Research finds plastic tax sign-ups 'surprisingly low’

Law firm Pinsent Masons says that businesses are experiencing ‘widespread confusion’ in regards to the Plastic Packaging Tax, with figures showing that only 992 firms have registered to pay the levy.

Plastic packagingGovernment department HM Revenue and Customs (HMRC) previously estimated that up to 20,000 businesses would be affected by the tax, which came into force in April. The tax is payable by UK businesses manufacturing or importing plastic packaging with less than 30 per cent recycled content. All businesses trading over 10 tonnes of plastic packaging each year are obligated.

Abigail McGregor, Tax Solicitor at Pinsent Masons, said the registration figures were surprisingly low, despite the fact that only the UK’s largest suppliers were required to register in the first month.

According to McGregor, this could call into question the £235 million in revenue that HMRC predicted it would collect from the new tax in its first year. Some firms may be unaware they have to pay the tax, since the definition of ‘plastic packaging’ is ‘not always obvious’, with McGregor noting the inclusion of items such as plastic coat-hangers within the tax.

Businesses are required to carry out ‘due diligence on their supply chains’ and can be held jointly liable with suppliers or customers who fail to pay the tax correctly. Pinsent Masons highlights that deliberate failure to comply carries the risk of criminal charges.

The Plastic Packaging Tax

The Plastic Packaging Tax came into force at the start of April and applies to plastic packaging with less than 30 per cent recycled content. Companies have to pay £200 for every tonne of plastic packaging they use that does not contain the minimum recycled material.

A consultation on a tax on plastic packaging was first launched in the UK Government’s spring budget statement in 2018, drawing the largest response ever to a Treasury consultation with more than 162,000 responses received between 13 March and 18 May.
In the Government’s autumn budget statement of the same year, the tax was officially announced alongside a further consultation ahead of its implementation.

In 2020, a minimum threshold for the tax was set, exempting businesses producing less than 10 tonnes of packaging per year to protect smaller businesses from disproportionate charges.

According to recent research conducted by packaging suppliers Lindum Packaging, six out of 10 companies using plastic packaging have seen an increase in their packaging costs since the introduction of the tax.

‘Being unaware of a new tax will not stop HMRC from investigating your business’

Abigail McGregor commented: “There is a lot of confusion among UK businesses – as well as those who supply into the UK – about who needs to pay the plastic packaging tax, when they need to pay and on which products.

“Many are unaware the products they make or use are within the scope of the tax, or that they could be liable if another member of their supply chain fails to pay.”

“Although HMRC is unlikely to impose hefty penalties for innocent non-compliance immediately, unfortunately, being unaware of a new tax will not stop HMRC from investigating your business and levying penalties for any underpayments or failure to register and make returns in the longer term. Businesses that ignore the plastic packaging tax may be in for a nasty surprise.

“It is critically important that companies make sure they know whether they are liable or not – or whether they have sufficient due diligence measures in place – as soon as possible. Any businesses which are unsure should seek professional advice immediately.”