Tax Liability on Plastic Packaging Suppliers From April 2022

New Plastic Packaging Tax

A new plastic packaging tax (PPT) is being introduced by the Finance Act 2021, with effect from 1 April 2022.

As from April 2022, Sections 42-85 of the Act impose a liability for PPT on businesses that produce certain plastic packaging components or have such components imported on their behalf. They will be liable where the items produced or imported comprise or include any “chargeable plastic packaging component” as defined by the Act.

It is recommended that businesses take legal advice generally in relation to the PPT provisions of the Finance Act 2021 and how they do or might affect their business.

Liability for PPT and Chargeable Plastic Packaging Component

A business might be liable for PPT whether or not it on-sells the plastic packaging components – either packaging on its own or as part of other goods or materials.

If it is a producer of plastic packaging components or has them imported for it, it will need to establish in respect of such components whether they are “chargeable plastic packaging components” under the Act in order to see whether it is liable under the Act for PPT.

Even if a business is not the producer of the packaging component and has not had it imported for it, and the business is therefore not liable for PPT, the business might have purchased the packaging component from a supplier who charged the business an amount equal to the PPT on the packaging component that they had to bear.

Where a business is either directly liable for an amount of PPT under the Act or is indirectly liable (i.e. under its contract with its supplier) for an amount equivalent to it, if it supplies that packaging (or goods including that packaging) to its business customers, it might wish to pass on to them an equivalent amount (i.e. recoup it in addition to the price of the goods) rather than absorbing the tax cost.

PPT Clause

Whether or not a business decides to absorb it, it should include in its sales contracts for any goods comprising or including any chargeable plastic packaging component a suitable clause to take account of the effects and requirements of the plastic packaging tax provisions of the Finance Act 2021, including the requirement to provide customers with certain information.

To assist suppliers of chargeable plastic packaging components to include a suitable price clause in their contracts which takes account of PPT, a new template clause is available: Plastic Packaging Tax: Sale of Goods Price Clause. This template clause should be adapted as necessary to ensure that its content and terminology are consistent with the terms and conditions used by the business when selling to its business customers.

Information Required for Consumer Customers

This new template clause is designed for use by suppliers only when selling goods to business customers, not to consumer customers. However, where the business is directly or indirectly liable for PPT on any packaging and it does not simply want to absorb that tax cost but instead increase the price to consumers to reflect that cost, it should consider what if anything should be included in its terms of sale in relation to that increase.