From April 2027, chemically recycled plastic may count towards the Plastic Packaging Tax’s 30% threshold only when attributed through a qualifying certified mass-balance supply chain.
HM Revenue & Customs has published initial guidance and minimum certification requirements for accounting for chemically recycled plastic under the Plastic Packaging Tax.
From 1 April 2027, manufacturers and importers will be able to use mass balance to attribute chemically recycled plastic to packaging when calculating whether it meets the tax’s 30% recycled-content threshold.
Using the approach will be optional. However, HMRC’s guidance states that chemically recycled plastic will be treated as non-recycled, or virgin, material for tax purposes if a business does not follow the new requirements.
The current tax rate is £228.82 per tonne for chargeable finished plastic packaging components containing less than 30% recycled plastic.
Mass balance is a chain-of-custody method that allows recycled inputs mixed with virgin material during complex processing to be attributed to particular outputs. Once the materials have been mixed, it is not possible to distinguish physically between the recycled and virgin material in an individual product.
The changes are provided for in the Finance Act 2026 and apply to packaging components manufactured in the UK and finished packaging components imported into the country.
Certification throughout the supply chain
All businesses from the chemical recycler through to the plastic-packaging converter that process, receive, supply or store the material must be covered by a certification scheme meeting HMRC’s minimum requirements.
Certification must cover the chain from when waste plastic enters chemical recycling through completion of the packaging component. For HMRC’s purposes, the supply chain ends when the final attribution declaration is given to the recipient that accounts for the component on its tax return.
Businesses within the same supply chain may use different certification schemes, provided each meets HMRC’s minimum requirements.
A business that only imports finished packaging will not itself need certification. It must, however, ensure that the upstream supply chain is certified and retain its supplier’s valid certificate and attribution declarations.
HMRC says it will not regulate certification schemes. Under the minimum certification requirements, the business claiming the tax exemption is responsible for ensuring its chosen scheme complies with the rules.
As of 1 September 2026, HMRC had not published a list of qualifying schemes. Certification bodies must be accredited by a signatory to the Global Accreditation Cooperation Incorporated Multilateral Recognition Arrangement; HMRC identifies the United Kingdom Accreditation Service as the UK signatory.
Certified businesses must operate a site-level mass-balance system using consecutive three-month accounting periods, beginning on the date of certification and with no gaps. A negative balance is not permitted at any point, meaning a business cannot attribute more recovered-material credits than are available in its site balance.
Businesses must account for processing losses through site-specific conversion factors based on operating data. The fuel-excluded attribution method must be used where a process produces multiple outputs that include fuel-use products. Where outputs have dual uses, businesses must categorise them and apply a dual-use factor to each product.
A new attribution declaration is required for every batch passed between businesses. Valid certificates, batch declarations and applicable site-specific mass-balance records must be retained for six years.
Recipients must use the relevant certification scheme’s electronic register to confirm their supplier’s certification details and eligibility dates. They must also check that each attribution declaration is complete and valid.
If the required certificates, declarations or supply-chain evidence cannot be produced, HMRC may require Plastic Packaging Tax to be paid on components previously reported as exempt. Penalties may also apply.
Investment certainty and compliance costs
The government says recognising mass balance within the tax will create more favourable conditions for investment in chemical recycling, particularly where mechanically recycled plastic is not viable because of regulatory or quality constraints.
HMRC’s fuel-excluded allocation requirement reflects the “fuel exempt” approach previously sought by the British Plastics Federation. The BPF has argued that the allocation method directly affects the commercial viability of chemical recycling. As of 1 September, it had not posted a public response to HMRC’s detailed certification requirements on its website.
In May, RECOUP said enforcement should be “appropriate and proportionate”. At HMRC’s request, it also sought member evidence about how different interpretations of “fuel use output products” could make the proposed method impractical for some recycling technologies.
The government’s 2024 consultation response said a majority of respondents expected acceptance of mass balance to support investment. Respondents also identified feedstock availability, energy costs, permitting, international consistency and allocation rules as significant factors.
Some respondents warned that requirements more restrictive than those applied elsewhere in Europe could divert investment away from the UK. Environmental respondents questioned chemical recycling’s emissions and warned that poorly designed rules could undermine the tax’s carbon-saving objectives. Other respondents raised concerns about competition for material suitable for mechanical recycling and the risk that some allocation methods could misrepresent recycled content or encourage greenwashing.
The government’s Tax Information and Impact Note says the measure will have a “negligible impact” on some businesses. It nevertheless identifies possible one-off costs for familiarisation, internal systems and certification, followed by continuing certification and evidence-management costs. The note does not quantify those costs.
From the same April 2027 date, pre-consumer plastic waste will cease to count as recycled content for Plastic Packaging Tax purposes. Businesses may continue using the material, but it will no longer contribute towards the 30% threshold.
HMRC’s latest statistics estimate that the tax accrued £250 million in revenue in 2025–26. Of the total packaging tonnage declared, 37% was taxable and 51% was reported as containing at least 30% recycled content. HMRC says the figures may be revised.
HMRC says more detailed guidance and information on penalties will be published in early 2027. As of 1 September 2026, its published guidance did not set out transitional treatment for pre-implementation stock, pre-existing scheme certificates or recovered-material credits.
