Plastic Packaging Tax: Last chance to have your say
Gary Armstrong, Industrial Resource Management Lead at SLR, summarises his views on the five fundamentals of the proposed Plastic Packaging Tax to help you decide if you want to submit a consultation response before the deadline.
On 11th March 2020 HM Revenue & Customs released its Plastic Packaging Tax Policy Paper, which sets out how the new tax will be introduced in April 2022.
The objective of the policy is to “… provide a clear economic incentive for businesses to use recycled material in the production of plastic packaging, which will create greater demand for this material and in turn stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration” (1). The Chancellor of Exchequer, Rishi Sunak, suggested that the policy “… will increase the use of recycled plastic in packaging by 40% – equal to carbon savings of nearly 200,000 tonnes” (2).
This also commenced the 10-week consultation (3) period, set to end Wednesday 20th May 2020.
- A £200 per tonne tax rate is proposed on manufactured or imported (filled or unfilled) plastic packaging with less than 30% recycled plastic content.
- For plastic packaging produced the manufacturer of the primary product e.g. roll of film, pre-form bottle liable for the tax; for plastic packaging imported into the UK the first to ‘commercial exploit’ the packaging will be liable for the tax.
- The tax will apply to the weight of packaging that is ‘predominately plastic by weight’. The total weight of multiple material packaging is included where plastic is the heaviest of the individual materials, plastic does not need to be greater than 50% of the weight of the total.
- Businesses that manufacture or import less than 10 tonnes of plastic packaging (of any level of recycled content), in a 12-month period, will be exempt from the requirement to pay the tax. Disaggregation of companies will not avoid the tax as the 10 tonne limit uses the ‘connected persons’ definition from the Corporation Tax Act (4).
- Plastic packaging that is manufactured or imported to the UK to be exported directly to an overseas customer will be exempt from the requirement to pay the tax.
The use of recycled plastic can often be more expensive than using new plastic (3), for example a report from S&P Global Platts (5), a commodity market specialist, suggests recycled PET clear flake is more expensive than virgin PET (~9%). The large reductions in the international oil price we are seeing currently may drive the virgin price down further.
The Plastic Packaging Tax impact upon unit costs will vary depending on the unit type, the heavier the packaging the greater the potential tax implications, for example a 500ml plastic drinks bottle weighing 25g and not having at least 30% recycled plastic would incur a relative cost increase of 0.5 pence.
Manufacturers are already seeking to manage plastic in a more circular way, for example under the UK Plastics Pact (6) which brings together businesses across the plastics value chain with government and NGOs to address plastic waste. As a result some of these businesses are also working directly with the plastic reprocessors in order to secure supplies of recycled plastic content, for example Müller UK (7) has secured a ‘long-term’ agreement with Biffa for the receipt of food grade recycled High-Density Polyethylene (HDPE), while Proctor & Gamble (8) and Unilever (9) have secured (separate) supply agreements with Viridor. Contracts like these give manufacturers increased supply and cost certainty for recycled plastic, as well as a more environmentally friendly product, and plastic reprocessors can make significant investments in the necessary plant and equipment.
The Government has proposed the use of ISO 14021:2016 for defining recycled plastic, this means post-consumer wastes and pre-consumer wastes (that have been through a separate reprocessing facility) are included, but excludes scrap or regrind. The consultation has specifically retained bio-based, biodegradable and compostable plastic within scope of the tax, with the only exemption being cellulose-based plastic. The Government is looking further into alternative plastics with the Bioeconomy strategy. The consultation also specifically references that product from chemical recycling will be considered recycled plastic.
This tax focusses on the utilisation of recycled content within plastic packaging but does not address whether the packaging itself is recyclable or whether recycling routes exist. Recyclability of packaging is to be addressed through Government’s proposed Extended Producer Responsibility (EPR) system, for which a second more detailed consultation is expected over the coming months (10).
This summary has been drafted from a generalised perspective and individual manufacturers or importers will need to consider the specific implications for their own operations. If this proposed Plastic Packaging Tax could impact your business, we’d suggest you review the consultation document.