Firms still ‘confused’ about Plastic Packaging Tax

Recent data suggests that less than a thousand UK businesses have registered to pay a new tax on plastic packaging, despite the government expecting tens of thousands to be affected.

The Plastic Packaging Tax, which came into force on 1 April 2022, places a £200-per-tonne tax on plastic packaging that contains less than 30 per cent recycled plastic. It applies to most types of plastic packaging manufactured in, or imported into, the UK – affecting not only those that manufacture packaging, but also those who purchase, or import filled or unfilled packaging:

• Manufacturers of plastic packaging must register for the tax and keep sufficient records if they manufactured 10 or more tonnes of finished plastic packaging components within the last 12 months, or will do so in the next 30 days
• Importers of plastic packaging, or goods in plastic packaging, need to register for the tax if they imported 10 or more tonnes of finished plastic packaging components within the last 12 months, or will do so in the next 30 days
• Businesses that buy finished plastic packaging from another business within the UK do not have to register but should still complete due diligence to make sure their supplier has accounted for the tax or provided proof that the packaging is exempt.

Despite HMRC estimating that up to 20,000 businesses could be impacted by the tax, less than a thousand had signed up by August. This suggests that many thousands of businesses are still unaware they are directly affected.

Businesses are required to carry out due diligence on their supply chains and can be held jointly liable with suppliers or customers who fail to pay the tax correctly. Deliberate failure to comply carries the risk of criminal charges.

Abigail McGregor, Tax Solicitor at law firm Pinsent Masons, warned that confusion or lack of awareness will not stop HMRC from taking action:

“There is a lot of confusion among UK businesses – as well as those who supply into the UK – about who needs to pay the plastic packaging tax, when they need to pay and on which products. Many are unaware the products they make or use are within the scope of the tax, or that they could be liable if another member of their supply chain fails to pay.

“Although HMRC is unlikely to impose hefty penalties for innocent non-compliance immediately, unfortunately, being unaware of a new tax will not stop HMRC from investigating your business and levying penalties for any underpayments or failure to register and make returns in the longer term. Businesses that ignore the plastic packaging tax may be in for a nasty surprise.

“It is critically important that companies make sure they know whether they are liable or not – or whether they have sufficient due diligence measures in place – as soon as possible. Any businesses which are unsure should seek professional advice immediately.”