Consultation on tax regime to curb plastic packaging production

The Treasury and the Department for Environment, Food and Rural Affairs are consulting on proposals first announced at Budget 2018 to introduce a new tax on the production and import of plastic packaging with less than 30% recycled content, in a bid to encourage greater reduction in the use of plastic

The government’s call for evidence last year, which received a record 162,000 responses, highlighted that recycled plastic using is often more expensive than using new plastic, despite its lower environmental impacts.

The aim of the proposed tax is to shift the economic incentives involved in the production of more sustainable plastic packaging, encouraging greater use of recycled plastic and helping to reduce plastic waste.

The consultation says the tax would apply to all plastic packaging manufactured in the UK and unfilled plastic packaging imported into the UK. It would only apply to plastic packaging (as defined by the tax) with less than 30% recycled content.

The definition of plastic packaging for the specific purposes of applying the tax would be set out in legislation. Where there is one manufacturer involved in the manufacturing process the tax would be applied when the packaging product or component, such as a tub, tray or bottle, is made available for use or onward sale.

For imported, unfilled plastic packaging, the tax would be charged when liable products are imported into the UK and released onto the UK market as plastic packaging or plastic packaging material which will be used to make plastic packaging. Unfilled plastic packaging that is exported would not be subject to the tax.

The tax would be charged on the full weight of the packaging product, at a flat rate set per tonne of packaging material.

The government’s preferred approach is to set a single threshold for all plastic packaging, to better ensure a level playing field between manufacturers of different types of plastic and packaging. It would also make the tax simpler for businesses to administer and minimise compliance risks.

Alternatively, the government could consider having more than one threshold. The different incentive structure could reward increases in recycled content for a wider range of products at a range of levels of recycled content and would possibly drive greater, or different behaviour change.

While there will be exemptions for small operators, the government expects the de minimis for the tax will be significantly lower than the current de minimis in the existing packaging producer responsibility system. Under this businesses with less than £2m annual turnover and which handle less than 50 tonnes of packaging a year are not required to comply.

By April 2022, manufacturers and importers who are liable for the tax will have to register with HMRC, declare the amount of chargeable product, and account for the tax.

Once registered, businesses will need to submit a quarterly tax return online and make an electronic payment of the tax due within one month of filing the tax return.

The consultation seeks views on:  defining products within the scope of the tax; setting a threshold for recycled plastic content;  the approach to rates; the precise point at which the tax is charged and who will be liable to pay; how to minimise administrative burdens for the smallest operators and/or low volumes of production or import; the treatment of imports and exports; promoting compliance and preventing opportunities for tax avoidance or evasion; and how business can demonstrate the recycled content of their products in a robust way without introducing unnecessary administrative burdens.

The government intends to publish a summary of responses within 12 weeks of closing and will  set out its next steps at Budget 2019. HMRC will publish a technical consultation on the tax at a later date and will publish draft legislation for consultation in 2020.

The deadline for comments is 12 May.

HMT/DEFRA Plastic packaging tax consultation

Report by Pat Sweet

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