A complete guide to the Plastic Packaging Tax

What packaging is subject to the Plastic Packaging Tax?

So we’ve covered what’s not subject to PPT, but what is counted towards the thresholds and limits? The tax is specifically targeted towards certain types of plastic packaging to incentivise the use of recycled materials and reduce plastic waste. However, the following types of plastic packaging are subject to PPT:

• Packaging designed for use in the supply chain

• Packaging designed for single-use consumer packaging

 If your packaging consists of multiple components, you must account for the Plastic Packaging Tax on each separate component. Typically, these components are manufactured individually before being assembled into a complete packaging unit. Examples include bottles, caps, and labels for drinks, as well as trays, boxes, and plastic windows for certain foods like pies and cakes.

Packaging designed for use in the supply chain

Packaging used in the supply chain covers anything that plays a role in the containment, protection, handling, delivery and presentation of goods from manufacturers to the end customer. This includes items like trays, films and pots that are used to keep goods safe during transit and delivery. Plastic packaging tax applies to these types of packaging to actively encourage the use of recycled materials at this point in the supply chain with the ideal outcome being a reduction in plastic waste and the effects on the environment.

Packaging designed for single-use consumer packaging

Single-use consumer packaging refers to packaging products such as plastic bags, disposable cups and even gift wrapping items like ribbon; anything that is used in the containment, protection, handling or presentation of goods by your customers. PPT applies to single-use consumer packaging because it is so prevalent in our day-to-day lives; reducing the amount of virgin plastic and encouraging the use of recycled materials by taxing these items should, as with all types of packing subject to PPT, encourage reduction, re-use and recycling of materials and more sustainable packaging practises across the UK.

How to be compliant with the Plastic Packaging Tax

For businesses that use plastic in their packaging, compliance with the PPT is not only a legal obligation, but also an opportunity to show commitment to corporate social responsibility. While the tax is designed to encourage better choices for the environment, ensuring adherence can also have broader benefits for businesses such as reducing financial risk, enhancing your brand reputation and contributing to global efforts to save our planet. Understanding how to be compliant and implementing the necessary measures to comply with the Plastic Packaging Tax is crucial for businesses who want to thrive in this more sustainably-focused market. Let’s explore what’s needed when it comes to compliance.

Plastic Packaging Tax reporting requirements

The UK government acknowledges that businesses affected by the plastic packaging tax will have to make specific efforts and investments of time and resources to comply with the PPT. In their documentation, they state that ‘[c]ontinuing costs could include … keeping appropriate records (including those required to claim the export credit) … In addition, joint and several liability requirements mean that some businesses or civil organisations will need to conduct due diligence on their supply chain or take action following notification of wrongdoing by a taxpayer they are connected with.’

In other words, the tax not only requires firms to know precisely what is in their packaging and the point at which it entered or left the UK market, they are also to some extent accountable for the businesses they work with. If a business elsewhere in your supply chain messes up with regard to PPT, and HMRC decide that you could or should have known about it, you may find yourself paying at least part of the PPT bill. 

Consequently, companies affected by the new tax absolutely must have constant, real time visibility of their supply chain and their own inventory. Examples of the Plastic Packaging Tax reporting requirements that businesses must know (and be able to show HMRC) include: 

• What each relevant item is made of – what percentage of it is plastic and of that, what percentage is recycled plastic?

• Where each item is, and for how long

• Where each item is going (credits/exemptions may apply to exported goods), where it went and when

• Details of relevant items from earlier in the supply chain: who supplied the product, can they verify the plastic content, does the invoice state that the supplier has/has not paid PPT? 

 In other words, companies affected by the PPT must have a detailed, real-time overview of their inventory, one that tracks assets both within their own premises and at least a few steps either side of them in the supply chain. But crucially, they must link this with their accounting and wider management processes; because if they don’t, PPT will generate a large volume of documentation and record collation that will eat up time and resources –  time and resources that could have been spent on profitable activity.

How to manage asset inventory for environmental regulatory compliance

The plastic packaging tax is not merely a tax; it has been designed to operate as a form of environmental regulation, and affected businesses must develop systems and processes that document their environmental regulatory compliance. Those organisations must now gather, verify and store data about their products, their composition and associated pricing, contract and supply chain information. Furthermore, this data must be fed into the accounting process in order to pay or show exemption from the PPT.

Clearly, this calls for a digital asset management and inventory control system; the thought of covering all the requirements of PPT manually does not bear thinking about! It would involve the deployment of resources on a scale that may well affect productivity, and run a substantial risk of (potentially costly) error. 

However, that inventory management system must go beyond the usual tracking, describing and locating capabilities (although these remain important); it must even go beyond the ability of inventory and asset management software to streamline processes and optimise operations.

The role of Plastic Packaging Tax inventory software

A PPT-compliant asset management package must plug into the organisation’s wider systems in order to meet its tax and tax documentation liabilities. For example, inventory information (product composition, location, date of import/export) and financial/contractual information are all required to cover PPT.

Fortunately, there are asset and inventory management tools that can do this. TagworX, for example, is asset management software that works hard for your organisation in terms of optimising traceability, processes and documentation, but also plugs into your other management software (including ERP and accounting) to ‘share’ your data across applications in the most efficient way. 

That way, not only do you know where your items are and who has responsibility for them at any given time, you can also document that line of liability to HMRC (which, bearing in mind the joint and several liability nature of PPT, may prove important). With TagworX, especially when aligned with accounting software, you can generate supply chain and financial/contractual insights for both tax and environmental regulatory compliance requirements. 

PPT compliance made easy with inventory software from The Barcode Warehouse

In summary, the Packaging Tax is a crucial initiative designed to reduce plastic waste and mitigate some of its harmful effects on our environment. Businesses are actively encouraged to use recycled materials rather than virgin plastic and can face financial penalties where their choice of packaging materials do not comply. In order to maintain compliance, businesses must track and report on their plastic packaging and components accurately throughout the supply chain in order to avoid further penalties.

Understanding the nuances of what packaging is subject to the tax, and implementing measures such as inventory management systems is essential for compliance. If you find yourself in need of support as a growing business, the team here at The Barcode Warehouse offer some of the best inventory management software on the market.

Nobody wants to fall foul of HMRC, and everybody wants their business to work in as streamlined and efficient a way as possible. If you are interested in using asset and inventory management and plastic packaging tax inventory software to help your business, get in touch for a no-obligation discussion of your needs today.