From 1 April 2027, the UK government will introduce a mass balance approach in the Plastic Packaging Tax and at the same time remove pre-consumer waste as a source of recyclate. The aim is to promote chemical recycling in a more targeted manner and close loopholes in the recycled content of plastic packaging.
The Plastic Packaging Tax (PPT) has been in force since April 2022 and applies to plastic packaging that contains less than 30 per cent recycled plastic. With the measure that has now been published, the UK Treasury is addressing two key points: the inclusion of chemically recycled plastics and the handling of pre-consumer waste.
Mass balance approach for chemical recyclates
In future, companies will be allowed to offset chemically recycled plastics against plastic packaging using a mass balance approach (MBA). The background to this is that in chemical recycling and petrochemical processes, recycled and fossil raw materials are processed in the same plants and then „split up“ again into different products. A physical 1:1 allocation of recyclate to individual packaging is therefore not possible.
The MBT is intended to establish a standardised, transparent procedure for allocating recycled input streams to specific output quantities. Packaging that is assigned a recycled content of at least 30 per cent according to this model can be exempted from the PPT. The British Ministry of Finance sees this as an important lever for facilitating investment in chemical recycling technologies and increasing the use of high-quality recyclates, particularly in regulated applications such as food, medical and pharmaceutical packaging.
Implementation is subject to strict requirements: chemically recycled plastic must be verifiable through certification. Only certification systems that fulfil legally defined minimum standards are permitted, for example with regard to approved input materials, the calculation and allocation of recycled content, requirements for certification bodies and audit and documentation obligations along the supply chain.
End of the offsetting of pre-consumer waste
At the same time, pre-consumer waste - i.e. production rejects and internal returns before being placed on the market - will no longer be recognised as a source of „recycled plastic“ within the meaning of the PPT from 1 April 2027. Although companies can continue to recycle these materials, they will no longer count towards the 30 per cent threshold that triggers a tax exemption.
In doing so, the government is addressing a problem that has been labelled a „tax loophole“: different interpretations of the term pre-consumer waste meant that some easily manageable internal residual materials were counted as recyclate without more post-consumer plastic actually having to be collected and recycled. In future, the tax incentive should focus more on waste that is generated after use by the end consumer and whose collection and processing is significantly more complex.
Effects on packaging manufacturers and importers
According to the government, the overall fiscal effect of the change is „negligible“; the measure is primarily intended to steer investment in chemical recycling and strengthen the utilisation of post-consumer waste.
Nevertheless, there are significant strategic and administrative consequences for companies that manufacture packaging in the UK or export it there. Anyone wishing to use chemically recycled plastics in future and credit them via the MBT must:
- establish suitable supply chains for chemical recyclates,
- join a recognised certification system and
- adapt internal processes and verification documentation to the new requirements.
Although no one will be obliged to use the MBT, the policy paper states that tax relief will be denied without certification. Conversely, operators who have so far relied heavily on pre-consumer waste to achieve the 30 per cent limit will lose part of their previous credit base and will have to switch more to genuine post-consumer recyclates or chemically recycled input streams.
The UK government expects this reorientation to lead to more investment in collection and recycling systems and chemical recycling capacities in the long term. For packaging manufacturers - including those from the EU - the UK market therefore remains an important driver for high-quality recyclate solutions and transparent mass balance models.
Source: HM Revenue and Customs
