Packaging waste has a significant negative environmental impact both during production and disposal due to the generation of carbon emissions, especially when sourced from fossil fuels. As well as the environmental considerations, there are significant costs to local authorities relating to collecting, managing, recycling and disposing of packaging waste.

From 2025, following new legislation The Producer Responsibility Obligations (Packaging and Packaging Waste) Regulations 2024 (SI 2024/1332) that has been issued, some organisations and businesses will now have to pay a fee for the packaging they supply to or import into the UK market, with the money itself going to local authorities. This changes the dynamics of who pays for packaging waste. 

The new legislation, referred to as the packaging Extended Producer Responsibility (pEPR) Regulations, was enacted as drafted in December 2024 and came into effect on 1 January 2025.

It is critical for businesses to understand whether they are impacted by these new regulations and, if so, when to start to account for the new obligations to pay for disposal fees.

What is packaging waste?

First, it is important to understand what is meant by ‘packaging’ and ‘packaging waste’. Packaging waste goes far beyond the final on-shelf product we see in our homes and grocery stores. Under the regulations, packaging means all products made of any materials to be used in the containment, protection, handling, delivery or presentation of goods, from raw material to processed goods, from the producer to the user or the consumer. 

For example, packaging is much more than the primary packaging to constitute a sale to the customer such as a sweet wrapper. It extends to the bigger, branded box in which individual units of sweets are grouped (secondary packaging) as well as the packaging materials when shipped from the manufacturer (tertiary packaging).

The pEPR requirements will make certain businesses that supply household packaging are responsible for the costs of dealing with packaging waste.

Who is in the scope of the pEPR regulations?

To be in scope you firstly have to be a ‘producer’. It should be noted that the definition of a producer under the regulations is very wide, and among other things includes brand owners, importers, distributors, online marketplace operators, service providers or sellers. 

A producer is then a ‘liable producer’ in relation to an assessment year if, in the calendar year ending on 31 December preceding the start of the assessment year:

• it meets the definition of a producer;
• is a large producer (turnover of greater than £2m and handles more than 50 tonnes of packaging each year); and
• supplies household packaging.

A supply of packaging is, among other things, made when the owner, or through an agent, sells, hires or lends the packaging. It should be noted that where a supply of branded packaging is made, it is the brand owner that is usually treated as supplying the packaging. There are also a number of relevant exemptions in the case of reused packaging and any packaging exported from the UK. 

The relevant year and assessment year

The pEPR regulations refer to both the relevant year and assessment year. 

The ‘relevant year’ means the calendar year in which the whole, or any part of that business, is a producer, whereas the ‘assessment year’ (for waste disposal fees) runs from 1 April to 31 March, commencing on 1 April 2025.

When does the pEPR obligation arise? 

In accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets, an entity should recognise a provision if it has a present obligation as a result of a past event, it is probable that there will be an outflow of resources, and a reliable estimate can be made of the amount of the obligation.

Following clarification provided by the Department for Environment Food and Rural Affairs (DEFRA), producers must provide for pEPR disposal and administrative fees for the assessment year (ie, as at 1 April 2025) if they continue to be a producer at that date and they met the large producer criteria in the previous calendar year. The payment itself will be based on packaging activity during 2024. 

The charge is therefore expected to be recognised on a ‘lumpy’ basis (ie, at 1 April 2025) rather than being spread over the assessment year. 

Calculation of disposal fees

The pEPR regulations will change the way that costs are spread throughout the supply chain. ‘Recycling obligations’ are calculated as a percentage of the packaging waste you’ve reported. 

The charge at 1 April 2025 is based on the tonnes of packaging supplied in 2024 within each waste fee category (eg, paper/board, plastic, aluminium, etc) and the recycling fees specified in the legislation. The UK government website provides illustrative base fees, which are calculated by dividing local authority packaging waste management costs by the total amount of packaging placed on the market. This results in a rate per tonne of packaging placed on the market. If a proportion of the packaging was reported under previous regulations and someone has already met the recycling obligation, a discount may be applied.

Conclusion 

In summary, not all entities are impacted by the pEPR regulations; entities need to meet a set of criteria in order to be obligated. Following DEFRA clarification, a producer will be a liable producer for waste disposal fees in 2025/26 if it continues to be a producer and supplier of household packaging as at 1 April 2025, and was a large producer in the calendar year 2024. The charge itself will be recognised at 1 April 2025 and not spread over time.

These new regulations ensure that those entities that are responsible for packaging waste now have the financial responsibility to contribute to its end-of-life management. The legislation itself is complex and will need to be considered in detail to ensure it is appropriately applied by businesses that produce packaging waste. 

Steven Brice, Accounting Technical Services Partner, Forvis Mazars