Finance Bill 2021 Public Bill Committee - 2nd sitting (liveblog)

22 Apr 2021

A live blog of the second public bill committee sitting of Finance Bill 2021 (also known as Finance (No.2) Bill), which took place on Thursday 22 April 2021 from 2pm. The session covered the plastic packaging tax.

Documents on the Bill can be read here. These include explanatory notes on the clauses and the text of amendments and new clauses tabled for debate.

Proceedings can be listened to here

You can find a preview of the whole of committee stage of the Bill here.

Reports on previous debates on this Finance Bill are available:
Second reading debate - Tuesday 13 April (here)
Day One of Committee of Whole House - Monday 19 April (here)
Day Two of Committee of Whole House - Tuesday 20 April (here)
Public bill committee (1st sitting) - Thursday 22 April (am) (here)

Public Bill Committee does not debate clauses and schedules debated at Committee of Whole House, that is: Clauses 1 to 14 and Schedule 1, Clauses 24 to 26, Clause 28, Clause 30 and Schedule 6, Clauses 31 to 33, Clause 36 and Schedule 7, Clauses 40 and 41, Clauses 86 to 89 and Schedules 16 and 17, Clauses 90 to 96 and Schedule 18, Clause 97 and Schedule 19, Clauses 109 to 111 and Schedules 21 and 22, Clause 115 and Schedule 27, Clauses 117 to 121 and Schedules 29 to 32, Clauses 128 to 130.

NB. The live blog below is contemporaneous and not checked against Hansard. We cannot guarantee that no errors have crept in and we advise on checking any passage against Hansard before repeating it.

New clauses debated during proceedings will not be voted on until the end of the committee's proceedings

Committee members

Committee members are listed here. The main contributors are expected to be:

For the Government:
Jesse Norman, Financial Secretary to the Treasury (FST)
Kemi Badenoch, Exchequer Secretary to the Treasury (EST)

For the Opposition:
James Murray (Labour), Shadow Financial Secretary to the Treasury
Abena Oppong-Asare (Labour), Shadow Exchequer Secretary to the Treasury
Alison Thewliss, lead SNP Treasury Spokesperson
Peter Grant, SNP Treasury Spokesperson

Finance Bill Public Bill Committee - Sitting Two - Thursday 22 April 2021, 2pm


Plastic packaging tax will come into effect from April 2022. Announced at Budget 2018, the tax will apply to UK manufacturers and importers of plastic packaging which contains less than 30% recycled plastic content. The tax is designed to encourage the use of recycled plastic instead of new plastic within packaging. The tax is charged at a rate of £200 per metric tonne of chargeable plastic packaging components of a single specification, and will apply to plastic packaging manufactured in, or imported into, the UK. There will be an exemption for businesses who manufacture and/or import less than 10 tonnes of plastic packaging in a 12-month period.

Introductory and charging
Including Clause 42 (Plastic packaging tax); Clause 43 (Charge to plastic packaging tax); Clause 44 (Liability to pay plastic packaging tax); Clause 45 (Rate); Clause 46 (Payment); NC8 [SNP] + NC11 [Labour] + NC13 [Labour] - ALL PASSED (without vote)
New clause 8 (SNP) seeks a review of the efficacy of the proposed plastic packaging tax, with respect to whether the proposals will (a) increase use of certain plastics and (b) provide an incentive to recycle in the event of low oil prices. 
New clause 11 (Lab) would require the Chancellor to review the impact of section 45 and lay a report of that review before the House of Commons within six months of the passing of this Act. 
New clause 13 would require the Chancellor to review the impact of sections 42 to 85 and schedules 9 to 15 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act and once a year thereafter.

Kemi Badenoch, Exchequer Secretary to the Treasury (EST) spoke about the Government's committment to positive environmental policies. Over 2.2 million tonnes were manufactured in the UK last year. She describes this new tax as 'world leading'. The tax will provide a clear ecnomic incentive for businesses. Business will appreciate the clarity, she claimed. HMRC will be responsible for the collection of this tax. Clause 45 sets out the costs, she said. Both UK and foreign businesses are covered by these clauses. CLause 46 provides the high level principles and further information will be set out in separate regulations.

On New Clauses 8, 11 and 13, Badenoch said the Government has already set out the impacts, the result of extensive work. Further modelling was set out by OBR. The aim of the tax is to incentivise the use of all recycled plastic, she repeated, and will make busineses responsible for waste. The tax will be held unde review by the Treasury, as with most taxes. It will be difficult to assess the impact of this tax in isolation in just a year's time.

Alison Thewliss, lead SNP Treasury Spokesperson, moved amendment 8. Thewliss is very interested in plastic packaging tax, saying such a move is necessary. There are aspects of the Bill that need more detail, however. One is the 30 per cent threshold. It lacks ambition, she said, especially as some big companies such as Craft Heinz are committed to 100 per cent of packaging recyclable by 2025 on worldwide basis and American Chemical Councils plastic division working to 100 per cent packaging either recyclable or recoverable by 2020 and the EU and Australia also pushing ahead of us. Another area that is uncertain to her is how authorites will be able to follow the audit trail of plastics. She warned of some perverse outcomes within the legislation about packaging composed of multiple materials, so this may be card coated in plastic. These are very difficult and specialised to recycle and we do not want people switching those rather than using plastics, she said. She said the £200 per tonne level could be set higher and there should be further analysis of this, especially as it may be cheaper for businesses to pay the tax rather than recycle materials.

Abena Oppong-Asare, Labour, Shadow Exchequer Secretary to the Treasury, welcomed this tax in principle. Plastic pollution is one of the biggest threats to our environment. 67 per cent of plastic waste comes for packaging. Far too much of plastic waste goes to landfill or incinerating rather than being recycled or reused. Labour has concerns abour detail and operation of this tax. Clause 45 sets out rate of 200 per metric tonne of chargeable plastic packaging element is too low to provide an incentive to plastic manufactures and importers to move to greater use of recycled plastic at the speed we want them to, she said. Low oil prices has impacted on recycled plastic v new plastic; New Clause 11 says the Government should consider an esculator where the per tonne charge will increase each year; it will send a powerful message to the industry, as well as take account of market conditions.

Kemi Badenoch said the 30 per cent level is a enough of an incentive. She said engagement with  the business and manufacturing industry is ongoing, such as those covering food and drink, waste companies and private businesses. Badenoch said the price of oil may impact on the demand for virgin and recycled plastic. That is why the Government is putting in measures to transform the economics of recycling. But a stabilisation fund to protect against changes to the oil price will be highly complex to administer and carry a risk to the public finances – so we are not going with that.  She said tax measures taken forward by DEFRA including extended producer responsibility reform and a deposit return scheme (which will happen in England as it has already happened in Scotland) will all help to increase the supply of plastic, making it cheaper than virgin plastic and less susceptible to the oil price.

Interpretation of main terms etc

Including Clause 47 (Chargeable plastic packaging components); amendment 20 [Labour]; Clause 48 (Meaning of “plastic packaging component”); Clause 49 (Meaning of “plastic” and “recycled plastic”); Clause 50 (Time of importation); NC12 [Labour] - ALL PASSED (without a vote)

Amendment 20 would mean that before making regulations under subsection (5), the Commissioners must consult (a) industry representatives, (b) environmental NGOs, and (c) any other relevant individuals or organisations
New clause 12 (Lab) would require the Chancellor to review the impact of section 47 and lay a report of that review before the House of Commons within six months of the passing of this Act. 

Abena Oppong-Asare, Labour, Shadow Exchequer Secretary to the Treasury, is concerned that the ambition on this from the Government is too low. An esculator liked that used for landfill will help businesses. Amendment 20 will help businesses and NGOs get involved in this policy. We need an independent recycled content verification system, she suggested. The Government must committ to working with all interested parties in this. Many of the most packaging most difficult to recycle will not be captured by this tax. How do we know for sure that this tax will not increase the use of plastic?

Kemi Badenoch, on the need for the Government to consult better, she said two policy consultations have gone on before this tax was included in the Bill - and a further technical consultation occured, making the amendment unnecessary. Government recognises that there is a difference between the definition of packaging in the BIll does not align with packaging regulations terminology. But the differences between deisgn of the tax and these responsible obligations mean a different approach is required. On New Clause 12, calling for a review of the impact and having different threshold for different types of plastic, she said it is not needed but it will be kepy under widew review.

Deferrals, exemptions and credits
Including Clause 51 (Plastic packaging components intended for export); Clause 52 (Exempt plastic packaging components); Clause 53 (Tax credits) - ALL PASSED (without the vote)

Kemi Badenoch said it is important to included plastics even when it is difficult to recycle some of them at the moment. Plastic used for transporting things will not be included because of the difficulty of a reliable audit trail. Peter Grant, SNP Treasury Spokesperson, intervened to say the tax is a bit of waste if plastic waste can manufacture it an export it to other countries that do not have a plastic packaging tax.

She went on to say there is a narrow exemption for some packaging used in medicine, which she says is strict and feasible. UK manufacturers will not be at a competitive disadvantage by having to pay the tax on exports under this Bill.

Abena Oppong-Asare wanted reassurance that the list for exemptions wil be kept as short a possible. Will HMRC have resources needed for the considerable extra work involved in making this tax work? Badenoch said they will.

Including Clause 54 (The register); Clause 55 (Liability to register: producers and importers); Clause 56 (Notification of liability and registration); Clause 57 (Cancellation of registration); Clause 58 (Correction of the register) - ALL PASSED (without a vote)

Kemi Badenoch said these clauses will stop any disproportionate impact on small busineses. The de minimus in the Bill will work as well as the VAT de minimus threshold has done, she claimed.

Abena Oppong-Asare wonders if the threshold is a bit too sharp? She is also concerned about potential tax avoidance. Badenoch said there will be anti-tax avoidance measures on this, such as measures on connected persons and the de minimus level.

Secondary liability and joint and several liability notices
Including Clause 59 (Notices imposing secondary or joint and several liability); Schedule 9 (Plastic packaging tax: secondary liability and assessment notices and joint and several liability notices) - PASSED

The XST outlined that the measures will help to prevent fraud and non-payment, allowing HMRC to effectively tackle non-compliance.

Abena Oppong-Asare (Labour) said that the opposition would support this measure. She cited concerns from the CIOT and others around the additional administrative and financial burdens that businesses may incur as a result of joint liability and sought assurances from the XST that supply-chain businesses will be able to check that the correct amount of tax has been paid.

The XST said that there was widespread support for the proposals. They will require that businesses knew or had reasonable suspicion to suspect that they tax had not been paid before they are held liable. Businesses will not be held liable if they can show they have taken reasonable steps to verify its tax status.

Administration and enforcement
Including Clause 60 (Measurement of weight etc); Clause 61 (Payment, collection, recovery); Schedule 10 (Plastic packaging tax: recovery and overpayments); Clause 62 (Reviews and appeals); Schedule 11 (Plastic packaging tax: reviews and appeals); Clause 63 (Records); Clause 64 (Information and evidence); Schedule 12 (Plastic packaging tax: information and evidence); Clause 65 (Security for tax); Clause 66 (Unincorporated bodies); Clause 67 (Service) - PASSED

The XST turned to the administration and enforcement of the plastics tax. She said these are technical clauses designed to ensure that the tax can be collected and enforced, together with record keeping.

Businesses will be required to keep appropriate records to ensure compliance. HMRC will be able to share information with other bodies in order to help protect revenue. The XST set out how the tax will be calculated and how businesses can work with HMRC to determine the amount of tax that they will owe.

Abena Oppong-Asare (Labour) said that the government should consult with business organisations before introducing these regulations. She added that the regulations required additional parliamentary scrutiny to ensure that the tax works efficiently with minimal impact on businesses. She said the opposition would return to this issue later in the debate.


Clause 68 (Statements for business customers) - PASSED

The XST said that clause 68 would help to ensure greater awareness and encourage behavioural change as a result of the inclusion of information related to the plastic packaging tax on certain invoices. She said that this clause will help to determine the type of information included on such a statement, and help to make customers aware of the amount of plastic material they are consuming. Over time, this should lead to changes in behaviour, as consumers become aware of how they can reduce their tax liabilities.

Peter Grant (SNP) asked about the impact on supply-chains and whether end-users would be aware of the actual costs involved in the tax. He also asked if the statement on tax would be provided on invoices or as a separate document. He said the former could require changes to the accounting software, while the latter could present enforcement challenges.

Abena Oppong-Asare (Labour) urged the Treasury and HMRC to work with businesses to make sure they aware of their obligations.

The XST said that businesses liable for the tax would be required to show the amount of tax on invoices to their customers.  She said this would help to make the tax visible and encourage businesses to use more sustainable materials. She warned of the burdens on business further down the supply chain if they were mandated to follow, but added they were free to decide whether to include the amount previously paid on their sales invoices.

Clause 69 (Tax representatives of non-resident taxpayers) - PASSED

The XST said HMRC will be able to make regulations requiring non-UK residential taxpayers to appoint tax representatives. This will ensure liable businesses pay the tax that they are owed.

Abena Oppong-Asare (Labour) cited evidence from the CIOT pointing out that future regulations to consider whether exceptions could apply if a non-resident taxpayer shows sustained evidence of compliance with UK taxes or has an internationally recognised accreditation.

The CIOT noted that it could be common for non-resident taxpayers to outsource the completion of UK tax returns to ensure compliance. Oppong-Asare said that it would not be commonplace for the majority of UK tax agents to working under joint and several liability for the taxes that they administer and that this could be a barrier to taking on such business.

The CIOT has also called for greater clarity around what constitutes an established place of business in future regulations.

The XST said that the government doesn’t believe that there will be a large number of businesses liable for the plastic packaging tax that do not already have a UK presence. But the regulations will help to ensure a level playing field and will only be used if absolutely required. She said HMRC will take on board the points raised and will address this in future consultations on the subject.

Clause 70 (Adjustment of contracts) - PASSED

The XST said that the clause will allow businesses to take account of the plastic packaging tax in existing contracts. It will allow existing contracts to be adjusted and help to avoid a double charge on plastic products that are further processed into other plastic products.

Clause 71 and Schedule 13 (Groups of companies) - PASSED

The XST said the clause and schedule will help to reduce the administrative burdens on businesses reporting the tax. It will help businesses to determine when they can be treated as a group for the purposes of the tax and sets out the limited grounds that HMRC will be able to refuse such applications.

Abena Oppong-Asare (Labour) asked the minister if she was aware of the CIOT’s submission, which points out that the requirement for a group member to be a corporate body for VAT grouping was changed by schedule 18 of the Finance Act 2019 and extended to include individuals and partnerships. She asked why these updated rules for VAT will not apply to the plastic packaging tax.

The XST said that she would ask officials to look into the matter and report back before the next committee session.

Clause 72 (Prevention of artificial separation of business activities: directions)
Clause 73 (Prevention of artificial separation of business activities: effect of directions) - BOTH PASSED

The XST said these clauses will prevent businesses from artificially splitting in order to avoid the tax and falling under the deminimis threshold, thereby protecting against tax avoidance. The measures were endorsed by the opposition.

Clause 74 (Death, incapacity or insolvency of person carrying on a business: regulations)
Clause 75 (Transfer of business as a going concern: regulations) - BOTH PASSED

The XST said that these clauses set out how the tax will be dealt with in the event of a change in ownership or the death of a company owner, incapacitation or insolvency. They provide for further regulations to deal with how changes like this will be handled within the tax. The XST said that this will help to protect tax revenues and are a common feature of the tax system.

Abena Oppong-Asare welcomed the measures on behalf of the opposition and noted that they were proposed by the CIOT in a submission to an earlier consultation on the subject.

Clause 76 (Isle of Man: import and export of chargeable plastic packaging components) - PASSED

The XST said this clause deals with the tax treatment of imports or exports to the Isle of Man and will provide taxpayers with clarity on the operation of the tax in this respect. For imports to the UK from the island, if a similar tax is adopted by the Isle of Man in the future and is equal to or more than the UK rate, the UK tax will not be charged. If the Isle of Man tax were lower, the UK tax will be charged as the difference between the two rates. The UK tax is charged on imports to the UK at the full rate if there is no equivalent Isle of Man tax. Exports from the UK to the Isle of Man will not be treated as exports for tax purposes.

Abena Oppong-Asare (Labour) described the measures as sensible and indicated the opposition’s support.

Offences and penalties
Including Clause 77 (Fraudulent evasion); Clause 78 (Misstatements); Clause 79 (Conduct involving evasions or misstatements); Clause 80 (Penalty for contravening relevant requirements); Schedule 14 (Plastic packaging tax: assessment of penalties under section 80); Clause 81 (Criminal proceedings) - ALL PASSED

The XST said that these clauses and schedule set out criminal offences in relation to fraudulent activities and the penalties associated with these. Sanctions for non-compliance will be consistent with other taxes. They also create a criminal offences for being engaged in knowingly fraudulent evasion, deception and misstatements. They also set out how penalties will be collected and the implementation of the Customs and Excise Act 1979 will apply to the plastic packaging tax, consistent with other areas of the tax system.

The measures were welcomed by Abena Oppong-Asare on behalf of the opposition, who said that she looked forward to them being ‘robustly enforced’.

Including Clause 82 (Minor and consequential amendments); Schedule 15 (Plastic packaging tax: amendments of other legislation); Clause 83 (Interpretation); Clause 84 (Regulations); Clause 85 (Commencement etc) PASSED amendment 22 [Labour]; amendment 21 [Labour] WITHDRAWN

The XST said that the clauses allow for minor amendments to be made to other regulations in support of the implementation of the plastic packaging tax. They allow for existing penalties to be applied in respect of the new tax, identify key terms for the tax used in the bill and general provisions for making regulations in respect of the tax and their commencement dates.

The XST said that the amendments proposed by the opposition requiring all regulations to be made by the affirmative procedure and mandating consultation with industry representatives, environmental NGOs and other relevant organisations.

The XST said that she had already outlined the ways in which government consults on tax policy. She said that with regards to the affirmative procedure, it was right for parliament to scrutinise proposals but also important to strike a balance given the volume of legislation considered by parliament. She said the government had select ‘the most fundamental regulations to be subject to the affirmative procedure’.

Abena Oppong-Asare (Labour) said that Labour’s amendments would improve scrutiny and ensure the tax meets wider environmental goals.

Alison Thewliss (SNP) agreed with the amendments and said it was important to ensure that parliamentary scrutiny is optimised to ensure the legislation meets its objectives.

The XST said that she appreciated the points made by opposition members, but that she was confident that the government had struck the correct balance in its proposals.

The committee adjourned at 3.37pm. Proceedings will resume next Tuesday (27 April)