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Plastic Packaging Tax: Blurred Lines Place Unjust Burden On Sustainable Businesses

For many years we have taken great pride in the fact that we are champions for sustainability across the logistics sector – whether that’s down to the products we supply, our pioneering recycling scheme (over 1,000 tonnes of plastic recycled already, by the way!), our accreditation from the Environment Agency, or the work we do with various charities and environmental organisations. Therefore, when the Plastic Packaging Tax (PPT) was announced in July 2021, to come into force the following April, I was eager to understand its impact and the positive effects it could bring. However, as we reach the first anniversary of the introduction of the tax, I can only shake my head in disappointment at this misguided approach, which has unfairly cost our business hundreds of thousands of pounds.

If you’re not aware, PPT applies to plastic packaging manufactured in, or imported into the UK, that does not contain at least 30% recycled plastic. According to HMRC in 2021, those most likely to be affected by PPT were “UK manufacturers of plastic packaging, importers of plastic packaging, business customers of manufacturers and importers of plastic packaging, and consumers who buy plastic packaging or goods in plastic packaging in the UK”.

My longstanding view, and one I know is shared by many of my peers across the logistics industry, is that this tax should have been designed to drive down the use of single-use/limited use plastics and where plastic packaging is otherwise avoidable. This should cover items such as plastic water bottles, food packaging, shrink wrap, etc.

I do believe HMRC started off with good intentions (while lining their coffers in the process), however, problems arose following a consultation period and due to a lack of clear guidelines, when people sought further clarity from HMRC – asking questions, such as “does this item qualify?”, “where do we stand on that?” and “what qualifies as packaging?”.

Seemingly, when quizzed by manufacturers and importers, HMRC gave answers on a case-by-case basis, and it quickly became apparent there was no logic or consistency around the decision-making process. It was at this point that we were informed our virgin products would be subject to the tax.

In my opinion, a virgin plastic pallet we supply to a food manufacturer, and they use for up to 10 or 15 years within their factory, should not be considered “packaging” – yet a plastic case for reading glasses, or the case a drill is sold and stored in, is exempt.

We spent in excess of £24,000 challenging the decision and arguing that our products shouldn’t be included in this tax. Despite our best efforts, we were told the only avenue would be to fight this decision in the High Court, which would cost us more than £250,000.

Plastic Packaging Tax: The numbers do not add up

In response to our Freedom of Information (FOI) request, HMRC confirmed that it forecasted 20,000 manufacturers and importers of plastic packaging to register for PPT in its first year, however only 3,426 had signed up between 1 April 2022 (the launch date) and 16 February 2023 (the date of our request). Therefore, if my maths is correct, HMRC has seen just 17% of its expected number of companies register for PPT.

In my view, this can only be down to a small handful of reasons: Maybe those businesses didn’t exist in the first place, or they do operate, but haven’t registered – down to a lack of desire or awareness. I imagine it could be a mixture of both and the blame for that shouldn’t solely rest at their doors. For instance, the lack of clarity surrounding the original criteria of PPT hasn’t helped in the slightest, whilst the messaging and general communications since, can be best described as “wishy-washy”.

When it comes to unpicking the forecasted revenues from PPT, this gets even more confusing. HMRC said it expected to collect £200m in tax for the 2022-23 period, which was revised to £300m in November. As part of the same FOI request, the department told us that from the beginning of the financial year (April 22) to the end of Jan 23, they had collected around £195m. Therefore, you can assume the targets will be met.

However, when you look at the number of registered companies, it feels like HMRC has thrown a dart whilst blindfolded. If just 17% of the companies expected to register have far exceeded the forecasted amount of tax, then it illustrates just how wrong HMRC has got this.

For transparency, I can reveal that has so far paid £146,667 – which covers three quarters of the first year of PPT. Therefore, the total figure, once settled, will probably sit around the £200,000 mark. When you consider that HMRC originally expected 20,000 companies to pay £200m in the first year, or £10,000 each, we are paying well over the odds for selling products that have a positive effect upon the environment.

From my point of view, this is money we could have better spent investing in our business, our plans for growth, R&D, and rewarding and developing our brilliant people.

Time to learn lessons and find a sustainable way forward for PPT

Categorically, for the record, I don’t believe PPT should apply to the products we sell – and I believe its fundamentally flawed in its current form.

This tax has now inadvertently placed an undue burden on our environmentally-friendly plastic pallets. These pallets are designed for repeat use over many years and contribute to sustainable supply chains. Our plastic pallets are specifically engineered to be robust, durable, and reusable, lasting for up to 10-15 years in some cases. They offer an eco-friendly alternative to traditional wooden pallets, which are often discarded after a few supply chain cycles and contribute to deforestation.

Furthermore, our pallets are 100% recyclable, ensuring that they do not end up in landfills or the ocean once their lifespan has been exhausted – has David Attenborough ever fished a plastic pallet out of a river? I very much doubt it. The lack of foresight and the failure from HMRC to differentiate between truly harmful single-use plastics and sustainable, reusable products like ours is baffling.

HMRC said they planned to review the tax after the first year. My message would be to scrap it completely and start again with a focus on single-use plastic. I’m willing to meet with Prime Minister Rishi Sunak, who was Chancellor of the Exchequer when PPT was devised and introduced, to fight the case of sustainably-focused businesses like us, who have been battered by a tax that just isn’t fit for purpose. Let’s work together to create a tax that doesn’t put eco-conscious businesses at a disadvantage. After all, we all want a greener future, and it’s time to send this misguided policy to landfill, and unwrap a fresh, targeted approach that truly distinguishes between single-use plastic and sustainable alternatives.