UK plastic packaging tax data shows environmental and economic impact

Abigail McGregor of Pinsent Masons was commenting after statistics concerning the second year of the operation of the PPT were published by HM Revenue and Customs (HMRC) earlier this week.

The PPT took effect on 1 April 2022 and applies to plastic packaging manufactured in, or imported into, the UK that does not contain at least 30% recycled plastic. The tax is calculated on a fixed amount per tonne. Manufacturers or importers of 10 or more tonnes of plastic packaging over a 12-month period must register for the tax. Businesses can face a range of penalties for non-compliance.

Revenue generated from the PPT fell in the year 2023-24, down 6% to £268 million from £285 million in 2022-23. This, McGregor said, was in spite of an increase in the rate of PPT and an increase in the overall number of businesses registered for PPT – HMRC said that as of 24 July 2024, there were 4,669 businesses registered for PPT, up from the 4,142 registered as at time the previous year’s data was published.

The statistics show that the total amounts of plastic packaging manufactured in and imported into the UK both fell over the past year. In the case of imports, there were 1,710 tonnes imported into the UK in 2022-23 and 1,324 tonnes imported in the last year.

McGregor said the data is striking: “Overall, there has been a drop in total plastic packaging imported into and manufactured in the UK – from 3,451 tonnes down to 2,967 tonnes – but what is striking is that the bulk of that drop has been in imported plastics, which almost exactly matches the drop in plastic that has been imported and then re-exported. This shows that the tax has changed the way that plastic importers are operating – they are keeping the UK out of their supply chain process where they can in order to prevent the administration involved in obtaining the relief from PPT.”

“While this has no impact on the total amount of PPT payable, because it was credited on export in any event, these changes in behaviour will have other economic consequences, for example a reduction in the use of UK storage space and haulage services,” she said.

The data also shows a gradual increase in the volume of plastic packaging that businesses are reporting contains 30% or more recycled plastic. McGregor said this is “another positive trend” that “aligns with the environmental aims of the tax”.

“The volume of plastic packaging that contains 30% or more recycled plastic has gone up in real terms, from 1,293 tonnes to 1,371 tonnes and as a proportion of the overall volume of plastic packaging components manufactured or imported in the UK, where it has gone from 37% to 46% in one year,” McGregor said.

McGregor said the increase in the number of businesses registered for PPT suggests that “mini-campaigns” the HMRC has conducted targeting businesses that it believes should be registered, “have probably borne some fruit”, but that the number of business registered for the tax still falls well short of the 20,000 that was originally estimated would be subject to it. She said HMRC now concedes the original estimate must have been wrong.

“HMRC has ceased its initial ‘softly, softly’ approach to PPT compliance and will likely come down hard on those who remain unregistered where they should be,” McGregor said.