Plastic Packaging Tax: HMRC attempt to increase number of registrations

When the Plastic Packaging Tax (PPT) was introduced on 1 April 2022, HMRC had estimated that this would impact at least 20,000 manufacturers and importers. However, per recently published statistics on 8 August 2023 only 4,142 businesses had registered for PPT, a long way below that estimate. With a view to increasing the number of registrations HMRC are writing to businesses asking them to either register for PPT if they are required to do so, or more unusually, asking them to confirm that they are not required to register.

Businesses who receive such a letter will need to act to ensure that they have sufficient evidence to support a decision not to register and therefore we’d recommend that all businesses review their position.

In addition, HMRC have also published guidance explaining that businesses may be liable for unpaid PPT due from another person in their supply chain. We would therefore recommend that businesses carry out due diligence checks to ensure that they are able to defend their position.

In order to do this and establish the potential impact, we’d recommend that as part of any review a business considers the following:

• Have all products which may be subject to the tax been identified? The scope of the products which are subject to the tax is far wider than plastic single use products and packaging. It includes items which are reused in the supply chain, for example to contain, protect, or deliver product.
• Where a business does not manufacture plastic packaging, has it considered whether the packaging around imported goods has or will trigger a liability to register? Where a business manufactures or imports more than 10 tonnes of plastic packaging per annum it will be required to register (although the external packaging around imported goods can be excluded when considering whether this threshold has been breached). HMRC's statistics show that of the total plastic packaging manufactured in and imported into the UK, 39% was declared as subject to PPT.
• Has the business assumed that as it only manufacturers or imports packaging made of at least 30% recycled material it does not need to register? Although PPT is not payable on packaging which contains at least 30% recycled material, the weight of this packaging does count towards the 10 tonne registration threshold.
• Where products are potentially subject to PPT, are any reliefs or exemptions available? Some packaging is exempt from PPT, for example, items used for long term storage (e.g. toolboxes) or packaging which forms an integral part of the product (e.g. printer cartridges). In addition, relief from PPT can be claimed on products which are destined for export.
• Where a business has not registered for PPT, does it hold evidence to support this decision, should the position be challenged by HMRC? We’d recommend that a business prepares documentation to demonstrate that PPT registration has been considered, products have been reviewed and details of relevant weights to support a decision not to register are retained.
• Where a business considers that it may be required to register for PPT at some point in the future, has it considered whether the tax charge can be passed on to its customers and does it intend to separately identify the charge on sales invoices? Where the cost will be passed on, we’d recommend that contracts are reviewed. Although there is currently no requirement to show any PPT charged separately on sales invoices, many businesses have chosen to disclose any PPT charged for transparency reasons and to ensure they have systems in place, should HMRC revert to their initial view that any PPT charged must be separately identified.
• Has the business considered who is liable for the payment of PPT in the supply chain? We’d recommend that the business carries out checks to protect themselves against HMRC issuing secondary and joint and several liability notices relating to unpaid PPT in the supply chain.  

While held out to be a simple tax which would not generate a significant amount of tax, our experience from helping businesses with PPT has been that is far from the case. The fact that it has also raised £276 million means HMRC are likely to pursue businesses with more rigour. There are complex rules to consider and the interpretative nature of what is and isn’t within the scope of that tax continues to be challenging. Given HMRC’s apparent intent to check on business’ compliance with these rules and that penalties are now being imposed for late registration, actions should be taken now if they have not been already.

If you would like to discuss this issue further, please contact Rob Janering, Jacki Wells or your usual Crowe contact.