When the UK Government introduced PPT in April 2022, the aim was to encourage the use of recycled plastic within packaging. PPT should be considered by all businesses who either manufacture plastic packaging in the UK or import it into the UK. In 2022/3 HMRC raised £276m from PPT receipts which exceeded their initial predictions of £235m. Surprisingly though, these receipts came from only 4.142 registered businesses which compares with an initial prediction of 20,000 businesses that would need to register. PPT revenue has also been relatively stable quarter by quarter.
So, what does the data tell us?
The data would suggest that there may still be a sizeable number of businesses that have not registered for the PPT regime when they should. Better enforcement of the scheme by HMRC looks to be needed.
The fact that PPT revenues are not significantly decreasing over time could also suggest that many businesses may just be accepting the PPT as a cost of doing business rather than looking to move to more sustainable materials and reducing their reliance on plastic. So, will the UK Government need to introduce more significant rate hikes and also perhaps an increase in the minimum recycled content threshold in order to deter the future use of plastic packaging?
Has your business considered whether it has any PPT obligations?
HMRC expect as a minimum that all businesses understand whether they have any plastic packaging in their supply chain and if there is, ensure that it is documented as to who has the reporting and payment obligations.
Recent changes and what can we expect next?
Rate
From 1 April 2024 the PPT rate increases in line with the Consumer Price Index (CPI) from £210.82 to £217.85 per tonne.
Invoicing
It was previously expected that businesses would be required to include a relevant statement with their invoices to show that PPT had been paid but this requirement has been delayed. Instead HMRC have said that you are encouraged to make the PPT you have paid visible to your business customers, and work with them to try and increase the amount of recycled plastic they use wherever possible.
Reusable plastic crates and transport packaging
There is HMRC guidance about exemptions for reusable plastic crates and transport packaging when imported into the UK filled with goods. The exemption applies to pallet wrap and straps when used to import goods, but all packaging imported unfilled into the UK is still subject to PPT.
PPT across the globe
Other countries (e.g., Spain, Belgium, and Germany ) have also introduced plastic packaging taxes with others introducing plastic tax regimes later this year (e.g. Italy from 1 July 2024) and many other countries still debating their introduction (e.g. the USA)
Carbon Border Adjustment Mechanism (CBAM) for UK importers of carbon-intensive goods
On 18 December 2023, the UK Government announced its plans to implement a UK CABM from 2027. There are likely to be significant overlaps with the EU CBAM. Further details on the design and delivery of a UK CBAM will be subject to consultation in 2024. Under the mechanism, it is proposed that the charge applied on in-scope imported products would depend on the carbon emitted in the production of the imported good. The scheme would contribute towards the UK’s goal to be carbon neutral by 2050 and would encourage businesses to make carbon efficient choices when importing in-scope goods.
ESG and Tax
It is important that businesses keep up to speed with the ever-changing tax and regulatory landscape both in the UK and abroad. Getting ESG right should drive value creation and manage risk. Getting it wrong could expose a business to significant risk and lead to dissatisfied stakeholders.
Companies with high environmental impact may face increased scrutiny from tax authorities including enquiries. For businesses that are readily embracing ESG and that are innovators in this area they may be able to benefit from making R and D claims which could produce significant additional value. Any ESG initiatives and the value associated with these should also be considered by International Groups when looking at their transfer pricing models.
For more information on PPT or ESG please contact your usual Menzies contact. For more general ESG guidance Menzies, click on the page below:
Posted in Blog, Manufacturing