Food and drink companies - Get ready for the plastic tax

RSM UK provides businesses with audit, tax and advisory services. Stuart is a Business Advisory Partner, his clients include a number of food and drink manufacturers, who are a key sector for RSM.

Stuart explained that the Plastic Packaging Tax is an environmental tax designed to provide a financial incentive for businesses to use more recycled plastic in packaging. The tax is put in place by the UK Government and covers the whole of the UK. The tax will apply to chargeable plastic packaging components where the recycled content is less than 30 per cent. It will apply to traditional packaging as well as single use items you might not initially consider as packaging such as bin liners, sandwich bags, disposable plates, gift wrap and disposable cups. The UK Government’s aim is for the tax to divert plastics from landfill or incineration by creating greater demand for recycled plastic.

So, what do food and drink businesses need to do? Stuart noted that firstly businesses need to work out if they are liable to pay the tax. He advised that there is a 10-tonne per year threshold. Importers or manufacturers under that threshold will not need to register for the tax. He said that it is important that these businesses keep records of the materials they import to use as evidence.

Stuart urged businesses to notify HMRC as soon as possible if they will need to pay the tax – the deadline to notify them is 30 April 2022.

What else do businesses need to be aware of? Stuart explained that manufacturers and importers will be liable to pay the levy whether the plastic packaging is filled or unfilled. For example, if a business imports fizzy drinks in plastic bottles or ice cream within a plastic tub (with less than 30 per cent recycled content), then the plastic bottles/tubs will need to be identified for the purposes of the tax.

I wanted to know if the tax will put up the price of food and drink? Stuart said that any additional costs that food and drink manufacturers incur will put pressure on price. Along with inflation, the tax is likely to be a key influencer on the price of food and drink. He noted that it will depend on the impact for each manufacturer and whether they can pivot and change packaging to mitigate the tax, which would minimise any need for price increases.

Stuart advised that our shoppers may notice a change in pricing or perhaps a change in how food and drink is packaged. He said “ultimately, the consumer will be a key driver through behavioural change and may demand food and drink manufacturers to consider switching to more environmentally friendly packaging sooner rather than later.”

It’s important that all food and drink businesses in Scotland are prepared for their role in this new tax, using advisers like Stuart when they need to. And as consumers, we all need to understand the many pressures that contribute to the high prices we are seeing.

To note: This article was orginally published in the Scotsman on 12 April 2022.