Frequently asked questions around the plastic packaging tax answered

We have been hosting a series of webinars alongside Comply Direct about this new plastic tax to help businesses prepare and ensure they are compliant. During the webinars, we received many interesting questions.

In this article, we answer the most frequently asked questions surrounding the plastic tax. Including:

• How is the 30% recycled tax calculated?
• What if you have items with more than 30% RPC or just a little bit less than 30% RPC?
• If the packaging is by weight in majority non-plastic, is then the plastic component exempt from taxation?
• Are products such as plastic wrap, plastic strapping and corner protection strips liable?
• How does the reporting process work and how is the tax paid?
• If packaging is made up of majority of paper but contains plastic that is 100% virgin is that within scope of the tax?
• For a container such as a plastic bottle, does the tax apply to the total unit or the individual components eg: the cap/label/bottle?
• If a UK company has products packed outside the UK and imports them as a finished product, who pays?
• With the pre-consumer recycled plastic definitions: Can we re-purpose stocked material/products and would this be considered as recycled plastics?
• When purchasing pallet wrap from a UK supplier, would that mean that the supplier is liable?
• What would be required to prove recycled content if importing plastics?
• Are there any exempts from the tax?
• Why are compostable and biodegradable plastics included in the tax?

Please do keep in mind that new information is coming out regularly, so information might change.

Q1. How is the 30% recycled tax calculated?

A: 30% will be calculated using the mass balance equation - total plastic recycled content divided by total plastic weight. For mixed plastic components, the same mass balance calculation will apply.

Q1b: What if you have items with more than 30% RPC or just a little bit less than 30% RPC?

A: 30% is currently the only threshold, there is no reward for exceeding the 30% value, nor any benefit for getting close to it. From a taxation purpose, the figure only matters if it is above or below 30%.

Q2. If the packaging is by weight in majority non-plastic, is then the plastic component exempt from taxation?

A: Majority in this sense refers to plastic being "the largest constituent material by weight", whilst this does encapsulate >50% it would also include components where plastic is the single largest material. For example, if an item was 30% aluminium, 30% steel and 40% plastic, it would be considered plastic. The other thing that is important to consider is the definition of a component vs a product. Whilst HMRC have been relatively broad in their definition of what constitutes a component, in general this would be an individual packaging component such as a cap, bottle or label etc. We are using the "hand separable" definition as a guide.

Q3. Are products such as plastic wrap, plastic strapping and corner protection strips liable?

A: Tertiary/transit packaging on imports would not be liable under the plastic tax. However, any UK sourced or UK added packaging would be.

Q4. How does the reporting process work and how is the tax paid?

A: Liable parties will be expected to report quarterly on the tonnage of plastic packaging components either manufactured or imported into the UK, as well as recording what proportion has 30% recycled content and what proportion is exempt. HMRC will likely then tax the business directly based on what has been handled each quarter.

Q5. If packaging is made up of majority of paper but contains plastic that is 100% virgin is that within the scope of the tax?

A: As plastic is not the main constituent material in the component, it would not be considered a plastic component and therefore would not be liable. For example, a paper coffee cup which has a thin plastic liner would likely not be liable under the tax.

Q6: For a container such as a plastic bottle, does the tax apply to the total unit or the individual components eg: the cap/label/bottle?

A: We expect it to be on individual components, but it is still unclear how individual components would be defined. We expect factors such as hand separability to be quite key. With this in mind, we would suggest a label, bottle and cap would be individually classified.

Q7: If a UK company has products packed outside the UK and imports them as a finished product, who pays?

A: The business who owns the packaging at point of import into the UK. If the company imports the finished product, it would be them who would need to pay, but if a retailer imports from an overseas manufacturer, the retailer would be liable as the importer.

Q8: With the pre-consumer recycled plastic definitions: Can we re-purpose stocked material/products and would this be considered as recycled plastics? Like upcycling?

A: As long as the material is undergoing a reprocessing activity at a “reprocessing facility” first then yes. As discussed in our webinar, we hope for more clarity from HMRC on exactly which activities would count.

Q9: When purchasing pallet wrap from a UK supplier would that mean that the supplier is liable?

A: Correct, the supplier is liable. However, you have a duty of due diligence to ensure the tax has been paid on the item, otherwise you would be considered jointly liable.

Q10: What would be required to prove recycled content if importing plastics?

A: The government has provided a list on gov.uk of potential evidence types including but not limited to: Product Specification Contracts Production Certificates, Business Accounting Systems, Accreditation Quality assurance audits, and Sales and purchase invoices. Please note that HMRC have suggested that providing multiple streams of evidence may help further enhance the evidencing process.

Q11: Are there any exempts from the tax?

A: There are currently only 4 categories of packaging exempts from the tax. They are products designed to be:

• Used for the immediate packaging of licensed human medicine
• Permanently recorded as sit aside for a non-packaging use
• Used as transport packaging to import multiple goods safely into the UK
• Used in aircraft, ship and rail goods stores

If the product doesn’t fall under the above exempts, there is no exemption in the tax for materials that can’t contain 30% recycled content. The tax is meant to act as an incentive to encourage industry demand and investment for more sustainable materials.

Q12: Why are compostable and biodegradable plastics included in the tax?

A: First of all, let’s start with the definition in the tax of what is meant with plastic. Plastic in this tax means a polymer material to which additives or substances may have been added. This does not include cellulose-based polymers which have not been chemically modified. It does include polymers which are biodegradable, compostable or oxo-degradable.

Currently, biodegradable and compostable plastics are not deemed completely suitable for UK recycling as they can still end up in landfill. When it comes to end of life management there’s a risk of cross contamination, so this is why biodegradable/compostable plastics are being included.

To find out more about the packaging in and out of scope of the plastic packaging tax, visit gov.uk or attend one of our plastic packaging tax webinars.