Businesses that ignore Plastic Packaging Tax 'in for a nasty surprise'

Multinational law firm Pinsent Masons has revealed just 992 UK businesses signed up to pay the government’s new tax on plastic packaging in April 2022 – the first month of registrations – and has warned businesses may be subject to substantial HMRC fines if they should be paying the tax.

The Plastic Packaging Tax is payable by UK businesses which will manufacture or import 10 tonnes or more of plastic packaging which fails to include at least 30 per cent recycled plastic in the year from 1 April 2022. HMRC had estimated that around 20,000 businesses would be affected.

Due to the way the threshold works, it is only the largest suppliers that needed to register in the first month; however, Pinsent Masons believe 992 registrants in the first month is still a “surprisingly low” number. The firm said it may put into doubt HMRC’s forecast of £235m in revenue from the first year of the tax.

Pinsent Masons said one reason why so few businesses have signed up may be that they are unaware they are required to or are confused about the scope of the tax. What constitutes ‘plastic packaging’ is not always obvious, with items such as plastic coat-hangers subject to the tax.

In addition, many businesses are unaware that they are responsible for doing due diligence on their supply chain, as they can be held jointly liable with suppliers or customers who fail to pay the tax correctly, which could lead to substantial costs. Businesses that deliberately fail to comply also risk criminal charges.

Abigail McGregor, Legal Director at Pinsent Masons, said there was a lot of confusion among UK  businesses and those who supply into the UK about who needs to pay the Plastic Packaging Tax, when they need to pay and on which products.

“Many are unaware the products they make or use are within the scope of the tax, or that they could be liable if another member of their supply chain fails to pay”, said McGregor.

“Although HMRC are unlikely to impose hefty penalties for innocent non-compliance immediately, unfortunately, being unaware of a new tax will not stop HMRC from investigating your business and levying penalties for any underpayments or failure to register and make returns in the longer term”.

She said businesses that ignore the Plastic Packaging Tax “may be in for a nasty surprise”.

“It is critically important that companies make sure they know whether they are liable or not – or whether they have sufficient due diligence measures in place – as soon as possible. Any businesses which are unsure should seek professional advice immediately.”