The UK Plastic Packaging Tax and Hibiscus Labels

plastic tax

What is the Plastic Packaging Tax?

Introduced on 1st April 2022, the Plastic Packaging Tax (PPT) is a tax on plastic packaging, manufactured or imported into the UK, that does not contain at least 30% recycled plastic.

Who does the tax affect?

The tax is to be paid by the person/company who produces the ‘finished’ plastic packaging item, or whoever imports the item.

Finished is determined if the item has undergone its last substantial modification. In addition to this, anyone who manufactures or imports 10 or more tonnes of plastic packaging within a 12-month period is subject to register for the tax.

Components

Packaging can be made up of several packaging components and are generally manufactured separately before being assembled into a packaging unit. Each individual component (including labels) would be subject to the tax.  Each component would need to include at least 30% recycled plastic for no tax to be charged.

A packaging component that is made of multiple materials but contains more plastic by weight than any other single substance will be a plastic packaging component for the purposes of the tax.

Label backing paper is a packaging component in its own right and where it is plastic, it will be in scope of the tax. This is because the backing paper acts as packaging of the label in the supply chain and although the two parts are joined together in the supply chain they remain distinct and separable from one another, similar to a lid and a bottle. The fact that the backing paper becomes waste in the supply chain does not alter this or allow the backing paper to be relieved as waste.

How much is the tax?

The plastic packaging tax will be charged at £200 per tonne of plastic packaging placed onto the UK market, for packaging with less than 30% post-consumer recycled (PCR) plastic content.

VAT is charged on the price of the goods, as normal. If businesses choose to pass on the cost of the Plastic Packaging Tax through higher prices, then VAT will be charged on the new, higher price of the goods.

All businesses are required to report plastic packaging data and pay for the tax quarterly.

Who will be liable for the tax?

If you are unsure if your packaging is liable for the Plastic Packaging Tax, follow the diagram below which will guide you through the exemptions defined by HMRC.

Plastic-Tax-Decision-Tree

Are Hibiscus Labels Subject to the Tax?

Labels are considered to be an individual packaging component and each of our major product substrates: Polypropylene PP, Polyethylene PE, and laser sheet materials – with standard backings, are subject to the tax.

It is our current understanding that if you complete one of the last substantial manufacturing process, then you are liable for the tax.  Printing and lamination are classed as substantial modifications.  In most cases this makes Hibiscus responsible for paying the plastic tax, rather than its customers, however, if we provide labels that are unprinted, or part-printed, and the customer is overprinting these themselves, then they are responsible for the last substantial modification and the payment of the tax.

There are 4 processes that are excluded from being substantial modifications. These are: blowing from a preform, cutting, labelling, and sealing.

Adding a label to packaging is NOT considered a last substantial modification, but printing is.

A label should be considered separately. Where a label is predominantly plastic by weight and so is in scope of the tax, it is treated as an individual plastic packaging component. The backing for the label is another separate packaging component, as it is the packaging for the label.

What you must do to comply

  1. Check which packaging is subject to Plastic Packaging Tax and the definitions of finished components and substantial modifications, to find out if the packaging you manufacture or import is subject to the tax.
  2. Work out the weight of the packaging you manufacture or import to find out if you must register for the tax.
  3. Find out how to register.
  4. Check which records and accounts you must keep and how to carry out due diligence.
  5. Find out if you can claim a credit or defer paying Plastic Packaging Tax.
  6. Find out how to complete your return.

 

Further information:

https://www.gov.uk/guidance/check-if-you-need-to-register-for-plastic-packaging-tax

https://www.complydirect.com/media/2992/ppt-liability-to-register-guide.pdf

https://brc.org.uk/media/679262/ppt-faq-update_4_march_2022.pdf