Note: The information provided in this FAQ is not intended to be (and should not be construed as) professional legal or tax advice, nor does anything contained here constitute an attorney-client relationship between Wish Legal and merchants. Merchants should seek independent counsel if they have legal and/or tax-related queries.
On April 1, 2022, the United Kingdom HM Revenue and Customs’ (UK HMRC) introduced the Plastic Packaging Tax (UK PPT), an environmental tax designed as a financial incentive to change plastic production processes.
In this article (click on a topic to be taken to that particular section):
1. How do I comply with UK PPT?
To comply, merchants must first determine if they are required to register for UK PPT, which means they meet either of the following criteria (Tonnage Criteria):
- Have manufactured or imported 10 metric tons or more of finished plastic packaging components in the UK since April 1, 2022, in any cumulative 12-month period; or
- Are planning to manufacture or import 10 metric tons or more of finished plastic packaging components in the UK within any 30-day period
If 30% or more recycled plastic is used, no tax will be due, but merchants may still be obligated to register and report relevant information if the Tonnage Criteria is met. Plastic packaging components (regardless of being filled with product) made with less than 30% of recycled plastic material are subject to tax.
UK PPT defines plastic as a polymer material with added substances or additives. This applies to chemically modified cellulose-based materials, such as cellulose acetate and other biodegradable labeled plastics. When assessing whether the 30% recycled plastic threshold is met, only the proportion of plastic is relevant. For example, comparing only recycled plastic versus non-recycled or virgin plastic. Other materials are ignored. A plastic packaging component made with multiple materials will be considered taxable if the amount of plastic used within the packaging is the heaviest material by weight.
See further guidance from HMRC.
Note: Merchants will need to maintain records of material weight and materials used to manufacture packaging to support their conclusions on UK PPT. Guidelines are provided by HMRC.
2. How do I register for UK PPT?
3. What are examples of plastic packaging subject to UK PPT?
A. Plastic packaging on products you manufacture or import
Plastic packaging on products is broken down into its constituent components for UK PPT purposes. For example, the plastic packaging components in a bottle of water include the bottle, lid, and label.
Additional examples include:
- Protective bags
- Coat hangers
- Bubble wrap
- Packing nuts
B. Plastic packaging manufactured or imported for sale as packaging products to consumers
These include items that are not used as packaging at the time of manufacture or import, but are intended to be used by the consumer as packaging. Examples include:
- Plastic coat hangers
- Mailing bags
- Bubble wrap
- Pallet wrap
C. Single-use plastic products manufactured or imported where those products are designed as containers
- Cling film (i.e., plastic wrap)
- Sandwich bags
- Black bin bags (i.e., trash bags)
- Carrier bags (i.e., grocery bags)
- Nappy sacks (i.e., disposable diaper bags)
- Plastic party cups
- Vending machine cups
4. What plastic packaging is out of scope and not subject to UK PPT?
Some plastic packaging is out-of-scope and not taxable by UK PPT. However, some of this out-of-scope plastic packaging may still count towards the 10-ton threshold for UK PPT registration. In this case, a merchant would still be required to register for UK PPT, but not need to pay tax on the out-of-scope plastic packaging. See below for details.
A. Non-taxable plastic packaging that counts towards the 10-ton threshold for UK PPT registration
- Plastic with greater than 30% of recycled content
- Products with a primary storage function
- Packaging for human medicinal products
- Product that is an integral part of the goods
- Packaging designed to be reused for presentation of the goods and that is permanently used and designated for a non-packaging use
- Products permanently set aside for non-packaging use
- Transport packaging
B. Non-taxable plastic packaging that DOES NOT count towards the 10-ton threshold for UK PPT registration
- Tertiary or transport packaging
- Plastic packaging used in relation to goods used on ships, aircraft, or trains on international journeys
See below for example scenarios involving out-of-scope plastic packaging and UK PPT registration:
A. A non-UK domiciled merchant imports 11 tons of plastic packaging into the UK in a year. Five tons of this has more than 30% recycled plastic, and the remaining six tons are taxable packaging. The following steps would need to be followed for compliance:
- The merchant must register for UK PPT (because all 11 tons count towards the threshold).
- Quarterly returns must be submitted by the merchant once registered. The return needs to include the amounts of taxable and nontaxable plastic packaging.
- UK PPT would only need to be paid on the six tons of taxable packaging (subject to reliefs for export, etc.)
B. A merchant that imports or manufactures 9.5 tons of taxable plastic packaging (such as plastic packaging containing no recycled content) will NOT have to register for UK PPT, make any UK PPT-relevant tax returns, or pay any UK PPT because the applicable threshold has not been met.
5. How do I know if I’m considered a manufacturer of applicable plastic packaging?
According to legislation Finance Act 2021, Part 2, those who finish the plastic packaging components are treated as the manufacturer and may be responsible to register for UK PPT.
6. Am I still responsible for paying UK PPT if I don’t have a UK entity or operation?
Merchants with a non-UK entity or operation who meet the Tonnage Criteria will are still subject to UK PPT requirements. For example, a non-UK entity that is the importer of record of taxable packaging components into the UK will be liable for UK PPT (provided they meet the Tonnage Criteria).
7. What is the UK PPT rate?
The PPT rate is £200 per metric ton of plastic packaging.
8. What if I dropship goods from outside the UK to UK consumers?
Merchants that dropship packages into the UK may be treated as the importer of the goods. Therefore, merchants must maintain records of their applicable product packaging components and check regularly if the total supplies into the UK in a certain period exceeds the threshold of 10 metric tons. UK HMRC interprets the importer as the consignee on the importation documents, unless the consignee can produce records showing they are acting on behalf of someone else.
9. Is Wish obligated to pay UK PPT?
Wish is not responsible for paying UK PPT. Merchants are required to perform their due diligence and follow all applicable provisions under UK PPT. Wish may request data from merchants related to merchants’ UK PPT exposure and process it for its own purposes.
10. What do I do once I have registered for UK PPT?
After registration, merchants must submit periodic local returns in the UK. Merchants are encouraged to contact a local tax and/or legal professional, advisor, or expert for further information/guidance on the UK PPT. Wish reserves the right to request data from merchants related to merchants’ UK PPT exposure and process it for its own purposes.
11. What happens if I don’t register and pay UK PPT?
In the case of non-compliant or unregistered merchants, HMRC may contact Wish to block applicable merchants' relevant product listings until UK PPT registration, reporting, and/or payment obligations are fulfilled, or send Wish a notice of non-compliance making Wish secondarily liable for the unpaid tax amount. If a merchant has not completed the necessary registration and paid the tax amount to HMRC, Wish may freeze their account, pay the tax amount due, and claim this amount from the merchant. After Wish receives confirmation from HMRC that the tax amount has been paid and the merchant has provided us with a UK PPT registration number, Wish may reactivate their account.
Non-compliant merchants can face both civil and criminal penalties from the UK HMRC. These penalties include failing to register, failing to file returns, and failing to pay any liability. Non-compliant merchants can also face monetary penalties directly from the UK HMRC, typically calculated based on a percentage of the unpaid UK PPT. UK penalties for tax non-compliance, which include a failure to notify liability to the tax, late or failure to make returns, late payment of the tax, and inaccuracies in returns, all apply to UK PPT.
There is also a specific set of fixed and daily penalties (an initial £500 plus a daily penalty of £40) for not complying with a specified list of UK PPT obligations, including matters such as the preservation of records and appointment of representatives.
Finally, there are potential criminal offenses specific to UK PPT, such as knowingly making false statements regarding UK PPT, and some general tax offenses.
12. What resources are available for more information on UK PPT?
Wish merchants are expected to conduct their independent due diligence in good faith to verify their current standing with UK PPT. The following resources provide additional information regarding Plastic Packaging Tax:
- UK Legislation: “Finance Act 2021”
- HMRC: “Check which packaging is not subjected to Plastic Packaging Tax”
- HMRC: “Plastic Packaging Tax”
- HMRC: “Definitions of finished components and substantial modifications for Plastic Packaging Tax”
- HMRC: “Secondary liability and assessment notices and joint and several liability notices for Plastic Packaging Tax”
Please send any questions regarding Wish’s treatment of UK PPT to the following email address: firstname.lastname@example.org.