QUESTION: I import a lot of plastic packaging from the EU for my small manufacturing business. I have been told about a new Plastic Packaging tax that was introduced into the UK last month. Can you tell me more about it?
ANSWER: From April 1, the UK government introduced the Plastic Packaging Tax (PPT) and has advised all manufacturers or importers of plastic packaging to check whether they are subject to the tax. The tax will apply to businesses who manufacture or import certain finished plastic packaging materials. It will apply to both UK and overseas based organisations alike.
HMRC have noted that "No one will have to file a PPT declaration or pay the tax until July 2022," but it is advisable to register before this date.
The tax is expected to have a significant impact across a broad range of sectors including, but not limited to:
• Manufacturing;
• Consumer goods;
• Retail;
• Food and beverage;
• Pharmaceutical and cosmetics.
The PPT will incentivise businesses to use recycled plastic in the production of plastic packaging. The production or import of 10 tonnes or more of plastic packaging containing less than 30 per cent recycled plastic will be taxed at £200 per tonne.
Registration for PPT and record keeping obligations start from the moment 10 or more tonnes of plastic packaging is imported or manufactured. Registration will be required even if an organisation has no tax to pay (because it is below the 30 per cent recycled content threshold).
Companies that exceed the registration threshold and already include recycled plastic in their packaging will still have to register but will not be required to pay any tax. Anyone importing plastic packaging will have to check who is responsible for documenting and paying the PPT. In this case it is unlikely to be the suppliers.
For example, if a UK-based retailer imports goods from a European food manufacturer, the retailer is the recipient and therefore has control over the import, so it is the businesses that will have to register for the tax if they exceed the 10-tonne registration threshold.
Businesses now need to consider their packaging strategy and some key questions to ask are as follows.
• Have you assessed your supply chains to determine which entities may be impacted across your businesses?
• Specifically, will the product you manufacture/import be subject to PPT or does it qualify for exemption?
• Will contracts allow your suppliers to pass the cost of this tax on to you? Can you pass it on to your customers? Are contractual changes needed?
• Have you modelled the financial effect of the tax on your pricing/margins?
• Do your existing systems and processes capture all the information needed to comply with the PPT compliance requirements, even if to demonstrate you have no PPT to pay?
• From a governance perspective, what changes to your processes and controls are needed and which teams/persons will have responsibility for this tax?
• Will your manufacturing/procurement processes need to change as a result of the introduction of PPT?
If businesses import finished plastic packaging components using Incoterms, they will need to agree with the other business who should complete the PPT declaration and who is liable to pay the tax. HMRC's guidance states that if you are unsure whether plastic packaging items fall within the scope of the PPT, you can contact HMRC at indirecttaxdesign.team@hmrc.gov.uk and provide information on the product's end use and how it is used, including photos and links to websites where the product is purchased.
The HMRC portal to register and pay PPT has been available from the day the tax comes into effect, although partnerships cannot be registered for PPT at the moment through the portal.
We recommend that businesses should take action now to assess the likely impact of the tax and to begin the preparatory work required to ensure that the relevant information is available to meet the compliance requirements arising and the declaration that may need to be completed to HMRC.
:: Malachy McLernon (m.mclernon@fpmaab.com) is a partner of FPM Accountants Ltd (www.fpmaab.com).
The advice in this column is specific to the facts surrounding the question posed. Neither the Irish News nor contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
