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Autumn Budget and update to the finance bill, what you need to know!

28th October 2021

Martin Hyde

Yesterday (Wednesday 27 October), Rishi Sunak published the treasury’s Autumn Budget. Whilst there are many fiscal measures for discussion from alcohol / tobacco duties through to rises to the National Living Wage, I wanted to focus on the key takeaways related to the Resource and Waste Strategy.

With COP26 just days away, and the government’s Environment Bill still undergoing proposed changes and debate, the future of the Resources and Waste Strategy needs to provide consistency to the waste and resources sector. For those unaware, the Resources and Waste Strategy (RWS) was published in late 2018, and sets the scene for eliminating avoidable waste by 2050.

The RWS highlights four specific policy measures for reduction of waste, these include:

  • Extended Producer Responsibility for Packaging Waste
  • Consistent Collection of waste from kerbsides across England
  • A UK wide Plastic Tax
  • Deposit Return Schemes for drinks containers in England, Wales, Scotland and Northern Ireland

So, what mention did the Resources and Waste Strategy have in the autumn budget?

Overall, there was very little mention of this wider strategy in the budget, with no mentions at all of Resources and Waste strategy within the 202-page document. The only area within the RWS that actually gets a mention is the consistent collection proposals, specifically the rollout of kerbside food waste collections.

Kerbside Food Waste collections – delay until 2025?

DEFRA’s plan for consistent kerbside collections under the Resource and Waste Strategy originally proposed legislation for the mandatory kerbside collection of food waste, which would come into force in 2023 (subject to consultation). Yesterday’s budget confirmed that the treasury would make available over £300 million of funds to support this transition but not until 2024. This implies that a 2025 delivery timeline for food waste collections is more likely. This is an announcement that was teased in the government’s recent Net Zero Plan (although the quoted figure was £295 Million).

The UK Plastic Tax – Little presence in the budget, but amendments behind the scenes

From April next year, businesses manufacturing or importing plastic packaging to place on the UK market will be required to register with HMRC, make quarterly returns based on the tonnage of plastic packaging handled, and pay a tax of £200 per tonne of plastic where the recycled content is less than 30% by weight. More information on the tax is available below:

Click here for more information on the tax

Click here to watch our most recent webinar, covering an update on the tax

The tax itself earned very little mention in the budget, only as a recurring figure in the “policy measures announced in spring budget or earlier” tables.  

At the same time as the budget announcement, HMRC released 6 amendments to the Plastic Tax legislation (within the Finance Bill 2021-22). For those hoping for a significant overhaul of the draft legislation, unfortunately these revisions are relatively minor, each is summarised below:

Amendment 1 - Provision to allow HMRC to modify the timing of an import and the meaning of import / customs facilities.

Explained – The main aim here is to allow HMRC flexibility on importing and custom definitions so they can be made to match other legislations more closely, such as customs and freeport requirements.

Amendment 2 - Ensuring that businesses below the de-minimis threshold do not have to pay the tax.

Explained – The aim here seems to reduce the implications for businesses below the tax’s 10 tonne threshold, however the wording used seems to leave a lot open for debate. A common issue presented by the tax is that businesses selling to those below the threshold will likely still pass the cost of the tax down the supply chain, meaning that the tax would be paid “indirectly” by businesses purchasing from liable tax parties. This amendment does not seem to do anything to prevent this from occurring.

Amendment 3 – Provide tax relief for those “enjoying certain immunities and privileges”

Explained – The main aim here seems to be to minimise the impact on military bases, diplomatic services and others whom would usually be exempt from tax requirements such as this.

Amendment 4 – Transferring obligations of group members to representative members of groups

Explained – By transferring liability to a central point in a group of companies, HMRC will be better able to identify liability and ensure the correct tax requirements are being met, this should (in theory) reduce the administrative burden on subsidiaries of group companies.

Amendment 5 – require HMRC to notify representative members of a group of the date these changes will take place.

Explained – Alongside amendment 4, the proposal here will ensure that HMRC are required to inform the correct parties within group companies regarding their obligation.

Amendment 6 – Change terms used to describe unincorporated bodies.

Explained – This appears to simply be a measure to minimise confusion by ensuring definitions are aligned across the tax legislation.

For future guidance updates and to be notified of updates relating to the tax, please email indirecttaxdesign.team@hmrc.gov.uk with ‘mailing list’ in the subject line.

Why is it disappointing to see such little mention of the Resource and Waste Strategy?

Over the next few years, the measure proposed under the RWS will have significant financial implications for the packaging and waste and resources industries, with many costs finding their way to consumers. At the same time, the RWS presents massive opportunity for the reform of waste management in the UK as well as the transition towards a more circular economy. Given the significant cost implications, it is disappointing to see little mention of the implications within the government’s financial strategy.

Some of the key costings presented by the RWS are highlighted below:

Plastic Tax - £235 Million a year

The plastic tax is estimated to provide £235 million a year through levies collected from businesses placing plastic packaging on the UK market. Unfortunately, none of these funds are ring fenced for increasing the capacity of UK recycling, and we expect these costs to ultimately be passed down to consumers. Even those whom opt not to purchase products in plastic packaging will not be immune to the impacts of the tax, as there is a significant quantity of material that will fall under the tax that is not consumer facing (secondary packaging such as bags / containers etc).

Extended Producer Responsibility (EPR) for Packaging - £2.7 billion a year

EPR will introduce a full costs-covered approach to funding packaging recycling in the UK that will support a clearer definition of recyclability, as well as ensure that the costs paid by businesses reflect the recyclability of packaging placed on the market. More information on the proposals for EPR can be found at the link below. The exact timeline for EPR implementation is still unclear, but a transition between 2023 and 2026 is to be expected.

Click here to watch a selection of videos summarising EPR

EPR is estimated to cost businesses £2.7 billion per year after its introduction, and this figure is considered by many to be a low estimate.

Deposit Return scheme (DRS) for beverage containers - £576 Million a year

A Deposit Return scheme involves adding a returnable levy on drinks containers at point of sale that is passed back to the consumer when they return an empty and clean container, this policy has had a lot of public support due to a mixture of euphoria and its potential implications for litter reduction, however the cost analysis is possibly the most subjective of the Resource and Waste Strategy

DRS in England, Wales and Northern Ireland is expected to cost £576 million a year for its first 11 years when reviewed solely on its tangible, measurable outcomes.

Summary of RWS costings - £125 Per household

Reviewing the above costs, it is feasible that the Resource and Waste Strategy could lead to costs of £3.5 Billion per year. Whilst there is significant societal benefit and considerable increases to recycling levels presented by these legislative changes, it is worth considering the net cost to the consumer. Through these three measures alone, an annual cost of £125 per household is feasible.

Comply Direct can support companies to both understand their liability and mitigate costs as a result of the plastic tax and EPR. If you would like further information on our services, please contact the team on consultation@complydirect.com