What does your business need to know about the new Plastic Packaging Tax? 

James Paterson (BDO)

by James Paterson, BDO LLP

THE BEST time to start something was yesterday. The second best time is now – or so the saying goes. For Scottish businesses, there’s a new consideration that must now become key to an overall tax strategy; compliance with the Plastic Packaging Tax (PPT). 

This new tax came into force on 1 April 2022, and will impact importers, manufacturers and retailers; there are few businesses dealing with goods which won’t need to sit up and take notice and, worryingly, there’s a wide-ranging level of preparedness. 

Understanding and properly applying the Plastic Packaging Tax requires input from multiple departments, a razor sharp view of your organisation’s supply chain, and a savvy finance team with an keen eye on the detail. 

What is the Plastic Packaging Tax?

The Plastic Packaging Tax impacts businesses manufacturing or importing more than 10 tonnes of plastic packaging over a 12 month period. Brought in as part of the Government’s efforts to tackle plastic use and, while packaging components containing more than 30% recycled plastic aren’t taxable, they still count towards the 10 tonne threshold – so businesses need to get a firm grasp on their supply chain and all the components within it. 

When will it impact my business?

The tax came into effect on 1 April 2022, so businesses must now register for the tax if it applies to them and make sure they keep accurate records of all the plastic they’re importing or generating.

Like many tax and legislative changes, we’re encountering businesses in varying states of readiness, but time is now of the essence and organisations need to get their processes firmed up. Obtaining data – particularly from overseas suppliers – is proving time-consuming for many of the businesses we speak to about this.

How should I approach the PPT?

It’s important to recognise that this is not a tax which can be left to an FD to manage alone. 

Applying the rules will require input from multiple departments including supply chain, procurement, logistics and product development, as it will require intricate knowledge of the use of plastics at all stages of the product lifespan. The first step, therefore, is to nominate a department to take responsibility for it. 

The tax places a heavy burden of proof on the organisation. Businesses must capture exact data, and proof is required for any exemptions claimed. 

Is it easier to pay than claim exemptions?

Such a high burden of proof means that for businesses using all recycled plastic, for example, may feel that it’s simpler (and more cost effective) just to pay the tax than to collate all the evidence needed. And, while that may be true in the short term, the likelihood is that the rate of PPT will increase over time, or the percentage threshold for recycled plastic may change, making this a risky policy. It will be better in the long term to get the processes sorted and apply for exemption. 

What should I do now?

Act now. That’s the single most important message here – this is a complex and time consuming tax and organisations must invest in understanding their current picture and preparing for the PPT. Filing requirements are now live, making this a priority. 

For smaller businesses – which typically have less complex supply chains but often find that the technical knowledge is contained within individuals and with limited support from a finance department – it will be vital that you spend time now assessing your true needs and seek advice if needed. 

You can look at your supplier contracts to see if you can push for changes to your plastic composition. This may also be a good opportunity to explore non-plastic packaging options like paper and card, which can have wider benefits and consumer appeal. 

If the PPT is causing headaches in your organisation, then BDO can help. We have created a guide to explain the tax and how it works, and our expert team is available to offer impartial advice. 

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