21st September 2021
The Plastic Packaging Tax (PPT) comes into effect from April 2022. PPT will be charged on plastic packaging which contains less than 30% recycled plastic material. The rate of tax is £200 per tonne of plastic packaging material.
The tax applies to plastic packaging components which includes a product designed to be suitable for use in the containment, protection, handling, delivery or presentation of goods at any stage in the supply chain. There are limited exceptions to this very wide definition, including packaging used in the immediate packaging of a medicinal product and transport packaging used on imported goods.
PPT is levied on producers of plastic packaging, and importers of packaging or of products which are packaged in plastic (food or drink products, for example). Since we wrote about the tax in May, Her Majesty’s Revenue and Customs (HMRC) has been contacting packaging producers and importers to alert them to the tax and that they may need to register for and pay PPT and update their systems to deal with the tax.
Although the focus is mainly on businesses which may need to pay the tax as producers or importers of packaging, other businesses in supply chains involving packaging need to consider whether the tax could also affect their costs and whether their supplier and customer contracts deal with PPT risks. Businesses may find that the cost of PPT can be passed onto them by their supplier but they may not be able to pass the cost to their customer.
An unusual feature of PPT is that HMRC has been given powers to impose “secondary liability” assessments on other parties in a supply chain in certain cases where a producer or importer has failed to pay the tax. Parties in the supply chain, including those storing or transporting the product and operators of online marketplaces or fulfilment businesses, can be made liable for any unpaid PPT if they knew or ought to have known that PPT was not paid at another stage in the supply chain. HMRC is due to issue guidance on how it will apply these rules, but it seems likely that it will expect businesses to have done some due diligence on suppliers and, possibly the product, if it is sold to them as recycled plastic. A particularly important point to be clarified in guidance is when HMRC will treat a person as “ought to have been aware” of a PPT default.
Businesses should start to consider the impact of PPT in relation to their supply chain contracts. In particular:
Businesses need to be considering PPT now, it should not be left until 2022. We can advise businesses on how PPT may apply in their supply chains, and the review and changes that may be needed to their contracts to ensure that they are ready for the PPT regime.
Head of Commercial