Policy paper

Introduction of a new plastic packaging tax

Published 12 November 2020

Who is likely to be affected

UK producers of plastic packaging, importers of plastic packaging, business customers of producers and importers of plastic packaging, and consumers who buy goods in plastic packaging in the UK.

There will be an exemption for producers and importers of small amounts of plastic packaging to mitigate against disproportionate administrative burdens in comparison to the tax liability.

General description of the measure

This is a new tax that applies to plastic packaging produced in, or imported into, the UK, that does not contain at least 30% recycled plastic. Plastic packaging is packaging that is predominantly plastic by weight.

It will not apply to any plastic packaging which contains at least 30% recycled plastic, or any packaging which is not predominantly plastic by weight.

Imported plastic packaging will be liable to the tax, whether the packaging is unfilled or filled.

The government has recently held a consultation on the design and implementation of the tax, using stakeholder engagement and feedback to help inform the tax design. The government is now publishing the summary of responses and draft primary legislation for technical consultation.

Policy objective

The tax will provide a clear economic incentive for businesses to use recycled material in the production of plastic packaging, which will create greater demand for this material. In turn this will stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration.

Background to the measure

At Budget 2017, the government announced a call for evidence into using the tax system or charges to tackle single-use plastic waste and received 162,000 responses.

At Budget 2018, a new tax on plastic packaging with less than 30% recycled plastic was announced. The government launched a consultation in February 2019 seeking input on the initial proposals for the design of the tax. A summary of responses was published in July 2019.

At Budget 2020, the government announced key decisions on the design of the tax, and HM Revenue & Customs (HMRC) launched a consultation on the more detailed design and implementation of the tax.

The TIIN on the tax published at Budget on 11 March 2020 is superseded by this note. 

Detailed proposal

Operative date

The tax will take effect from April 2022.

Current law

This is new legislation to establish a Plastic Packaging tax.

Finance Act 2020 contains paving legislation which enables HMRC spending on costs associated with the development of the tax, in particular the development of the IT system to support this new tax.

Proposed revisions

Legislation will be introduced to establish a Plastic Packaging Tax. The government is now publishing a draft of the legislation for technical consultation which sets out the key features of the tax, including:

• the £200 per tonne tax rate for packaging with less than 30% recycled plastic
• the registration threshold of 10 tonnes of plastic packaging produced in or imported into the UK per annum
• the scope of the tax by definition of the type of taxable product and recycled content
• the exemption for producers and importers of small quantities of plastic packaging
• who will be liable to pay the tax and need to register with HMRC
• how the tax will be collected, recovered and enforced
• how the tax will be relieved on exports

Summary of impacts

Exchequer impact (£ million)

2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025
-	-	-	+240	+235	+220

The impacts of this measure were set out in Table 2.1 of Budget 2020. More details can be found in the policy costings document published alongside Budget 2020. Revisions to the impact of the measure in light of changes made here will be subject to scrutiny by the Office for Budget Responsibility and will be set out at a future fiscal event.

Economic impact

This measure is not expected to have any significant macroeconomic impacts. The tax will provide a clear economic incentive for businesses to use recycled material in plastic packaging, which will create greater demand for this material and in turn stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration.

A behavioural adjustment is made to account for a behavioural response due to the policy, most significantly an increase in recycled content. Smaller behavioural adjustments include business behaviour such as reducing plastic packaging use, and consumer reduction of purchases of products containing plastic packaging.

Impact on individuals, households and families

This measure is not expected to impact individuals unless businesses pass on the charge. It is expected that if all the tax is passed on to individual consumers, the cost to consumers will be small as plastic packaging usually makes up a very small amount of the total cost of goods. On this basis we expect customer experience to stay broadly the same. There is not expected to be any impact on family formation, stability or breakdown.

Equalities impacts

It is not anticipated that this measure will impact on groups sharing protected characteristics.

Impact on business including civil society organisations

This measure is expected to impact on up to an estimated 20,000 producers and importers of plastic packaging. One-off costs include familiarisation with the new rules, training for staff, registration with HMRC, and developing the required reporting framework to complete tax returns. Continuing costs could include completing, filing and paying tax returns, keeping appropriate records (including those required to claim the export credit), and amending returns. There will also be new registrations and de-registrations each year.

Customer experience could be negatively impacted as this is a new tax that businesses will need to understand and comply with. However, to support businesses HMRC will develop clear guidance and other tools to help businesses understand and meet their obligations.

It is expected that the impact on businesses will be significant and the overall impact will depend on the design of the tax. The government has recently held a consultation on the detailed design and implementation of the tax, including on guidance and tools that can help businesses meet their obligations, and the information gathered from this will be used to gain a better understanding of these impacts.

There is expected to be no impact on civil society organisations.

Operational impact (£ million) (HMRC or other)

HMRC expects to incur one-off capital costs to develop the system for collecting the tax. There will also be ongoing resource costs for HMRC to implement this change, monitor compliance and meet customer service needs.

HMRC will incur estimated costs of £6.59m developing a new computer system to support this tax, together with £11.36m in staff costs. Revisions to the operational impact of the measure covering a new scorecard period will be set out at a future fiscal event. There may also be extra costs incurred by the Ministry of Justice as a result of this new tax, which will be quantified in due course.

Other impacts

Justice Impact Test

In line with other taxes, there will be civil and criminal penalties for failing to comply with the tax, including penalties for failure to register, failure to file returns and failure to pay the tax. A full Justice Impact Test will be completed.

Environmental impact assessment

The rationale of this tax aims to increase the use of recycled content in plastic packaging and it is anticipated that as a result of the tax there will be a significant increase in the amount of plastic packaging with greater than 30% recycled plastic. Recycled plastic has a carbon footprint than can be up to four times lower than that of virgin plastic. The policy may also help to divert plastics from landfill or incineration, and drive recycling technologies within the UK.

Other impacts have been considered and none has been identified.

Monitoring and evaluation

The measure will be monitored through information collected from tax returns and will be kept under review through communication with affected taxpayer groups.

Further advice

If you have any questions about this change, please contact Alex Marsh by email: indirecttaxdesign.team@hmrc.gov.uk.