Lawyers have rounded up everything procurement needs to know about the new Plastic Packaging Tax (PPT) and Extended Producer Responsibility (EPR) rules for the UK.

• What you need to know

• What you need to do

• When you need to do it

What has to be paid?

Plastic packaging manufactured in, or imported into, the UK, where the proportion of recycled plastic in the component, when measured by weight, is less than 30% of the total amount of plastic in the component

UK importers and UK manufacturers

£200 per tonne of chargeable plastic packaging components of a single specification 

Yes, if your business manufactures or imports 10 or more tonnes of plastic packaging over a 12 month period

Unrecyclable packaging, categories of materials to be confirmed

UK producers and manufacturers who place packaged products onto the UK market (further details of different categories of ‘producer’ set out below)

The full net costs of managing packaging waste, further details to be confirmed

Producers will be required to register with the Scheme 

Administrator in 2023 and at this point will be expected to pay registration fees (details to be confirmed)

A new tax on plastic packaging is being introduced from 1 April 2022. The hope is that this will provide an economic incentive for businesses to use recycled material in the production of their plastic packaging, which will a create a greater demand for this material, resulting in increased levels of recycling and collection of plastic waste.  This in turn will ensure that those materials are diverted from landfill sites and incineration. 

PPT applies to plastic packaging that is manufactured in, or imported into, the UK, where the proportion of recycled plastic in the component, when measured by weight, is less than 30% of the total amount of plastic in the component.  The tax is charged at a rate of £200 per metric tonne of chargeable plastic packaging components within a single specification.  The government will keep the level of the rate and threshold of PPT under review to ensure that the tax remains effective in increasing the use of recycled plastic. 

A ‘packaging component’ is a product that is designed to be suitable for use, whether alone or in combination with other products, in the containment, protection, handling, delivery or presentation of goods at any stage in the supply chain.  This is a wide definition and may apply to items that you would not initially consider categorising as ‘packaging’, such as plastic hangers. A “plastic packaging component” is a packaging component that contains more plastic, when measured by weight, than any other single substance.

The tax therefore has a limited scope, as it applies to packaging only and excludes non-plastic items, which could result in businesses substituting plastic packaging for other potentially less environmentally efficient materials.

PPT is not applicable to the following categories of packaging:

Transport packaging used when importing goods from the UK (i.e. packaging used to protect any goods during a journey); 

Packaging products used in aircraft, ship or railway stores for international journeys; 

Packaging used for human medicine; 

Components that are permanently designated for packaging use (i.e. the plastic film that is used to coat white boards);

Where the packaging function is secondary to the storage function (i.e. drill case, glasses case);

Packaging that is considered an integral part of the goods (i.e. an ink cartridge or an inhaler); and

Packaging designed primarily for the presentation of goods (i.e. display shelves for use in a shop). 

At any time after 1 April 2022, businesses that manufacture or import 10 or more tonnes of plastic packaging over a 12-month period will need to register for the tax within 30 days of the first day that this condition is met. This is irrespective of whether that business is actually obligated to pay PPT.  The minimum threshold to register is set at 10 tonnes of plastic packaging to ensure that smaller businesses are not disproportionately impacted.

Businesses that import less than 10 tonnes of packaging a year are still obliged to keep records of the packaging they are manufacturing or importing into the UK.  This is because it will automatically be assumed that plastic packaging does not contain more than 30% recycled packaging, unless it can be specifically shown that it does.  Essentially, businesses will be required to actively demonstrate to HMRC that they are not liable for the tax.  It is also useful to keep these records to check if your business becomes liable for the tax in the future.  

Such records would include: 

Weight details of each plastic packaging component; 

Evidence of recycled packaging content;

Evidence of why an exemption applies; and

Details of how much PPT a business will need to pay, or alternatively, confirmation that they have nothing to pay.

Businesses will also be encouraged to make any PPT that has been paid visible to their customers, and to work with them to try and increase the amount of recycled plastic used wherever possible.

How to calculate your tax return

Clicking on this link Completing your Plastic Packaging Tax return will help businesses determine their tax liability. 

Many businesses have already worked with suppliers to increase their use of recycled packaging, and businesses should bear in mind not only the financial implications of PPT but also practicalities such as:

Who will be responsible for training staff as required in relation to the new PPT legislation? 

Who will collate the necessary evidence for compliance with PPT, maintain records and liaise with HMRC?

Who will liaise with suppliers/customers regarding increased costs arising from PPT?

Are the finance team aware of the possible changes that will need to be made to customer invoices?

Who will arrange for existing supply/customer contracts to be amended to factor PPT into the pricing?

Following an initial consultation launched by Defra in 2019, the government has confirmed its intention to proceed with the introduction of EPR, a waste prevention programme to tackle excessive waste and the lack of infrastructure around recycling and collection.  The EPR scheme is designed to take the burden of packaging waste from councils and taxpayers (i.e. through council tax) and place that onto the businesses that are actually producing and manufacturing that waste.  

The introduction of EPR is one of many schemes being implemented with an aim to incentivise producers to design products that can be reused and/or recycled at end of life.  Whilst EPR is a vital part of the solution to packaging waste and pollution, it is by itself insufficient and will need to be complemented by a wider set of policies.  Upcoming legislation will also introduce measures relating to other materials other than packaging (which is currently covered by the introduction of PPT) such as textiles, vehicle tyres and fishing gear.  

If businesses take action now to reduce their liability for PPT, it is likely that their liability for EPR will also be reduced. This all a part of the government’s ‘25 Year Environment Plan’ to change the landscape of how waste is managed in England, with a pledge to leave the environment in a better condition for the next generation. 

EPR is being implemented as secondary legislation to the Environment Act, seeking to place a single point of obligation on the packaging producers, who will be made responsible for the full net costs of the packaging, including the costs of collection, transporting, information to consumers, litter clean-up and data collection.  Interestingly, the consultation is also proposing that producers of commonly littered packaging items, such as plastic cups, should be made responsible for the costs of the litter management, both as bin and ground litter.  This would extend to a contribution to costs incurred by charities, local authorities and litter picks. 

The fees will vary according to certain criteria, such as the recyclability of the packaging.  Businesses who use packaging that is easily recyclable will pay lower fees, whilst businesses that use unrecyclable packaging will pay higher fees.

It is proposed that there should be six types of obliged producer under the reforms: 

(A) - Businesses who either put goods into packaging, or have goods put into packaging, and place those goods on the UK market under their brand name (brand owners). 

(B) - Businesses who are responsible for the import of filled packaging into the UK for sale (importers).

(C) - Businesses who sell unfilled packaging to producers i.e. wholesalers/distributors (distributors). 

(D) - Businesses who operate a website (or any other means by which information is made available over the internet) through which persons based outside the UK are able to offer filled packaging for sale in the UK (online marketplaces). 

(E) - Businesses who sell any filled packaging to the end user (sellers).

(F) - Businesses who supply reusable packaging to a user of that packaging where the supply is made by hiring/lending the packaging (service providers).

In a case where a business is both the brand owner and the seller of a packaged product, they would have to take on obligations as both a Brand Owner (A) and a Seller (E).  The costs of the EPR scheme, therefore, would be proportionally much higher for businesses that sell their own-branded products.  Brand Owners should therefore act quickly to evaluate and change the type of packaging used on their products and also seek to liaise with their suppliers who import products in non-recyclable packaging. 

All producers who are obliged to pay packaging waste management costs will need to report packaging weight data to ensure that every producer covers 100% of the costs incurred by their packaging.  Costs will broadly be split into two sections:

Costs in the collection, management and disposal of packaging waste; and

Costs in providing public information on waste prevention and recycling, data collection and reporting, and supporting local authorities in contract negotiations.

It is proposed that payments should be based on both the quantity and quality of packaging waste collected and recycled, with specific requirements being phased in, and a Scheme Administrator being appointed to support local authorities in obtaining payments in full.

The scale of the reforms and impact of the Covid-19 pandemic means that meeting the 2023 date for implementation of EPR is ambitious, but businesses should be keeping a watchful eye on the introduction of new legislation in respect of the proposed waste reforms. The EPR consultation period is now closed, and Defra has stated that the department’s response and the way forward with the consultations will be published early next year.

☛ Kirstin Roberts is a waste and sustainability lawyer and Ravinder Bhomra is a trainee solicitor within the Energy, Waste & Sustainability (Commercial) team at law firm Freeths.