Customs Law Update - December 2023

Proposed New Environmental Tariff on Imports

The UK Emissions Trading Scheme (ETS) plays a vital role in providing businesses with the long-term certainty to plan ahead and decarbonise efficiently. Reforms to the ETS, as set out by the UK ETS Authority in July 2023, will reduce the number of ETS permits available for purchase from government by 45% between 2023 and 2025. It will also extend the scheme to cover emissions from domestic maritime and energy from waste in 2026 and 2028 respectively. This is an important step in achieving net zero ambitions.

In a connected world, the ETS can only be truly effective if action is taken to mitigate the risk of carbon leakage. The government has undertaken extensive consultation on possible measures to mitigate carbon leakage risk including introducing a carbon border adjustment mechanism and will publish its response shortly.

Tariff Suspension Update

Tariff suspensions – The government is maintaining tariff-free imports on over 2,000 goods to provide continuity and avoid unnecessary costs for UK businesses. This measure will extend, for five years, tariff suspensions on goods ranging from vaccine components to ingredients used by UK food producers.

Reforms to Energy-Saving Materials VAT Relief

Following a call for evidence, the government will expand the VAT relief available on the installation of energy-saving materials by extending the relief to additional technologies – such as water-source heat pumps – and bringing buildings used solely for a relevant charitable purpose within scope. Thanks to the Windsor Framework, these reforms will be implemented UK-wide in February 2024. Full details on these reforms will be published shortly.

Plastic Packaging Tax (PPT) 

The government will legislate in the Autumn Finance Bill 2023 to increase the PPT rate in line with CPI, from 1 April 2024, to £217.85 per tonne.

To ensure the PPT continues to incentivise the use of recycled plastic in packaging, the government will publish an evaluation plan by the end of the year and gather further evidence to inform the future trajectory of the rate and recycled plastic content threshold.