HMRC have distributed a draft schedule outlining the procedures they will take to enforce the plastic packaging tax and discourage non-compliance.
The schedule contains powers to make producers operating with non-compliant businesses jointly or severally liable, or hold them secondarily liable when the tax has not been paid.
Whereas joint and several liability is prospective, secondary liability is retrospective, but both will work in tandem to deter tax avoidance. Secondary liability notices render the recipient liable for the tax when the taxable person has failed to pay. A joint and several liability notice mandates the recipient is liable for the tax for two years after the notice is served.
There are a number of conditions that must be met before either of these two notices are served. The Commissioner must be satisfied that:
- They believe the recipient is acting in the ‘course of related business’.
- They believe the recipient knows, or should have known, that their actions would lead to the tax failing to have been paid.
- The recipient was or is involved with ‘dealing’ with the chargeable plastic packaging – this could be transporting and storing the component.
Anticipate tax allocation responsibilities
The draft schedule goes on to outline a number of other conditions associated with the notices. These include stipulations on payment timings, a clause to allow more than one notice to be served within an accounting period, and that a notice can be revoked or reduced if the recipient took ‘all reasonable steps’ to establish the taxable person their dues.
The decision to use liability notices was consulted on in both the 2019 and 2020 consultations, and was met with general agreement from respondents. Understanding the framework around this mechanism will be useful to both anticipate tax allocation responsibilities and to deter illegal activity within a producer network.
The schedule will be released in full at a later date, alongside finalised legislation in the next Finance Bill and detailed guidance. In the meantime, there is more detail on how it will work in the latest summary of responses published in November of last year.
We are actively working to assess the impact of the Plastic Packaging Tax, and what support we can offer in the future. If you have any questions or would like more detail, please contact our team.
As Policy advisor Louisa provides key support to our team, including preparing reports on environmental policy issues and maintaining awareness of new developments. As such she will often be found coordinating responses to policy consultations, advocating policy positions and providing internal guidance to current legislation.