How does the incoming plastic tax affect businesses?

In this article, PKF Smith Cooper takes a closer look at what businesses need to know regarding the upcoming plastic tax that is due to come in on the 1st of April.

The environment, and the effect we have on it, is at the forefront of the minds of businesses, consumers and the Government. As a result, the Government is eager for businesses and consumers to increase their use of recycled materials over plastics, wherever possible, which has led to the creation of the Plastic Packaging Tax.

This tax comes into force from 1st April 2022 and applies a tax to some plastic packaging manufacturing and imports (or packaging for which plastic is the main component).

The reason behind this tax is to provide a clear, economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging. In turn, this is predicted to stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfills or incineration.

What is the plastic packaging tax?

The definition of “plastic packaging” is packaging that is predominantly plastic by weight.

This tax has been planned since 2018 and applies to plastic packaging manufactured in, or imported into the UK, that contains less than 30% recycled plastic. This is slightly different for packing comprised of mixed components (such as cardboard and plastic). In this instance, if the weight of the plastic constituent is higher than the other components, then the packaging falls within the scope of the tax.

Furthermore, this will not apply to any plastic packaging which contains at least 30% recycled plastic, or any packaging which is not predominantly plastic by weight.

Where the tax applies, it’s charged at £200 per metric tonne of packaging, and affected businesses must register ahead of time and start filing a special quarterly tax return.

Am I affected by these changes?

This affects UK companies but there’s good news for smaller businesses. The threshold is 10 tonnes a year, so if the weight of packaging you import or manufacture is below this weight across a 12-month rolling period, the tax won’t apply.

Once a business reaches the 10 tonnes threshold within a 12 month period, they must register for and start applying the tax in the following quarter.

How to register for the plastic packaging tax?

To register for the tax on the HMRC website, you may need to provide the following details:

  • Your business type
  • Your businesses address and contact details
  • The date your business became liable for plastic packaging tax
  • An estimate of how much finished plastic packaging you expect to manufacture or import in the next 12 months
  • A customer reference number. This could be your Corporation Tax Unique Tax Reference (UTR), Self Assessment UTR (or National Insurance number), Company Reference number, or Charity Registration number. Once registered, you’ll be assigned a reference number that you should use in correspondence.

Do I need to do anything in my accounting system?

We advise that you check with your accounting system provider for specifics concerning your situation. For Sage 200 users, Sage has not yet advised of any formal actions or changes that they are planning for the system.

Where to find more information?

To find out more information about this tax, including its history, records you need to keep and tips to prepare, please refer to Gov.UK.

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