Finding Nemo in a plastic bottle

This could be the unfortunate sequel in the Finding Nemo trilogy unless the many new environmental initiatives around the globe have the desired impact, which on the back of COP26 it is hoped that re-focused political action will follow. The new Plastic Packaging Tax is one such scheme and is set to be introduced on 1 April 2022. 

It will be a penal tax deterrent aimed to accelerate the use of recycled plastic within the plastic packaging manufacturing process, encouraging new levels of recycling and processing which should have a positive impact on reduced levels of plastic in landfill.

The new tax will apply to plastic packaging manufactured in or imported into the UK, that does not contain at least 30% recycled plastic. The rate of tax will be £200 per metric tonne of plastic packaging.

In order to mitigate the administrative burden, there will be an exemption for manufacturers and importers of less than 10 tonnes of plastic packaging per year. It is understood that some form of record keeping will still be required to qualify an exemption claim, so records of weight of manufactured and imported packaging are likely to be required.

A registration and reporting process will exist for businesses that cannot claim the exemption which is likely to go live on 1 April 2022, with registration required by 30 April 2022.

It is undeniable that there will be significant cost implications for businesses to whom the scheme applies and HMRC estimate that 20,000 businesses will be impacted.

The better news for companies from a tax planning perspective to alleviate the administration burden, could be the availability of research and development tax incentives “R&D”. For example, if new packaging solutions are being sought using new materials, increasing performance or requiring new processes to be developed, R&D may apply. 

R&D tax incentives range from being able to claim relevant expenditure deductions of 230%, tax credits of 14.5% of a surrenderable loss or 13% above the line tax credits, all dependant on the size and profitability of the company. At Dafferns, we are well placed to assist you in assessing the validity of these potentially valuable claims.

The introduction of the new tax combined with industry thirst for seeking new advancements may herald a new eco-conscious era in UK packaging. The recent Earthshot prize was awarded to the Costa Rican Ministry of Environment for successfully implementing a scheme that resulted in the doubling of rainforest coverage from 1997 levels and changes in the packaging industry may help achieve similar positive environmental results.

Further plastic packaging guidance for businesses can be found here and precise details of the scheme are expected later this year.