Waste and packaging – obligations for the sector

Many would grumble that recycling and waste obligations are a burden on the brewing and hospitality sectors that rival hiked energy prices and NI increases. With the phased implementation of the new extended producer responsibility for packaging (pEPR) legislation in full swing in the UK and the Deposit Return Scheme draft regulations having been published, the Drinks, Hospitality and Leisure sector continues to undergo significant change – the merit of which will not be fully realised until at least October 2025. One thing that remains clear is that a “polluter pays” system is here to stay and therefore, against this background we look at changes set to affect the sector over the next year. 

Packaging Waste Regulations (2007) recycling targets

These Regulations have been in place for many years and the intention is that obligations of packaging producers under them will be replaced by producer obligations under pEPR.

Under the Regulations, obligated producers are required to meet the annual recycling targets (known as business targets). Initiatives like the pEPR scheme and the DRS, detailed in this article, aim to assist businesses in reaching these targets.

Packaging is any material used to hold, protect, handle, deliver and present goods. In the drinks and hospitality sectors examples will include beer kegs, cans and bottles, cake and sandwich wrappings, takeaway boxes and cups, complimentary hotel toiletries etc

Note that where a business provides licences to other businesses such as franchises or pub leases, any packaging they handle may contribute towards the 50 tonne threshold for your business.

Example

Trademarked packaging that McDonald’s franchisees are required to use may contribute to the 50 tonne threshold for McDonalds.

Action: check now whether your business is deemed an obligated producer and whether you need to register as a packaging producer. [Check if you are an obligated packaging producer].

Waste packaging – Extended Producer Responsibility (pEPR)

The pEPR scheme is designed to move the cost of dealing with packaging waste away from the taxpayer onto the businesses that import and supply packaging onto the UK market by collecting fees from them, which will be paid to local authorities to cover the costs of collection, handling, treatment and disposal of waste  – ‘polluter pays’.

The regulations apply to your business if you are:

• an individual business, subsidiary or group (but not a charity)   
• you have an annual turnover of £1 million or more, based on your most recent annual accounts up to 7 April   
• were responsible for importing or supplying more than 25 tonnes of packaging to the UK market in the previous calendar year  
• you carry out any of the six packaging activities e.g. placing goods into packaging under your own branding or for someone else such as a catering company packing and supplying food or beverages in one of the eight packaging categories such as cakes and tray bakes in cardboard boxes, steel drinks kegs or plastic wrapped sandwiches.  

For a list of all packaging activities see the guidance here: Extended producer responsibility for packaging: who is affected and what to do - GOV.UK

Note that aluminium, steel and PET plastic drinks containers that fall within the scope of the Deposit Return Scheme (DRS- see below) are excluded from pEPR e.g. cans of beer that are 330ml.

pEPR imposes mandatory obligations on producers to collect packaging data and report on the amount and type of packaging they place on the market. It is worth businesses familiarising themselves with the following Government guidance and determining whether they are a small or large organisation as this affects their producer obligations:

Packaging data: what to collect for extended producer responsibility - GOV.UK

Extended producer responsibility for packaging: recycling obligations and waste disposal fees - GOV.UK

Example: Individual mobile coffee shop owner

They sell takeaway hot drinks in paper cups, cakes and tray bakes in cardboard boxes and plastic wrapped sandwiches. Are they caught by the regulations? The first hurdle is whether they are an individual business? In this case, yes. The second hurdle is whether they have an annual turnover of more than £1 million? In this case, it is extremely unlikely. As such, it doesn’t matter what packaging they use to sell to consumers, if they fall at the second hurdle, they are not captured by pEPR and therefore do not have to report any packaging data.

Action: check now whether pEPR obligations apply to your business and what you need to do next. Fees are due to come into force in 2025 –  particularly if your business supplies packaging that may become household packaging, you will pay fees under the current PRN (Packaging Recovery Note) system and pEPR. That is on top of tax under the Plastic Packaging Tax regime (see below). By way of summary:

• all businesses with obligations have PRNs to obtain (focused on funding reprocessing side);
• obligated businesses supplying household packaging will have EPR fees on top of PRN fees.  These are to fund household collections.
• Businesses therefore, will not be subject to EPR fees if only supplying B2B packaging.
• PRNs will be reviewed in the future but if they disappeared overnight, reprocessing infrastructure could collapse.
• Plastic Tax is out on its own with HMRC .

Deposit Return Scheme (DRS)

The aim of a DRS is to increase the recycling of drinks containers and reduce litter through a deposit charged on containers at point of sale which is refunded when the container is returned or recycled. Defra had hoped to have a 4 nation DRS but Wales recently pulled out of the UK scheme, saying that it will separately develop its own DRS that supports the transition to reuse for all drinks containers including those made from glass. Meanwhile, Defra has committed to three-country DRS excluding Wales which will include drinks containers made of polyethylene terephthalate (PET), steel, and aluminium cans but exclude glass.

All retail and hospitality businesses that sell drinks to takeaway in single-use containers will be required to operate a return point, subject to certain exemptions.

The size of containers within the scope of the DRS across the UK will be 150ml to 3 litres. Any containers outside of this range will be in scope of the Extended Producer Responsibility for packaging.

Example

If a specialist brewery produces and sells beverages online in containers within the scope of DRS e.g. beverages packaged in aluminium cans the DRS will apply.

However, if the brewery only produces 4,000 units of a limited edition cask ale, they will not be impacted by the DRS if they choose to register product lines with less than 5,000 units placed on the market across the UK per annum as a “Low Volume Product”. These Low Volume Products will be exempt from specific DRS obligations, such as the requirement to pay fees, apply deposits, and carry DRS labelling. Producers of Low Volume Products will still register with the DMOs and report the number of containers placed on the market for each product.

For now, the UK government, the DAERA in Northern Ireland, the Scottish Government, and the Welsh Government have also decided that there will not be a requirement for online retailers to operate a takeback service for drinks containers sold online from day 1.

Example

The supermarket who sells their own brand cola drink in a 330ml aluminium will be caught by the DRS. However, they would not be caught by DRS for selling non-own brand drinks such as Pepsi in a 330ml can; Pepsi Co itself would be caught by DRS instead.

In addition, the DRS regulations will require supermarkets and convenience stores to act as return points from day 1 of schemes across the UK. These drinks suppliers must register as a return point.

Single-use plastic items in England

The ‘25 Year Environment Plan’ sets out the Government’s commitment to eliminate avoidable plastic waste by 2042 and a number of policies and consultations have focused on this commitment. DEFRA’s consultation proposed a new policy of banning single-use plastic items in England. Now in force, the ban prohibits the use, by businesses, of plastic plates, cutlery, balloon sticks, and expended and extruded polystyrene cups and food and beverage containers. Businesses who are required to comply with the ban will need to source alternative items in sufficient time to ensure they are complying with the ban and have adequate supplies ready to meet the supply needs of their business. Businesses not complying with the ban could be subject to local authority inspection and fines.

Action: If your business still uses single-use plastic items you will need to use existing stock and find alternative products. Use this as an opportunity to reduce waste by supplying consumers with re-usable items (e.g. metal forks and knives and take them back for washing) rather than simply replacing plastic with cardboard.

Plastic Packaging Tax (PPT)

A new tax on plastic packaging was introduced on 1 April 2022 as part of an agenda to meet the government's 2042 target to eliminate avoidable plastic waste. PPT applies to plastic packaging that is manufactured in, or imported into, the UK, where the proportion of recycled plastic in the “component”, when measured by weight, is less than 30% of the total amount of plastic in the component. In the last Budget it was announced that the rate of Plastic Packaging Tax (PPT) will increase in line with the Consumer Price Index (CPI). The new rate of PPT will be £223.69 per tonne and will apply to plastic packaging containing less than 30% recycled plastic that is manufactured and imported into the UK from 1 April 2025.

Guidance on PPT can be found [here].

Importantly, a guidance note published in October 2022 provides further information for businesses which may be subject to ‘secondary liability’ or ‘joint and several liability’ for PPT where they are part of the supply chain for plastic packaging components. The guidance confirms the situations where a business may be liable for unpaid PPT due from another business if they knew or should have known PPT has not been paid, as well as outlining that a liability notice may be issued where HMRC believes there is a risk that PPT will not be paid in the future.

Example

A Spa Hotel chain whose business is domiciled in Switzerland for tax purposes but operates 20 UK hotels imports thousands of bottles of shampoo, shower gel, soap, conditioner and spa oils in plastic bottles from Germany to be used in their hotels by their guests as standard complimentary products. The annual total weight of these bottles is 20 tonnes in the UK. These bottles are made up of several components: a virgin plastic label, a metal lid and the bottle itself which is made up of 30% recycled plastic.

The Spa Hotel Chain is liable to pay the PPT on the plastic labels of each bottle because they are virgin plastic and labels are used in the supply chain during the packaging manufacturing process (one of the criteria for when the tax applies). The hotel chain are not liable to pay the tax on the metal lids (not plastic) or plastic bottles because the bottles are made from 30% recycled plastic. However, the bottles still count towards the 10-tonne threshold for importing packaging in a 12 month period, so the hotel chain must still keep records of it. Given the total weight of the bottles they import into the UK exceeds 10-tonnes, they must register for the plastic packaging tax. They must work out the weight of the label packaging they import, register for the tax and pay £217.85 per tonne from 1 April 2024. It does not matter that the hotel chain is a non-resident taxpayer, if they meet the PPT thresholds the tax still applies.

Action: carry out due diligence checks across your supply chain and also ensure that PPT has been paid before purchasing packaging from suppliers. Contact Freeths if you need more information or support.

Food Waste & The Simpler Recycling Regime

With commercial waste legislation already in place in Scotland and Wales, from 31 March 2025 the UK will implement the new Simpler Recycling regime for all businesses whether or not they produce food but  including restaurants and other food outlets which will require them to separate food waste from general ‘black bin’ waste, as well as dry recyclable materials (plastic, metal, glass, paper and card) and have it collected separately.

Micro-firms which are workplaces with less than 10 full time employees in total will need to comply by 21 March 2027.

Action: Consider how this requirement will affect your business and what changes you will need to make to comply with the new obligations by 31 March 2025 or 31 March 2027.

For further guidance see this link.