The Foodservice Packaging Association has commented on issues of clarification surrounding VAT and taxing in relation to the UK’s plastic tax. The association comments The FPA has been discussing with HMRC the issue of high levels of wastage involved in some production processes, ranging from 20-45%. This means UK producers will be paying tax on this level of waste and scrap, which puts them at a big disadvantage versus importers, who only pay the tax on finished packaging. In response HMRC said: “The position on waste is confirmed in the primary legislation… it is not something we are in a position to change. We are aware of the risks around the position of UK businesses compared to imports. When designing the tax we needed to balance this with the environmental aim of the tax”.
HMRC also confirmed the position regarding VAT and the packaging tax, where a producer passes on the tax to a customer. It said: “It is not a requirement for businesses to onward charge customers the amount of Plastic Packaging Tax paid. How businesses manage any additional costs in terms of their pricing as a result of the tax is a commercial decision. If they do decide to incorporate PPT in their prices, this would be treated like any other standard increases in prices”.
This clarifies that the decision to pass on the tax charge is taken by the business and, if they choose to do so, it is treated as part of the price to which VAT is charged, effectively charging VAT on the tax.”
The Foodservice Packaging Association also drew attention to the issue of reusable cutlery, “The FPA has also clarified whether redesigning plastic cutlery to be reusable and dishwasher-safe removes the item from the scope of the plastics tax. This is clearly answered in the legislation: Products to which paragraph (2) applies (inclusion in definition of packaging component)..applies to any product that is designed to be suitable, whether alone or in combination, with other products for (a) single-use (even if they are capable of being used on more than one occasion).
For more information on the Foodservice Packaging Association visit foodservicepackaging.org.uk
For more information on the the introduction of Plastic Packaging Tax from April 2022 visit gov.uk/government/publications/introduction-of-plastic-packaging-tax-from-april-2022/introduction-of-plastic-packaging-tax-2021