The UK will exempt packaging tax if the recycled content of packaging materials exceeds 30%

HM Revenue and Customs announced that from April 1, 2022, the UK will impose a plastic packaging tax (PPT) of £200 (about RMB 1,700/ton) per ton on plastic packaging manufactured or imported into the UK in quantities exceeding 10 tons per year and containing less than 30% recycled plastic. If 30% or more recycled plastic is used, no tax will be paid. This major legislation has become law and constitutes Part 2 of the Finance Act 2021.

Among them, the key definition in the plastic packaging tax is that plastics include bioplastics, including biodegradable, compostable and oxidatively degradable plastics.

The UK has set regulations on whether packaging materials should be subject to this tax. Among them, disposable plastic packaging is subject to plastic packaging tax even if consumers need to buy and use it. In terms of composite packaging, if plastic is the most used in the packaging variety, all of it is considered plastic packaging and is subject to plastic packaging tax. If not, no tax will be levied.

1. A few key points 01Taxation​

Recycled plastic packaging with less than 30% tax exemption

Recycled plastic packaging materials equal to or greater than 30% 03 Tax exemption without restrictions on recycled plastic content

1. The packaging function is secondary to the storage function

2. Packaging is an integral part of the goods

3. Mainly designed for displaying goods 04 plastic

Plastics include bioplastics, including biodegradable, compostable and oxo-degradable plastics. 05 Single-use consumer packaging (subject to payment)

Plastic bags include: shopping bags, trash can liners and garbage bags, sandwich bags, diaper bags;

Disposable cups include: Expanded polystyrene cups, vending machine cups, plastic wine or pint glasses, party cups 06 Recycled plastic

Recycled plastic is plastic that has been reprocessed from recycled materials through the use of chemical or manufacturing processes so that it can be used for its original purpose or for other purposes. This does not include organic recycling. 07 4 categories of products exempted from tax by law (exemptions)

1. Used as transport packaging for export goods.

2. Used in aircraft, ship and railway cargo stores.

3. Used for direct packaging of pharmaceutical products.

4. Permanently designate or reserve for uses other than packaging. 2. How will the tax work?

The tax may apply to finished plastic packaging manufactured in or imported into the UK if the plastic used is less than 30% recycled (by weight). In cases where the plastic is less than 30% recycled, the tax payable is £200 per tonne, payable by the manufacturer/importer.

From the moment a company imports or manufactures 10 tonnes or more of plastic packaging, it is obliged to register with the PPT and keep relevant records. Even if a company does not pay the tax, it may still need to register (depending on whether it falls below the 30% recycled content threshold).

3. Will your business be affected?

If you sell and/or produce goods that use a lot of plastic packaging on the way to the consumer, it is likely that your business will be affected by the new tax. For cross-border sellers, even if you are a multinational company that does not manufacture in the UK, as long as you bring packaged goods into the UK, you may need to pay/register for this tax.

All businesses that manufacture or import plastic packaging must keep records of the packaging they make or import so they can prove to HMRC whether they need to register for the tax.

The PPT will come into effect on 1 April 2022 and HMRC’s portal for registering and paying the PPT is expected to be available on 1 April 2022, the day the tax comes into effect.

Final Thoughts

It is already July 2022. Faced with the irreversible global plastic ban, we hope that relevant enterprise-level sellers can make adjustments as soon as possible. In addition, the business needs to be adjusted in the later stage to pay more attention to renewable, recyclable, low-carbon and environmentally friendly packaging solutions.

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