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6th November 2013
Posted in Articles, Business Tax, Corporation Tax, Featured Articles by Tom Minnikin
We write to report on the outcome of a recent HMRC consultation on various issues concerning the landfill tax. In September this year, HMRC issued draft changes to their guidance and invited feedback from industry, and other interested parties ahead of the proposed publication on 11 November 2013. We understand that as a result of the number and nature of the replies HMRC have been forced to postpone the publication whilst they review the consultation responses.
Before commenting upon the specific points covered by the consultation it is worth providing some context to the whole issue of the landfill tax. The levy was introduced in 1996 as the U.K.’s first real ‘green tax’. It operates by imposing a charge levied upon landfill site operators when they dispose of waste to landfill. There are currently two rates of tax: a lower rate of £2.50 per tonne (applicable to naturally occurring material and non-hazardous wastes) and a standard rate applicable to everything else. Originally set at £7 per tonne, the standard rate has steadily increased to £72 (as of 1 April 2013).
The general aim of the tax is to divert as much waste away from landfill, in particular materials which are seen to be environmentally damaging, and to encourage recycling; and it is fair to say that to a large extent the government has been relatively successful in achieving these objectives. However, not all waste can be recycled and for landfill site operators this can create particular problems in determining the correct rate tax to apply. In 2012 HMRC issued two briefs intended to address some of these issues. Unfortunately, there still remained areas of ambiguity, hence the issue of this new guidance and consultation.
One particular area addressed by the consultation concerns the issue of material produced by waste transfer stations known as ‘trommel fines’.
Waste transfer stations accept waste in unsorted form e.g. skips, and then put it through a process to try and segregate the different types of waste into recyclable and non-recyclable materials. As well as manually picking out recycleable materials and using industrial blowers to extract loose plastics, they pass the waste through specialist machines known as trommels – effectively industrial sized ‘sieves’ – which separate out the bulkier materials such as wood, metals and stones. This leaves a fine, soil-like material, known as ‘trommel fines’.
If these materials are sent to landfill it leaves landfill site operators with the difficult task of deciding how to categorise the waste, as the ‘fines’ can differ vastly in form and composition. The HMRC guidance suggests that unless operators can provide sufficient documentation to:
(a) Evidence the source and nature of the waste;
(b) Verify that the load contains only an ‘incidental’ amount of standard-rated material; and
(c) Show that reasonable steps have been taken to extract the standard-rated waste,
then the material has to be standard rated.
Given the lack of clarity, waste operators have told us that landfill sites are likely to err on the side of caution and class all trommel fines as standard rated, even though the bulk of the material may qualify for the lower rate. Disposal at the higher rate will cause a direct increase in skip prices, which, ironically, could lead to high-cost operators who have invested in expensive plant and machinery to try and screen hazardous wastes being forced out of the market.
Forbes Dawson have been actively involved in the consultation process, and worked with a number of interested parties to coordinate a response. We are pleased that in light of the concerns raised HMRC have delayed the introduction of the new guidance pending further consultation.
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