Jargon Buster

Getting to grips with the new legislation.

Getting to grips with new legislation can be difficult when you are also trying to run a business, and you may encounter words, terms, and phrases that are hard to understand.

Our jargon buster helps to explain what many of these terms mean in order to enable you to make informed choices that could help your business comply with the regulatory requirements for plastic packaging.

Plastic packaging that is chargeable for the tax and the key definitions.

Plastic Packaging Tax will be due on finished plastic packaging components manufactured in or imported into the UK in which less than 30% of the plastic is recycled plastic.

This includes imports of packaging which already contain goods, such as plastic bottles filled with drinks. Where the packaging you import already contains other goods, the tax only applies to the plastic packaging itself.

1. Plastic

Includes bioplastics, including biodegradable, compostable, and oxo-degradable plastics.

2. Packaging components

A packaging component is a product that is designed to be suitable for use, whether alone or in combination with other products, in the containment, protection, handling, delivery, or presentation of goods at any stage in the supply chain of the goods, from the producer of the goods to the consumer or user.

If the packaging component meets the definition, it does not matter if it is produced or imported for use in the supply chain of the goods, or by a consumer or user.

Examples of packaging components include plastic:

trays designed to contain and protect food once filled, like a ready meal tray
film designed to protect produce, like film around raw meat or film sold to consumers
pots designed to handle and deliver products, like yogurt and soup pots
wrap designed to group products together to enable easier handling, like shrink wrap around canned goods
labels designed to present the goods and describe the contents of a product
reusable plastic crates designed to deliver fresh fruit or baked goods

If your plastic packaging components are captured by this definition and are not covered by one of the categories of products not chargeable for Plastic Packaging Tax you will need to account for Plastic Packaging Tax.

If your plastic packaging components are not captured by this definition but are designed as single-use consumer packaging they are chargeable and you will still need to account for Plastic Packaging Tax.

3. Single-use consumer packaging

You will need to account for Plastic Packaging Tax if your products are designed as single-use packaging for use by a consumer or user in containing any commodity or waste.

For example:

Plastic bags, including:

carrier bags
bin liners and refuse sacks
sandwich bags
nappy sacks

Disposable cups, including:

expanded polystyrene cups
vending machine cups
plastic wine or pint glasses
party cups

4. Packaging containing multiple materials

Packaging that is made of multiple materials but contains more plastic by weight than any other single substance will be a plastic packaging component for the purposes of the tax.

For example, if a 10-gram packaging component is made of 4 grams of plastic, 3 grams of aluminum, and 3 grams of cardboard, all 10 grams will be considered plastic packaging for the purposes of this tax.

Likewise, if the 10-gram packaging component was 3 grams of plastic, 4 grams of aluminum, and 3 grams of cardboard, none of the items would be taxable. If the weight of plastic in the component is equal to the weight of another single material used, the component would not be considered as plastic for this tax.

You will need to be able to demonstrate to HMRC if a packaging component that contains plastic is not subject to the tax because it does not contain more plastic than any other material when measured by weight.

If you cannot demonstrate this, the component will be treated as entirely plastic. You must record all the materials used in the packaging component, and the weight of each material, to demonstrate that plastic is not the main material overall and the packaging is not chargeable for the tax.

You must calculate the proportions of recycled plastic content based on single specifications of products manufactured continuously on a production run. All packaging should be uniform in weight (within processing variances and production tolerances) and recycled plastic content calculated as an average across the output.

5. Finished packaging component

A plastic packaging component is chargeable for Plastic Packaging Tax when it’s finished. A component is finished when it has undergone its last substantial modification.

This applies even if waste or surplus material remains attached to it, however, this is not treated as part of the finished component when calculating the amount of tax due.

If your business is in the UK, you will be liable as a manufacturer for Plastic Packaging Tax if you perform the last substantial modification before the packing or filling process.

Where a substantial modification is undertaken as part of the packing or filling process it should be ignored for the purposes of determining when a component is chargeable for Plastic Packaging Tax. In these cases, the business that undertakes the last substantial modification before the packing or filling process will be liable for the tax.

Therefore, if you pack or fill the packaging, you will only be liable for Plastic Packaging Tax if you also undertake a substantial modification before the packing or filling process.

If your business imports plastic packaging components that have already undergone their last substantial modification, they will be considered finished, and you will be liable for Plastic Packaging Tax.

The last substantial modification is the last manufacturing process that makes a significant change to the nature of the packaging component, as it alters one of the following characteristics of the packaging component:

shape
structure
thickness
weight

Not all manufacturing processes are substantial modifications.

Examples of manufacturing processes that are substantial modification processes:

Extrusion
Moulding
Layering and laminating
Forming
Printing

Not all manufacturing processes that change the shape, structure, thickness, or weight are a substantial modification. The following processes are manufacturing processes which are not substantial modification processes:

blowing or otherwise forming a packaging component from a preform — for example, blowing bottle preforms into bottles
cutting — for example, cutting film to size or cutting formed trays out of a larger sheet
labelling — for example, gluing a label to a tub or heating a shrink film label onto a bottle
sealing — for example, attaching a film lid onto a tub or attaching 2 sides of a piece of film to close a bag

If several manufacturing processes are completed at the same time.

Multiple processes can be completed at the same time to finish a packaging component.

In these cases, the liability for Plastic Packaging Tax remains with the business that completes the last substantial modification of a packaging component before the packing or filling takes place.

If you complete multiple processes to finish a packaging component, and at least one of those processes is a substantial modification process, then all other processes carried out at the same time will be regarded as the last substantial modification.

This includes where any of the other processes would not otherwise be regarded as substantial modifications.

6. Recycled plastic

Recycled plastic is plastic that has been reprocessed from recovered material, by using a chemical or manufacturing process, so that it can be used either for its original purpose or for other purposes. This does not include organic recycling.

7. Recovered material

The recovered material is pre-consumer plastic or post-consumer plastic that has been collected and recovered as a material input, instead of new primary material, for a recycling or manufacturing process. It would otherwise have been disposed of as waste or used for energy recovery.

8. Pre-consumer plastic

Pre-consumer plastic is plastic that is recovered from waste generated in a manufacturing process and processed by a reprocessing facility. It does not include plastic that is reused in the same process in which it was generated as scrap and from which it was recovered.

9. Post-consumer plastic

Post-consumer plastic is plastic that is generated by households or commercial, industrial, or institutional facilities in their role as end-user of the product that can no longer be used for its intended purpose. This includes returns of materials from the distribution chain.

Plastic packaging not chargeable for the tax

There are several types of products where Plastic Packaging Tax will not be charged regardless of how much recycled plastic the packaging contains.

There are 3 categories of products that are not chargeable because they are specified in the law as not being classed as a packaging component for the purpose of the tax even though they fall within the general definition.

These are items:

where the packaging function is secondary to the storage function
where the packaging is an integral part of the goods
designed primarily to be reused for the presentation of goods

There are 4 types of products that are classed as plastic packaging for the purpose of the tax but are exempted from being chargeable by the law.

These are plastic packaging components:

Used as transport packaging on imported goods.
Used in aircraft, ship, and rail goods stores.
Used in the immediate packaging of a medicinal product.
Those are permanently designated or set aside for use other than for packaging use.

You must still include 3 and 4 when assessing whether you meet the 10 tonnes threshold of plastic packaging in a 12 month period for determining if you need to register for the tax even though the tax is not chargeable on these.

Plastic packaging components which are exported from the UK may benefit from relief from the Plastic Packaging Tax.

For further information, please refer to further HMRC guidance HERE