Plastic Packaging Tax: How HMRC Plans to Account for Chemically Recycled Plastic

On 6 October 2026, HM Revenue & Customs (HMRC) opened a technical consultation on draft regulations that would allow chemically recycled plastic to be counted on a mass balance basis under the UK Plastic Packaging Tax (PPT) from 1 April 2027. The draft comes with a technical reference document setting out how refinery and petrochemical outputs are to be split between fuel and chemical feedstock. Together, the two documents define what the UK state will accept as “recycled” plastic when waste goes into a pyrolysis reactor rather than a shredder.

In short: From April 2027 the UK Plastic Packaging Tax may recognise chemically recycled plastic attributed through mass balance, but under strict conditions. Outputs destined for fuel cannot carry recycled content, balancing is quarterly, and attribution only works within an accredited, audited certification scheme. Much of the operational detail is left to future HMRC notices.

What is the UK Plastic Packaging Tax and what does the draft change?

Since April 2022, the UK has taxed plastic packaging components containing less than 30 per cent recycled plastic. The tax applies both to UK manufacturers and to importers of plastic packaging, including packaging around filled goods, which means European exporters supplying the UK market need to take it into account as well.

Until now, the Plastic Packaging Tax has in practice recognised physically traceable recycled content, typically from mechanical recycling. That approach breaks down for chemical recycling: pyrolysis oil is co-processed with fossil feedstock in a refinery or steam cracker, so nobody can tell which molecule in the finished polymer came from waste. Mass balance addresses this by allocating the waste-derived input to outputs on paper. How reliable that can be was the subject of our piece on the German Environment Agency’s ranking of recycled plastic certification schemes.

The legal basis is the Finance Act 2021, into which the Finance Act 2026 inserted new sections 49A and 49B on chemical recycling. The draft now out for consultation, The Plastic Packaging Tax (Chemical Recycling Certification Schemes) Regulations 2027, provides the implementing detail. It also introduces a new concept into the 2022 general PPT regulations: alongside recycled plastic there is now “attributed recycled plastic”, and the 30 per cent threshold is calculated on the combined proportion of the two.

Quarterly balancing and the conversion factor: how the numbers work

Under the draft, attribution takes place within balancing periods. The first three-month period begins on the day the certified business receives its certificate, followed by successive three-month periods.

The quantity that can be attributed in a given quarter is the sum of three elements:

• the weight of qualifying input material (the waste-derived feedstock) added to the mixture, multiplied by the conversion factor;
• any amount available for attribution in the preceding balancing period but not used, which can therefore be rolled forward;
• credit transferred from another process (covered in the next section).

The conversion factor is essentially a yield measure: the weight of material withdrawn from the mixture after processing plus the weight of fuel consumed in the process, divided by the weight of qualifying input plus other (for example fossil) input, expressed as a percentage. Using illustrative, invented figures: if 1,000 tonnes of waste-derived feedstock and 9,000 tonnes of other feedstock go in during a quarter, and 9,200 tonnes of withdrawn product and 300 tonnes of consumed fuel result, the conversion factor is 95 per cent and at most 950 tonnes can be attributed.

Two further rules tighten the formula. Recycled material must be attributed to consumed fuel in exactly the same proportion as qualifying input makes up the mixture before processing, so the process’s own energy use cannot dodge its share of waste-derived content. And all mass balance processes at a single site must be treated as one. A site is the whole area under one business’s control, and areas separated only by a road, railway or inland waterway count as a single site.

No pipeline, no credit transfer

The regulations allow attributable material generated in one process to be used in another, but the conditions are deliberately narrow. The transferring process’s available quantity must be reduced by whatever is attributed elsewhere, and the receiving process may only attribute it to output products that the transferring process could also have produced.

Both processes must be run by the same undertaking or within the same corporate group, and the two sites must be connected by a pipeline meeting requirements to be set out in a future HMRC notice. This is a significant limit: the draft does not permit free, book-and-claim style trading of credits between unconnected sites. A physical link must at least exist in principle.

Fuel or feedstock? The dual-use factor

The most criticised aspect of chemical recycling is that much of the pyrolysis output ends up as fuel rather than new plastic. The UK draft answers this with a “fuel-excluded” attribution method: recycled content associated with outputs that end up as fuel cannot be shifted onto other products from the same process.

Because many refinery and petrochemical intermediates can serve as either fuel or chemical feedstock, HMRC introduces the dual-use factor (DUF). This is a number between 0 and 1 reflecting what share of an output product remains on a technically feasible recycling pathway. Under the draft regulations, the share of an output product’s weight given by multiplying it by the DUF is not treated as withdrawn fuel.

The reference document Dual-use factors for refinery and petrochemical output products (version 0.1, September 2026) sets out three categories:

• fuel-use products (DUF = 0): fuel itself, material used to produce fuel, and output consumed to supply energy to the process;
• non-fuel products (DUF = 1): chemicals, polymers and materials used to make them;
• dual-use products (DUF between 0 and 1): outputs that could go either way.

For dual-use products, the key question is how much can be fed to a steam cracker. The operator must establish the maximum acceptable boiling point (MABP) of the steam cracker or crackers where the product will be further processed, then use the product’s boiling range distribution to work out what share falls below that limit. That share becomes the DUF. As an illustration: if 70 per cent of a pyrolysis oil fraction boils below the relevant cracker’s limit, 70 tonnes out of 100 can remain on the attributable side. For heavy or solid outputs such as heavy gas oils, operators must separately evidence the proportion that stays on a recycling pathway.

One consequence is that the same pyrolysis oil may carry a different DUF depending on which cracker receives it. For an industrial example of pyrolysis oil feeding into petrochemical production, see our coverage of the Nestlé and Viva Energy KitKat packaging project, which used ISCC PLUS mass balance certification.

Accreditation, audits and a public database

Part 3 of the draft lists what a chemical recycling certification scheme must contain to be acceptable for PPT purposes. Certification bodies must be accredited by a body that is a full member of Global Accreditation Cooperation Incorporated and meets standards to be published by HMRC.

Businesses seeking certification must meet minimum standards set out in an HMRC notice, evidenced by a written certificate from the certification body. Before a certificate is issued or renewed, an audit is required, including an on-site inspection of every site where the applicant runs a mass balance process.

Enforcement is tiered. If a certified business falls short, it is given a reasonable period to put things right. If it fails to do so, its certificate is suspended until the failure is rectified. A significant, deliberate or repeated failure leads to withdrawal, and schemes must provide a right of appeal against suspension or withdrawal.

Every attribution must be recorded in a written attribution declaration, and records must be kept for at least six years. Scheme operators must maintain a public, searchable database of certified businesses, the products covered and the certificates themselves, adding any issue, suspension or withdrawal within one week.

Supply chain: who has to prove what?

Where a certified business receives attributed material from a supplier, it must obtain the related attribution declarations and the certificates showing that whoever made them was certified at the time. It must also carry out appropriate due diligence and report any suspected non-compliance by the supplier to the scheme operator.

The draft provides an important safeguard in return: if the buyer has done all this, a later suspension or withdrawal of the supplier’s certificate does not retrospectively strip the material of its qualifying status. This protects the good-faith purchaser and places responsibility at the point in the chain where the failure occurred. Similar chain-of-custody options, with their trade-offs between flexibility and fraud risk, were discussed in our article on recycled content rules for batteries.

What is still open?

The draft is a framework, and a great deal is deferred to later HMRC notices. These will cover, among other things, the minimum standards for certified persons, certificate content and maximum validity, audit frequency and risk assessment criteria, the content of attribution declarations, pipeline requirements and what counts as sufficient evidence to support a DUF. According to the consultation page, these are generally expected to reflect relevant industry and ISO standards.

In the reference document’s annex, the default DUF values are currently placeholders marked “data needed”. HMRC says the defaults will be confirmed before the final legislation and reference document are published. Those numbers will largely determine how much attributable material pyrolysis-based chains can actually claim.

The consultation asks about the drafting and technical application of the rules, not the underlying policy. HMRC is mainly seeking views from businesses intending to use mass balance, supply chain businesses that may need certification, and certification bodies and scheme operators. Responses can be emailed to teamindirecttaxdesign@hmrc.gov.uk until 11:59pm (UK time) on 21 December 2026.

What does this mean for Europe?

The UK draft arrives while the European Union still lacks final rules on mass balance accounting for chemical recycling. The industry itself has been pressing for clarity, as shown by Cefic’s call for harmonised end-of-waste criteria for chemical recycling, while supporters such as the authors of the PPI report on doubling the US recycling rate argue that the technology cannot scale without supportive regulation.

How much the choice of mass balance method shapes the outcome was clear in our analysis of flexible mixed polyolefins: the same quantity of waste produces very different recycled content figures under strict versus more permissive accounting. The UK’s fuel-excluded logic, pipeline-bound credit transfers and cracker-specific DUF all pull towards the stricter end, and could become a reference point in the EU debate.

For companies in Hungary and elsewhere in Europe, the practical message is twofold. Anyone shipping filled goods to the UK will increasingly need to evidence recycled content to their UK importer, and from 2027 certified chemically recycled feedstock will be usable for that purpose. Petrochemical and waste management operators, meanwhile, can see from the UK rules what level of evidence and auditing they should expect if chemical recycling becomes a genuine market factor.

Frequently asked questions about the UK Plastic Packaging Tax and chemical recycling

When can chemically recycled plastic count under the UK Plastic Packaging Tax?

Under the draft, from 1 April 2027. From that date, recycled plastic attributed through mass balance can count towards the 30 per cent threshold, provided the manufacturer participates in a qualifying certification scheme. The technical consultation on the draft regulations closes on 21 December 2026, after which the final text and supporting notices will be prepared.

What is the mass balance approach in chemical recycling?

It is an accounting method that allocates waste-derived input to outputs on paper. Pyrolysis oil is co-processed with fossil feedstock, so it is physically impossible to trace which molecule came from where. The UK draft requires quarterly balancing periods, a conversion factor reflecting process yield, and site-level aggregation of all mass balance processes.

Can fuel outputs carry recycled content?

No, outputs that end up as fuel cannot be attributed recycled material. The dual-use factor is 0 for fuels and 1 for chemicals and polymers, while for dual-use products it equals the share that can be fed to a steam cracker. Credit linked to fuel fractions cannot be shifted onto other products from the same process.

What certification is required for attribution?

Attribution is only possible within a chemical recycling certification scheme that meets the draft regulations. Certification bodies must be accredited by a full member of Global Accreditation Cooperation, every applicant site must be inspected during audit, certificates must enter a public database within one week, and records must be kept for at least six years.

How can businesses respond to the consultation?

By email to teamindirecttaxdesign@hmrc.gov.uk. HMRC is seeking views on the drafting and technical application of the rules rather than the underlying policy. It is aimed mainly at businesses planning to use mass balance, supply chain businesses needing certification, and certification bodies and scheme operators. The deadline is 11:59pm UK time on 21 December 2026.

🔗 Hivatalos források és hivatkozások: 👉

• HM Revenue & Customs: Draft legislation: Plastic packaging tax — chemical recycling and adoption of a mass balance approach (consultation page, 6 October 2026) – https://www.gov.uk/government/consultations/draft-legislation-plastic-packaging-tax-chemical-recycling-and-adoption-of-a-mass-balance-approach
• HM Revenue & Customs: The Plastic Packaging Tax (Chemical Recycling Certification Schemes) Regulations 2027 – draft legislation (accessible version) – https://www.gov.uk/government/consultations/draft-legislation-plastic-packaging-tax-chemical-recycling-and-adoption-of-a-mass-balance-approach/draft-legislation-accessible-version
• HM Revenue & Customs: Dual-use factors for refinery and petrochemical output products (version 0.1, September 2026) – https://www.gov.uk/government/consultations/draft-legislation-plastic-packaging-tax-chemical-recycling-and-adoption-of-a-mass-balance-approach/dual-use-factors-for-refinery-and-petrochemical-output-products

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