Draft legislation published to introduce the UK’s Plastic Packaging Tax

On 12 November 2020, HM Revenue & Customs (“HMRC”) published a policy paper detailing the long-awaited plastic packaging tax (“Policy Paper”) along with the draft statutory instrument that will bring the tax into law (“Draft SI”) and an explanatory note[1].

The Policy Paper confirms that the tax will take effect from April 2022 and will apply to both filled and unfilled plastic packaging produced in, or imported into, the UK which contains less than 30% recycled plastic.

Key provisions

The Draft SI provides that the tax will be imposed when a “chargeable plastic packaging component” is either produced in, or imported into, the UK by a person acting in the course of a business. The reference to “a business” includes any activity of a government department, public authority or charity that is carried out for commercial purposes. The tax will be charged at a rate of £200 per metric tonne of chargeable plastic packaging components of a single specification.

HMRC invites comments on the Draft SI which should be sent to the Indirect Tax Directorate, Excise and Environmental Policy Design Team at [email protected].

Chargeable plastic packaging component

Under the Draft SI, a “packaging component” is defined as a product that is designed to be used in the containment, protection, handling, delivery or presentation of goods (at any stage in the transportation of goods from producer to user) or designed to be used solely or mainly by a user for the transportation, storage or preservation of goods.

A “plastic packaging component” is defined as a packaging component that contains more plastic, when measured by weight, than any other single substance. A plastic packaging component will be chargeable if the proportion of recycled plastic in the component is less than 30% by weight of the total amount of plastic in the component. Significantly, the Draft SI introduces a rebuttable presumption that a plastic packaging component is chargeable. The onus is on the producer or importer to demonstrate that the plastic packaging component is not chargeable.

“Recycled plastic” is plastic that has been reprocessed from recovered material by means of a chemical or manufacturing process so that it can be used either for its original purpose or for other purposes. “Plastic” is a material consisting of a polymer (other than a cellulose-based polymer that has not been chemically modified) to which additives or other substances may have been added. The revised definition removes part of the original definition which stated “…and which can function as a main structural component of final products…”, to take account of types of mixed material packaging where plastic is not the main structural component but is still the predominant material by weight. In such cases, the packaging will be considered plastic for the purposes of the tax. The revised definition also narrows the ‘natural polymer’ exceptions to those which are ‘cellulose-based’ to avoid instances of novel plastics or blends being developed to avoid the tax.

In the summary of Responses to the Policy Design Consultation[2], the government has confirmed that packaging-type products that do not fulfil a packaging function until they are used by the end consumer (such as cling film) will be included in the tax. The government has also decided not to exclude plastic packaging items that could also be characterised as longer-term storage items due to the difficulties in distinguishing between them and other types of packaging at the point of manufacture or import. It is also the case that their use as storage items is not always certain when they are sold to the users and inclusion in the tax will encourage more recycled content to be included in these products.

Liability to pay

Where the tax is imposed by virtue of the production of a plastic packaging component, the producer is liable to pay the amount charged. Where the tax is imposed by virtue of the importation of the plastic packaging component, the importer is liable.

Exemptions

Businesses that manufacture or import less than 10 tonnes of plastic packaging per year are not required to register for payment of the tax. There are also several use-based exemptions. The following products are out of scope of the tax:

1. plastic packaging manufactured or imported for use as immediate packaging of licensed human medicines;
2. plastic transport or tertiary packaging (as well as road, rail, ship and air containers);
3. plastic packaging components that are goods for use in a ship, aircraft or railway vehicle (including fuel, spare parts and other articles of equipment, whether or not for immediate fitting) are out of scope; and
4. plastic packaging components that have been permanently designated or set aside for use other than containment, protection, handling, delivery or presentation of goods (i.e. before, or as soon as, the plastic packaging components have been produced or imported, the components are permanently designated or set aside for another use insofar as the producer or person on whose behalf the components were imported keeps a record of that designation or setting aside).

Wider context

The plastic packaging tax is one of several UK measures targeting single-use plastics and incentivising plastic recycling. Businesses are likely aware of the ban on the distribution and sale of single-use plastic drinking straws, cotton buds and drink stirrers in England pursuant to the Environmental Protection (Plastic Straws, Cotton Buds and Stirrers) (England) Regulations 2020 and proposals to introduce similar bans in Scotland and Wales, as well as proposals by the European Commission to develop a regulatory framework for plastics.

Co-authored by Ben Collins.

[1]https://www.gov.uk/government/publications/introduction-of-a-new-plastic-packaging-tax

[2]https://www.gov.uk/government/consultations/plastic-packaging-tax-policy-design