QUESTION: I import a lot of plastic packaging from the EU for my small manufacturing business. I have been told about a new tax on plastic packaging which was introduced in the UK last month. Can you tell me more about this subject?
ANSWER: As of April 1, the UK Government introduced the Plastic Packaging Tax (PPT) and advised all manufacturers or importers of plastic packaging to check whether they are subject to the tax. The tax will apply to companies that manufacture or import certain finished plastic packaging materials. It will apply to organizations based in the UK and overseas.
HMRC noted that “No one will have to file a PPT return or pay the tax until July 2022”, but it is advisable to register before then.
The tax is expected to have a significant impact on a wide range of sectors, including but not limited to:
• Consumer goods ;
• Food and drink;
• Pharmaceuticals and cosmetics.
The TPP will encourage companies 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% recycled plastic will be taxed at £200 per tonne.
TPP registration and record keeping obligations begin when 10 tonnes or more of plastic packaging is imported or manufactured. Registration will be required even if an organization does not owe tax (because it is below the 30% recycled content threshold).
Businesses that exceed the registration threshold and already include recycled plastic in their packaging will still need to register but will not be required to pay tax. Anyone importing plastic packaging will need to verify who is responsible for documenting and paying for the TPP. 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 consignee and therefore controls the import. It is therefore the companies that will have to register for the tax if they exceed the limit of 10 tonnes. registration threshold.
Businesses now need to think about their packaging strategy and some key questions to ask are:
• Have you assessed your supply chains to determine which entities may be impacted in your activities?
• More specifically, will the product you manufacture/import be subject to the TPP or is it eligible for an exemption?
• Will the contracts allow your suppliers to pass on the cost of this tax to you? Can you pass it on to your customers? Are contractual modifications necessary?
• Have you modeled the financial effect of the tax on your prices/margins?
• Do your existing systems and processes capture all the information necessary to comply with PPT compliance requirements, even if it proves you don’t have PPT to pay?
• From a governance perspective, what changes to your processes and controls are needed and which teams/people will be accountable for this tax?
• Will your manufacturing/procurement processes need to change as a result of the introduction of PPT?
If companies import finished plastic packaging components using Incoterms, they will need to agree with the other company who must complete the PPT declaration and who is liable for the tax. HMRC guidelines state that if you are unsure whether plastic packaging falls within the scope of the PPT, you can contact HMRC at [email protected] and provide information on the end use of the product and its use, including photos. and links to websites where the product is purchased.
The HMRC portal for registering and paying the PPT has been available from the day the tax comes into force, although partnerships cannot currently be registered for the PPT through the portal.
We recommend that businesses take steps now to assess the likely impact of the tax and begin the necessary preparatory work to ensure the relevant information is available to meet the resulting compliance and reporting requirements. may need to be completed with HMRC.
:: Malachy McLernon ([email protected]) is a partner of FPM Accountants Ltd (www.fpmaab.com).
Advice in this column is specific to the facts surrounding the question being asked. Neither The Irish News nor the contributors accept any liability for any direct or indirect loss resulting from reliance on the answers.