supply chain audit.”
Q: If we use shrink wrap but don’t make it, are we liable for the tax on it or would this have been paid by the supplier of the shrink wrap?
A: The tax is liable on those businesses who manufacture in or import into the UK. So if you don’t make it (and are therefore not the manufacturer), you would only be liable if you import the product from a supplier overseas.
Q: What happens to product purchased before April say we sell all products in March is that applicable to tax?
A: The Plastic Packaging Tax comes into effect on 1st April, so anything sold prior to that is not in scope. The current guidance states you are liable for the tax “at any time after 1st April 2022 you expect to manufacture or import 10 tonnes or more of plastic packaging in the following 30 days.” More details on businesses that must notify liability, can be found in the guidance here.
Q: Is it true that pallet wrap is exempt?
A: No, transit packaging is in scope of the tax. Pallet wrap, and other transit packaging goods are specified as being exempt, only when used on imported goods coming into the UK. Should you manufacture or import pallet wrap, then you will be in scope of the tax.
Q: Does the 10 tonnes per 12 months refer to the total your company buys in? For example, if my company produce another brand’s products (B2B arrangement), is the tax broken down per brand produced or just at a total company level?
A: The 10 tonnes per 12 months is in reference to the business that either manufactures or imports. There is no reference in the guidance to how this is broken down, simply the business that manufactures or imports is to be the liable party. There is a reference in the guidance to group registration, which refers to ‘businesses who are members of a group of companies’, and that can be found in point 5.2 here.
Q: If you are a wholesaler of packaging, bought from a UK manufacturer (who has paid the tax) – we then don’t have to pay the tax either? However, we do have to record it?
A: If you purchase from a UK manufacturer, then they would be the ones who would be liable for the tax and should have paid it – if applicable (i.e. does not contain the necessary amount of recycled plastic). When purchasing, business invoices should make reference to the Plastic Packaging Tax; detailing weight and amount of recycled plastic and how much (if any) tax has been paid on the items you are purchasing. Therefore it would be advisable to keep a record of any plastic packaging purchased, to show the tax has been paid on it. Final legislation may give clearer guidance on this.
Q: Direct food contact products need virgin, so it will attract tax as it seems according to this it is not exempt, is that the case?
A: There is no specific reference in the guidance to food contact products. The only exemptions from the tax are the categories mentioned here. Unless the products come under any of the categories or products listed in the guidance as being not chargeable, then unfortunately they will be liable for the tax as it stands.
Q: Does this cover direct food packaging such as microwave containers etc?
A: As mentioned in the webinar, the HMRC guidance gives no definitive list of plastic packaging that is in scope of the tax. It does however give definitions to determine what plastic packaging components are in scope. It does also give some categories and product types that are not chargeable for the tax. There is no direct mention of direct food packaging, just general definitions for you to determine if your product is in scope. Definitions can be found here.
Q: With regards to multi material percentage, if the paper weight of a carton is more than plastic weight, but the plastic is imported is this exempt or liable?
A: If you imported the carton as a finished product, and the weight of the cardboard was more than the plastic, then this should not be in scope of the tax. However, the final list of substances that can be classed as multi-material has not been finalised yet, so the final guidance should confirm if cardboard is in scope.
If you imported the plastic before carton manufacture, then only items that are classed as finished packaging components are subject to the tax. Within the guidance, it states ‘a component is finished when it has undergone its last substantial modification.’ As such, plastic alone, before being made into a plastic packaging product we don’t believe to be liable – only once turned into a finished packaging component.
For further info, see details on both multi-materials and substantial modifications in section 2 here.
Q: If we import plastic packaging that is not yet considered a packaging component as defined, but over the 10t threshold in 12month period, are we liable to register?
A: Plastic Packaging tax is “due on finished plastic packaging components manufactured in, or imported into the UK in which less than 30% of the plastic is recycled plastic.” Definitions of plastic packaging and plastic packaging components can be found here, to determine if you would meet the criteria.
Q: When importing from China – who is liable? The UK wholesaler or the Chinese factory?
A: When importing finished plastic packaging components from China, it is the party that imports into the UK that is liable, not the overseas manufacturer. Therefore in this instance the wholesaler would be the importer and therefore would need to register and pay the tax (if products <30% recycled plastic).
Q: How does this affect plastic packaging which needs to be food grade (i.e. euro containers, ingredient storage etc). This cannot be recycled material so will it be exempt?
A: There is no specific reference to food grade products in the draft guidance. The only exemptions to the tax specified, which can be found here. At this stage, if your products meet the plastic packaging definition and aren’t within the exempt categories and product types, then they will be liable for the tax.
Q: If we forward the tax to our customers, would we have to add VAT?
A: In the register for the tax guidance online (which can be found here) it specifies that: “VAT will continue to be payable on the whole price charged for the goods you sell according to VAT rules. If you increase your price of your plastic packaging because of Plastic Packaging Tax, VAT will be payable on the whole of the new price.”
Q: So finished goods imported into the UK for sale are not in scope?
A: Finished packaging components that are imported into the UK are in scope if they are either empty or filled. As specified in the guidance: “This includes imports of packaging which already contains goods, such as plastic bottles filled with drinks. Where packaging you import already contains other goods, the tax only applies to the plastic packaging itself.
Don’t forget if you want help to reduce your liability for the Plastic Tax contact Lindum Packaging on 01469 574480 or email us at email@example.com