HM Revenue & Customs (HMRC) has set out new rules explaining how chemically recycled plastic can count towards the recycled-content threshold under the UK's Plastic Packaging Tax (PPT) from 1 April 2027.
The rules introduce a system known as mass balance for businesses that want chemically recycled plastic to be recognised as recycled content for PPT.
Put simply, mass balance is a way of keeping track of recycled material when it is mixed with newly made, or virgin, plastic during production. Businesses record how much qualifying recycled material goes into a production system and can then assign an equivalent amount to particular products coming out, following specified rules.
This will allow qualifying chemically recycled material to contribute towards the 30% recycled-content threshold for PPT. Businesses using the system will have to meet requirements covering independent certification, supply-chain records and detailed accounting of recycled material.
For packaging manufacturers, converters and importers, this means chemically recycled plastic will only count for PPT if there is sufficient evidence to support its recycled status.
HMRC published its preparation guidance and minimum certification requirements on 28 August 2026. More detailed guidance is due in early 2027.
Why mass balance is needed
Chemical recycling uses processes that change the chemical structure of plastic waste so the resulting material can be used as a raw material, or feedstock, to make new plastic.
This differs from mechanical recycling, where waste plastic is generally sorted, cleaned and physically processed for reuse without fundamentally changing its chemical structure.
With some chemical recycling processes, recycled feedstock is mixed with virgin material during later stages of production. Once the two are mixed, it may no longer be possible to tell which part of the resulting plastic physically came from recycled material.
Mass balance addresses this problem through accounting rather than keeping the recycled and virgin materials physically separate.
For example, if a qualifying amount of chemically recycled material enters a production system alongside virgin material, the mass-balance system records that input. A corresponding amount of recycled content can then be assigned, or "attributed", to eligible products coming out of the system under defined rules.
In simple terms, it works like a running account: businesses record qualifying recycled material going in and the amount of recycled content assigned to products coming out.
From 1 April 2027, businesses will be able to use this attributed content when calculating whether plastic packaging reaches the 30% recycled-content threshold for PPT.
Using chemically recycled plastic remains optional. However, businesses that want chemically recycled plastic recognised as recycled content in their PPT returns must use mass balance.
Without it, HMRC will treat the chemically recycled plastic as non-recycled plastic for PPT purposes.
The approach covers packaging components manufactured in the UK using chemically recycled plastic, as well as finished packaging components imported into the UK that were manufactured using chemically recycled plastic.
Businesses using only mechanically recycled plastic will continue to account for that material under the existing system.
Businesses will need independent certification
Companies cannot simply make their own mass-balance calculations and use them for PPT without external checks.
Third-party certification – verification by an independent organisation – will be a central part of the system.
Businesses in the relevant supply chain, from the chemical recycling stage through to completion of the plastic packaging component, must be certified under a scheme that meets HMRC's minimum requirements.
Depending on how the material moves through the supply chain, this could include chemical recyclers, petrochemical operations, polymer producers and packaging manufacturers or converters.
Businesses in the same supply chain do not all have to use the same certification scheme, provided their respective schemes meet the minimum requirements for PPT.
There is an important exception for importers. A business that only imports finished plastic packaging made using mass balance does not itself need certification. It must, however, ensure that the relevant supply chain is certified and keep evidence from its supplier.
HMRC will not directly regulate the certification schemes or organisations carrying out certification. Instead, they must meet HMRC's minimum requirements if their certificates are to be accepted as evidence for PPT.
Certification schemes must also operate electronic registers from 1 April 2027 so businesses can check certification details and the dates for which certificates are valid.
Records will have to follow the material
Certification is only one part of the system. Businesses will also need evidence showing how attributed chemically recycled material moves through the supply chain.
When material passes from one business to another, the supplier must provide a valid certificate and an attribution declaration.
An attribution declaration is a document recording how much chemically recycled content has been assigned to a particular delivery or batch.
A new declaration will be required for each delivery or batch containing attributed chemically recycled content. It must identify the amount of recycled material covered, a unique batch number, the dispatch date, and the supplier and recipient.
Businesses receiving the material must check that suppliers are properly certified and that the declarations are complete and valid.
If a declaration is incomplete, the receiving business will not be able to use the attributed chemically recycled content to claim an exemption from PPT.
For packaging manufacturers and converters, this makes supplier information a critical part of recycled-content accounting. A company's ability to count chemically recycled content will depend on records generated across the supply chain, rather than simply on calculations made when the final packaging is produced.
Businesses must keep certificates, attribution declarations and relevant mass-balance records for six years.
HMRC says businesses unable to produce the required evidence during a compliance check may have to pay PPT on packaging previously reported as exempt. Penalties may also apply where chemically recycled material has been accounted for without meeting the minimum requirements.
Companies will have to balance the books at each site
Mass balance is not simply a way of labelling material as recycled. Companies using it will need detailed records showing the movement and use of material at individual production sites.
Businesses must operate the system in three-month accounting periods and cannot assign more recycled content to products than their records show is available.
In practical terms, the recycled-material account cannot fall below zero. A business cannot, for example, assign 100 tonnes of recycled content to products if its records show that only 80 tonnes are available to be assigned.
The accounting periods run continuously from the date a business becomes certified and do not have to match its quarterly PPT accounting periods.
Businesses must also account for material lost during production.
If 100 tonnes of qualifying material enters a process but only 90 tonnes remains available after processing losses, a company cannot simply treat all 100 tonnes as available to assign to products.
Businesses will therefore have to use site-specific conversion factors based on their own operational data to calculate how much chemically recycled material remains available.
More complex rules apply to refineries and petrochemical plants that produce several outputs from the same process, particularly where some outputs are used as fuels. These requirements are designed to account for material directed to other uses when determining how much can be assigned to plastic products.
For packaging businesses, this means internal systems may need to reconcile recycled and virgin materials entering a site, products leaving it, stock levels, production data and the amount of recycled content assigned to different outputs.
What the rules mean for Plastic Packaging Tax
PPT applies to finished plastic packaging components containing less than 30% recycled plastic. The tax rate is £228.82 per tonne from 1 April 2026.
Businesses generally have to register for PPT if they manufacture or import 10 tonnes or more of finished plastic packaging components within the relevant 12-month period.
The April 2027 change gives qualifying chemically recycled material a route to count towards the 30% recycled-content threshold.
For packaging producers and importers, the commercial question will therefore go beyond whether they can buy chemically recycled plastic.
They will also need to know whether the material has passed through a properly certified supply chain and whether they have the documents needed to support its recycled status for PPT.
Pre-consumer plastic faces a separate change
Another change to PPT will take effect at the same time.
From 1 April 2027, pre-consumer plastic waste will no longer qualify as recycled plastic for PPT purposes.
Pre-consumer waste is plastic waste created during manufacturing before a product reaches the consumer. Post-consumer waste, by contrast, comes from plastic products after they have been used by consumers.
Reprocessed post-consumer plastic waste will continue to qualify as recycled plastic for PPT.
The government announced this change alongside the mass-balance reform as part of wider changes to the tax.
For packaging businesses, the combination of the two measures means existing recycled-content calculations and evidence from suppliers should be reviewed before April 2027.
What the changes mean for packaging
The mass-balance system gives chemically recycled plastic a defined way to count towards PPT recycled-content calculations even when recycled and virgin materials become physically indistinguishable during production.
Chemical recycling can complement mechanical recycling by handling some plastic waste that may be technically difficult or uneconomic to recycle mechanically.
The government's approach does not replace mechanical recycling. Instead, it establishes a separate way of accounting for qualifying chemically recycled material, backed by certification and supply-chain records.
For the packaging sector, the rules establish the conditions under which chemically recycled material can contribute towards the PPT recycled-content threshold.
This could affect decisions about which materials businesses buy and which suppliers they use as companies assess different ways of reaching the 30% threshold.
How packaging businesses should prepare
The 1 April 2027 start date gives packaging businesses time to prepare.
Companies considering mass balance should begin by mapping where their chemically recycled material comes from and identifying which businesses in the supply chain will need certification.
They should establish whether suppliers plan to use certification schemes that meet HMRC's requirements and determine how certificates and attribution declarations will be provided and checked.
Businesses may also need to update internal systems to record material movements, supplier certification, attribution declarations, production information and the amount of recycled material available to be assigned to products.
These records will need to be stored so they can be retrieved for the required six-year period.
Importers of finished packaging should also establish procedures for checking supplier certification and attribution declarations, even where they do not need certification themselves.
HMRC has said it will publish more detailed guidance in early 2027. The August 2026 documents therefore provide a framework for preparation, with further details on how the system will operate still to come.
For packaging manufacturers, converters and importers, the change goes beyond tax administration. It links recognition of chemically recycled content for PPT to a documented chain running from recycled raw material through processing and manufacturing to the finished packaging component.
From April 2027, using this route will remain a choice. But businesses that choose it will have to show, through certification, accounting and supply-chain records, how much chemically recycled material they are entitled to count.
