UK Plastic Tax Reporting: why It matters for your company and responsibilities 

The United Kingdom is introducing a new tax on plastic packaging from April 2022. The regulations on which companies must report when are still unclear to many. This article is intended to bring transparency to a complex topic and serve as a guide for manufacturers and importers of plastic packaging as well as their employees. 

• The obligations for companies to report on their impacts, not only at the request of customers but also due to legal requirements, are becoming ever greater
• The responsibilities for PPT reporting should be divided within the company
• Even if products are not taxable, there may be record-keeping and reporting requirements
  

Around the world, there are various regulations to achieve climate goals. In October/November 2021, the COP26 climate conference was held in Glasgow. The parties met in the UK to define further measures to achieve the objectives of the Paris Agreement and the UN Framework Convention on Climate Change. The agreements reached included a ban on the use of fossil fuels and a 55 percent global reduction in CO2 emissions by 2030. Goals like these are impacting businesses. Companies must adapt, commit to reducing emissions and help meet the 2-degree target.

In the UK, a tax on plastic packaging will be introduced from April 2022 for this reason. This strives to classify companies according to how their actions contribute to climate and sustainability. To make the impact of ESG criteria in companies measurable and manageable along the value chain, a climate data analysis is necessary. The obligations for companies to report on their impacts, not only at the request of customers but also due to legal requirements, are becoming ever greater.

How will the new regulations and plastic tax affect businesses?

The Plastic Packaging Tax (PPT), which comes into force on April 1, 2022, is summarised in brief: 

• The tax rate is £200 per ton on plastic packaging that contains less than 30% recycled plastic and is manufactured or imported in the UK (including packaging on imported finished goods).
• The purpose of the tax is to encourage the use of recycled material in the manufacturing of plastic packaging.
• If a company reaches the 30% recycled content threshold and there is a tax liability due to PPT, registration is still required.

When the business manufactures plastic packaging components in the UK or imports them into the UK, a quarterly tax return must be filed with HMRC every quarter. 

The tax returns must relate to an accounting period, which are: 

• April 1 to June 30
• July 1 to September 30
• October 1 to December 31
• January 1 to March 31

The income reported on the quarterly tax return must be accurately recorded and accounted for. The books must show how the figures in the tax return were arrived at and the records must contain the supporting documentation for these figures. In addition, the books and records must be kept for at least 6 years after the end of the accounting period, and the weight of the packages must be stated in tons, kilograms, and grams. The tax return must be submitted and the tax due paid no later than the last working day of the month that follows the accounting period.

Responsibilities within the company

Often the distribution of responsibilities within the company for PPT reporting is unclear. Since it is about taxes, one initially thinks that the finance department and tax experts are responsible for the topic. PPT was introduced to drive climate change within the company and to promote the use of recycled plastic. For these reasons alone, it makes sense to approach the topic at different levels and to view it from different management levels. 

Since PPT is a company-wide issue, ideally different internal stakeholders should work together. Teams from quality and procurement management, packaging and sustainability teams as well as systems management and traceability, should be involved in operational processes. An efficient approach is to assign one person from each department with responsibility for PPT, with additional technical support from the tax department. Also, internal tax experts should familiarise themselves with HMRC terms and conditions to act as a point of contact for questions and as a link between the company and HMRC.

Simple in theory, but how does implementation work?

PPT can be applied on a broad scale and hence a wide range of companies will be affected. HMRC has posted some guidance, including potential exemptions from the PPT on its website. Despite these guidelines, while no tax may arise, there may be record-keeping and reporting requirements. One of the biggest challenges arises with imported goods. In this case, British companies must obtain information from suppliers about the packaging, the contents, and the supply chain. They are liable for the taxable plastic in the imported packaging in this instance. 

We understand the complexity of the issue. That's why PlasticPlan's team has focused on helping all UK-based companies that manufacture, import, or export plastic packaging with data aggregation, data modeling and classification, and data validation and insight.
Contact us for initial questions. We specialize in a software solution, making PPT reporting easier for your company.