Recently released government statistics show that the total revenue generated from PPT decreased by £17m from 2022-23 to 2023-24. In this period, the tax payable per tonne and the number of PPT registrations both went up, which would have increased the tax yield. However, this appears to have been offset by an increase of 78,000 tonnes in plastic packaging with more than 30% recycled content, which is not subject to PPT.
Given that less than 5,000 businesses are currently registered (and with only 527 new registrations created in the last year), we consider it likely that there is still significant under-reporting and under-payment of PPT. This could be due to difficulties in sourcing the information needed to be compliant.
In the first instance, data regarding the type of packaging used is not routinely captured by procurement or finance. This is much more complicated than just identifying whether something was purchased in a box or a plastic bag and whether it included bubble wrap. It also covers the composition of clothing tags, sizing stickers, labels, hangers etc.
This means that for a single item (such as a pair of shoes), there may be more than 10 different packaging components to consider. In most cases, a physical review of each product stock-keeping unit (‘SKU’) from each supplier will need to be undertaken. The data is then linked to other systems that capture the volume of purchases, to confirm PPT obligations and calculate the tax due. As most businesses do not manufacture their own packaging, gathering data about packaging content from (often overseas) suppliers takes time.
However, businesses need to dedicate resource to data capture, as reporting obligations are only going to become more onerous over time. Legislation aimed at reducing carbon consumption, promoting recycling and using more environmentally friendly materials is increasing – bringing with it a need to deliver meaningful analysis to tax authorities, other enforcement agencies and environmentally conscious shareholders and consumers.
HMRC has started to take a more hardline approach to PPT – we are seeing an increase in enquiries, penalties for non-compliance and questions during HMRC business risk reviews. Businesses that are currently unsure of their position will need to put in place a clear process to identify whether they should be registered (or to prove to HMRC that they shouldn’t be). Ownership of this process is key – as a “tax”, a key part of this will fall to the finance team, but it requires significant input from logistics and procurement teams too.
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