The clock is ticking with One Year to go on the Plastic Tax.

The clock is ticking with One Year to go on the Plastic Tax.
24th March 2021 Felix Gummer
Felix Gummer
In Insights

We are, only a year away from the Plastic Tax and it is all getting threateningly real.  And there is another year marker upon us, the first anniversary of lockdown.  Many of us may feel that our lives have been put on hold for a year, but for HMRC the events of the last year has increased the urgency for new sources of income.  The Plastic Tax marks the next major milestone in the one-way street of the government transferring the costs it and the taxpayer has born for so long and put it squarely on the shoulders of business.  We all await the next consultation on Extended Producer Responsibility (EPR) which at the time of writing is still expected to follow hot on the heels of the Plastic Tax less than a year later.  Together they will constitute a very significant increase in many companies’ costs.

As with any new legislation, businesses have two main considerations.  How do I comply and who is going to pay for it?

Let us take compliance, whilst the initial legislation only cited producers and importers of relevant packaging, HMRC has just consulted on extending the liability to everyone from that point of the supply chain on, right through to and including the retailer.  This means that everyone from the moment that the packaging is produced must ensure that any plastic tax has been assessed and paid.  It is a simple trick but a clever one.  It essentially means that the Government’s job will be done for it, as at multiple stages compliance with the law will be checked and double checked.

However, if your business has a significant exposure to plastic, this compliance should be firmly on your to do list anyway.  At £200 per tonne, the tax represents a significant increase in input costs, on top of all the other price increases that we are seeing at the moment.  Before now, plastic costs were seen as yet another price largely outside our control, but this – this is one that is firmly in our control and designed to be so.

The price increases that EPR will incur will dwarf the plastic tax contribution, but the process for limiting them both is almost the same and the tax is more immediate.

Step 1: Measurement

The first thing to do is to understand your plastic use.  Where is it, where does it come from and where does it end up.

Step 2: Elimination

All business evolves but sometimes slowly and old practices can die hard.  Take a fresh look at your plastic use, where can it be eliminated, where can a change in process reduce or remove its necessity?  Can you switch to reusable rather than single use?  This should then leave you with only the necessary plastic.

Step 3: Assess the ‘necessary plastics’.

What material are you using for that vital plastic, is it recyclable, can it have recycled content?  If the answer is yes to all of these, then the next challenge is to work with your suppliers to ensure that the recycled content can be obtained and included.  Consider closed loop systems so that you are not just passing your precious material to someone else to profit by.  Begin to regard plastic as it now will be, an asset to be traded, not just a cost to be endured.

If the answer is no to any of these, then this is the start of the process.  Firstly, is the material you are using recycled.  If it isn’t then either use a recycled material or get the material you are using recycled.  Next, what are the barriers to using recycled content, is it a technical reason, food safety, performance, or appearance.  The answer to this question will send you in the right direction.

There are some quick fixes in this area, but most solutions will take some work and ingenuity.  Some solutions are not yet even legal, but the tax is designed to encourage, guide, even cajole the industry to come up with the solutions.  By putting a price on it, this is now a competitive issue.

This then brings me to the second question in everyone’s mind, who will pay for it?

If you have significant plastic in your business, the answer is most likely, you.

This cost is too big to be swallowed by any stage in the supply chain, whatever the wishes of the Chancellor are to hide it.  It is already a competitive issue from a reputational point of view and will soon be a financial one.  Be in no doubt, now that the step of a tax based on recyclability has been taken, it will not be reversed.  Indeed, we should plan on the basis that this is only the beginning.  Action now will avoid even greater costs in the future.

Sancroft is currently working with multiple companies right across the supply chain to help them minimise the risks and seize the opportunities of upcoming legislation from strategy to designing closed loop systems.  If you have any questions on this topic, please do email or call Felix Gummer on 07976323899.