Unpacking the UK Plastic Packaging Tax


On April 1st, 2022, the Plastic Packaging Tax (Descriptions of Products) Regulations 2021 (SI 2021/1417) (the Plastic Packaging Tax) will come into force.

According to estimations, the Plastic Packaging Tax should lead to a 40% increase in the use of recycled plastic in packaging, which would be equivalent to carbon savings of 200,000 tonnes in 2022 and 2023. As such, the Plastic Packaging Tax will be making a significant contribution in reaching the UK’s sustainability objectives. It will hopefully lead to increased use of recycled plastic and less plastic in landfills.

What is it?

The Plastic Packaging Tax is an environmental tax that will apply to plastic packaging that is either manufactured in or imported into the UK. The threshold to pay the Plastic Packaging Tax is that a company must have manufactured or imported 10 or more tonnes of finished plastic packaging components within the last 12 months or within the next 30 days.

In addition, the Plastic Packaging Tax charge will only apply to finished plastic packaging components that contain less than 30% recycled plastic. Yet, even plastic containing at least 30% recycled plastic will count towards the 10 tonne threshold.

The tax will be charged at a rate of £200 per tonne if a company meets the above criteria.

Who will be affected?

The Plastic Packaging Tax will affect a wide range of industries and companies. Any company involved in the import or manufacture of plastic packaging should check whether its activities fall within the scope of the Plastic Packaging Tax. Consider, for instance, retailers importing products for sale (bin liners, water bottles), or transporters who import bubble wrap for use during shipments.  

Which packaging is subject to the tax?

The definition of a ‘plastic packaging component’ is drafted widely, and therefore covers an extensive array of packaging, including, for example, refillable items such as plastic crates or bulk containers. A packaging component will be any product that is designed to be used in the containment, protection, handling, delivery, or presentation of goods at any link of the supply chain. If any packaging component is created from different materials, but contains more plastic by weight than any other material, the entire component will still count as a plastic packaging component under the Plastic Packaging Tax. For instance, a 10-gram item of packaging is made up of 4 grams of plastic, 3 grams of aluminium, and 3 grams of cardboard, the entire 10 grams will be considered plastic packaging.

So, the key takeaway is that there are two main pieces of information you need to be aware of:

  1. The total weight of the plastic packaging used by your business; and
  2. The percentage of recycled plastic content.

What are the exemptions?

The Plastic Packaging Tax will not apply to:

  • Products with 30% or more recycled plastic
  • Packaging made up of multiple materials where plastic is not proportionally the heaviest
  • Companies that manufacture and/or import less than 10 tonnes of finished plastic packaging annually
  • Plastic packaging that is manufactured or imported for the packaging of human medicines
  • Plastic packaging that is used to import products into the UK
  • Plastic packaging that is exported outside the UK (unless used as transport packaging)

How will your contracts need to be adapted?

The Plastic Packaging Tax will also affect contracts across the supply chain. The cost of the tax can be passed on to different companies depending on your arrangements. Commercial agreements will need to consider the Plastic Packaging Tax as regards pricing and payments. Prices and quotes should expressly state whether they are inclusive or exclusive of the Plastic Packaging Tax, just as we are used to with Value Added Tax.

Moreover, contracts should also reflect whether there is a possibility of the Plastic Packaging Tax arising at any point in the future.

Preventing Liability

If you are part of a supply chain where one link will be liable to pay the Plastic Packaging Tax, you can be held (jointly and severally or secondarily) liable for the payment thereof if you had knowledge of the fact that the tax has not been paid. To prevent such liability, conducting the proper due diligence is therefore very important.

What are the penalties for non-compliance?

If you fail to meet your obligations and requirements under the Plastic Packaging Tax, you can get a £500 fine per penalty. This may be increased with £40 per day for each day the default continues.

Next steps?

Here’s how can you prepare for the Plastic Packaging Tax:

  1. Check whether the Plastic Packaging Tax applies to your business
  2. Conduct due diligence across to supply chain to see whether it is affected
  3. Update your contracts, even if you are not (yet) subject to the Plastic Packaging Tax
  4. Ensure you have a system in place to collect data regarding plastic packaging weight, to report thereon, and to include this data in your invoices where needed
  5. Continuously check whether you and your products comply with the Plastic Packaging Tax