The Plastic Packaging Tax: everything you need to know

Sancroft Team
By Sancroft Team

By Michael Bateson, former Senior Analyst at Sancroft.

After nearly a year of waiting for details to emerge, this month finally saw the government set out how the new Plastic Packaging Tax will work.

While the measures revealed in Chancellor Rishi Sunak’s budget have been eclipsed by the urgent challenge of global Covid-19 pandemic, they will still require the attention of any business which manufactures or imports plastic packaging if they are to stand a chance of being ready when the tax comes into force in April 2022.

From this date, these businesses will need to ensure all products’ packaging contains over 30% of recycled content, or pay a levy of £200 per tonne.

What’s covered and what’s exempt

A closer look at the documentation supporting the policy provides a clear sense of what will be covered and who will pay.

In a significant change from the initial consultation, imported filled packaging will now be included, reversing an exclusion which some argued would have disadvantaged domestic manufacturers and importers. Packaging that is exported overseas will not be included.

Any business which manufactures or imports less that 10 tonnes of plastic per year will be excluded. So, while many details still need to be ironed out, it is certain that a number of smaller and micro-business won’t need to register.

Another exclusion is around paper cups and composite ‘multi-material’ packaging where plastic is the minority ingredient. The hope is that reforms to the packaging producer responsibility system will help encourage more sustainable packaging design.

For bio-based / biodegradable / compostable alternative products, no decision has been reached as yet. The findings of a separate consultation on standards for these products will inform whether or not they are included and the government is still working through feedback from business in this area.

How the tax will work

The government’s preferred method for calculating the proportions of recycled plastic will use a “mass balance approach”:

Recycled plastic content % = (mass of recycled plastic / mass of all plastic inputs) x100

The tax is being set by weight – a flat rate per tonne of product – rather than volume.

Roughly two thirds of respondents to the initial consultation favoured this as the easiest way to administer and manage compliance. By contrast, manufacturers mostly argued against this approach saying that charging by weight could lead to the use of lighter, less recyclable, more environmentally-damaging alternatives, such as expanded polystyrene.

A consultation on the tax design has recently opened and the Treasury has said that both the rate of the tax and the 30% threshold will be kept under review to ensure it remains effective in increasing the use of recycled plastic.

The key takeaway here is that although the government is departing from the idea of a multi-threshold tax structure or variable charging, policy design is highly likely to change in the future.

Domestic system capacity

One of the major concerns around the new tax is the ability of the UK’s domestic recycling capacity to cope with higher volumes of recycled plastics which are likely to be stimulated by reform. The government appears to be looking to supply and demand to solve the problem. At the recent BBIA Conference, a Treasury representative outlined his confidence that a focus on increasing recycled content levels in packaging would drive up appetite for additional capacity, which would in turn theoretically drive up national the levels of quality recyclate.

Compliance and enforcement

While compliance with the new tax will adopt a light touch approach, the strength of enforcement is less apparent.

To minimise the administrative burden, the government expects business to carry out their owns check and keep evidence on the levels of recycled plastics in their packaging such as weights dealt with and recyclability. The tax will be accounted for through quarterly tax returns and a group facility to register will be established in order to reduce additional reporting. The compliance and enforcement regime will be similar to the Soft Drinks Industry Levy (2018).

While the government says that enforcement and inspection powers currently used to administer other taxes will be used for the plastic tax, there is still significant concern that without accurate testing of recycled content, the tax would be ineffective in achieving its goal of encouraging more sustainable manufacturing.

What next?

For businesses who want to influence the final policy, there is still the opportunity to do so through the technical consultation which is currently due to close 20th May 2020.

For those with concerns about scope, liability or crossovers with other waste management consultation, including interaction with the reformed packaging producer responsibility system and the core set of materials that local authorities are to collect, now is the time to put forward your views.

Once the policy is designed and announced, the window of time in which businesses can prepare will be even smaller, so it is vital that organisations find a way ensuring they are in the right position – financially and operationally – to cope with the new regime ahead of time.

To learn more about the tax, the technical consultation, its impact on your business and how you can prepare please email