UK PPT: Mass Balance for Chemically Recycled Plastic Required by 2027

• From April 1, 2027, businesses must use a mass balance approach to account for chemically recycled plastic in UK Plastic Packaging Tax returns.
• Failure to use this optional approach means chemically recycled plastic will be treated as non-recycled for tax purposes.
• All chemically recycled plastic attributed via mass balance requires third-party certification across the entire supply chain, from recycler to converter.
• If any business in the supply chain is not certified, the recycled content cannot be accounted for using the mass balance approach.
• Importers of finished packaging must ensure and hold evidence of their supply chain's certification, even if they don't need to be certified themselves.

Failure to comply with the stringent Plastic Packaging Tax certification requirements and supply chain protocols will mean that chemically recycled plastic is treated as non-recycled, directly impacting a company's tax burden.

The United Kingdom's Plastic Packaging Tax (PPT) is set to introduce a significant change for businesses dealing with chemically recycled plastic, effective from 1 April 2027. From this date, companies wishing to account for chemically recycled plastic in their PPT returns will need to adopt a mass balance approach. While this method is optional, opting not to use it will result in all chemically recycled plastic being classified as non-recycled, or virgin, for tax purposes, potentially increasing tax liabilities.

The mass balance approach provides a mechanism to accurately attribute the proportion of chemically recycled plastic within a mixture that also contains virgin plastic. This is crucial because, without such a system, distinguishing between virgin and chemically recycled sources in the final packaging output is practically impossible. It is important to note that this specific approach is exclusively for chemically recycled plastic; it cannot be applied to mechanically recycled plastic, which requires a different method for accounting for its recycled content.

To utilize the mass balance approach for the UK Plastic Packaging Tax, any attributed chemically recycled plastic must be substantiated by a third-party certification scheme that adheres to the minimum requirements stipulated for the PPT. This certification mandate extends across the entire supply chain, encompassing every business involved in processing, receiving, supplying, or storing materials used to produce chemically recycled plastic. This includes entities from the initial chemical recycler through to the final plastic packaging converter.

Certification must be maintained continuously, covering the entire process from the point when waste is recycled up to the completion of the plastic packaging component's manufacturing. A critical aspect of UK PPT supply chain certification is that if even one business within the chain lacks proper certification, the recycled content cannot be legitimately accounted for using the mass balance approach in the PPT return. While all businesses in the supply chain must possess a valid certificate, they are not required to be registered under the same specific certification scheme. Furthermore, when chemically recycled plastic is transferred between businesses, the sending entity is obligated to provide the receiving business with a new attribution declaration for each batch of attributed recycled material.

Understanding and implementing the mass balance approach is vital for businesses aiming to meet the 30% Plastic Packaging Tax exemption threshold. Failure to comply with the stringent Plastic Packaging Tax certification requirements and supply chain protocols will mean that chemically recycled plastic is treated as non-recycled, directly impacting a company's tax burden. This could lead to significantly higher tax payments than anticipated.

For businesses that import finished plastic packaging where a mass balance approach has been applied, direct certification is not necessary. However, these importers bear the responsibility of ensuring their supply chain has been certified and must retain evidence of this compliance from their suppliers. HMRC Plastic Packaging Tax mass balance authorities plan to release more detailed guidance in early 2027, but businesses should begin preparations now to ensure readiness for the mass balance approach 1 April 2027 deadline. Proactive engagement with these new regulations is essential for mitigating future tax risks and ensuring compliance.

Businesses in the UK must prepare for the 1 April 2027 deadline by understanding and implementing the mass balance approach for chemically recycled plastic to qualify for tax exemptions. Failure to ensure full supply chain certification and proper attribution declarations will result in chemically recycled plastic being treated as non-recycled, increasing Plastic Packaging Tax liability.

Source: Original reporting via GOV.UK