Record keeping for businesses in and out of scope

An overview of record-keeping and due diligence requirements

There are significant record-keeping and due diligence expectations associated with this tax, which HMRC has set out in detail.

Although HMRC has stated that it is for each individual business to determine the precise set of due diligence checks that are appropriate to their circumstances, HMRC expects businesses to take steps to verify information provided to them.

So, an importer or purchaser must have procedures to verify information about the packaging that it receives from its suppliers (regarding the packaging’s weight and recycled content, for instance). An importer would be held liable for the tax if it accepted a supplier’s word that a component was exempt, without taking reasonable steps to confirm this.

Plastic Packaging Tax returns and payments are the responsibility of manufacturers and importers. However, a business that purchases plastic packaging produced in the UK could be held partially responsible for unpaid Plastic Packaging Tax within a supply chain that they are part of – if HMRC considers them to have shown insufficient due diligence.

Examples of due diligence procedures in practice:

• a purchaser creating a new stock code upon a component being supplied to them for the first time (with a ‘new stock code form’ needing to be raised and confirm information including the packaging waste, before being checked by a separate employee),
• the appointment of one or more employees tasked solely with keeping a purchaser’s technical specifications updated,
• an importer making on-site visits to (and auditing) an overseas supplier (to confirm the material that they are using within their packaging).

Please note that these due diligence examples are not exhaustive and are unlikely, by themselves, to constitute sufficient due diligence. Examples are available from HMRC regarding due diligence checks that may be appropriate.

Record-keeping for businesses inside and outside of scope

Records must be kept by businesses that are in scope. They should also be kept by those that are outside of scope if they manufacture or import plastic packaging components.

Manufacturers and importers that are liable must keep a record of how they have established their liability, demonstrating their calculation process; these records should be kept for a minimum of six years from the end of the accounting period. These businesses are encouraged to specify the Plastic Packaging Tax paid on a component in any sales invoice supplied to a business customer, although this is not a legal requirement.

Manufacturers and importers that are in scope but not liable must keep a supporting record of their non-liability (which again should be kept for a minimum of six years). Here are some examples of how this applies in practice:

1. An importer is not liable for the tax because the components that it imports are excluded from the regulations’ definition of ‘packaging’ or of ‘plastic’. They must have a record of how they have determined this, referring to the substances in the component if they are suggesting that it is not plastic.
2. Manufacturers and importers of exported components must keep evidence proving that the export occurred. This evidence must be either a document for any other tax/duty or another document, such as an export invoice.
3. A business can reclaim the tax paid on a component as it’s since been converted into different packaging. It must keep records of the conversion having taken place – for example, the production records of the new component. It must also keep a record of whether the tax is due on the new component.
4. Evidence must be stored by manufacturers and importers of components that are 30% or more recycled, showing how the 30% or more determination has been reached.

Businesses that are not in scope are advised to keep supporting records, which can be utilised should HMRC audit them. For example, if a manufacturer is not in scope because it has not met either test, it could maintain a record specifying the weight of each component that it finishes.