All materials sent to landfill sites will be taxable ‘unless expressly exempt’, under the government’s proposed changes to Landfill Tax legislation from 1 April next year.
HMRC elaborated on its plans on the 5th of December in a Policy Paper “Landfill Tax: definition of taxable disposal”. In it, the tax body confirmed that the current list for deciding materials which should or should not be taxed will be scrapped. This list currently comes under the term ‘prescribed activities’.
HMRC is unhappy with how non-taxable waste materials have been interpreted in the past across the sector
Instead, HMRC is proposing two new exemptions covering “materials that can legally be deposited outside of the landfill cell, and an exemption for the ‘drainage layer’ of the landfill cell – as well as any pipes inserted into the cell for extracting surplus liquid or gas”.
Furthermore, the HMRC has also published its thoughts on industry responses to the consultation that it held earlier this year on the landfill tax and exemptions.
At present, all landfill operators in England and Wales must charge a higher or lower rate of tax on all materials accepted at sites except for those used in ‘prescribed activities’, such as waste used in landfill restoration, landfill cell engineering, as a permanent cap or geological barrier, or in the construction of permanent landfill site roads.
These activities fall under section 65A of the primary Landfill Tax legislation, enshrined in the 1996 Finance Act, and the 2009 Landfill Tax (Prescribed Landfill Site Activities) Order.
The consultation, which concluded in August, was launched to inform the government’s Finance Bill 2017, which aims to amend this list of prescribed activities to prevent operators from ‘undermining’ the legislation
HMRC has been unhappy for some time and believes that some landfill operators have been trying to push the boundaries of which materials can avoid the landfill tax charge.
In its response to the industry views, HMRC noted ‘broad support’ from respondents for greater clarity on the definition of a taxable disposal, and said it would push ahead with plans to repeal the list of ‘prescribed activities’ that are non-taxable.
The consultation identified ‘two main concerns’ raised by respondents; primarily the need for a ‘potentially long list of exemptions’ to avoid inadvertently taxing material that is not currently within the scope of the tax.
Secondly, respondents suggested there would also be a need for ‘clear and unambiguous terminology’ so that landfill operators know which materials can and cannot be taxed.
Prescribed activities include landfill restoration and cell engineering
Considering these concerns, the government has decided to scrap the waste criteria which can be found in its Excise Note, last updated in August 2016, and adopt the two new exemptions.
HMRC notes: “These changes will significantly reduce the number of exemptions needed, and remove the need for some of the terminology that respondents felt was unclear. HMRC will continue to liaise with interested parties on any remaining terminology that respondents indicated was open to interpretation, and publish details in revised guidance.”
“This measure will redefine a taxable disposal for Landfill Tax purposes so that any material disposed of at a landfill site will be taxable unless expressly exempt,” it adds.
The repealing of existing legislation follows a historic decision by the Court of Appeal in 2008, which found where material received at landfill is used on the site it cannot be classified as taxable as there was no other disposal option available to processors.
Insertion of landfill gas pipes will come under the new exemption
Following a brief period in which waste companies were rebated for ‘reverse or top fluff layer’ waste used in landfill construction, HMRC decided to end tax relief for the material in 2012.
This has led to a flood of legal challenges from landfill operators and waste processors, which the government has described as ‘overwhelming’
The government has now launched an eight-week technical consultation on the landfill tax part of the Finance Bill within which it will sit, before the amendments are carried into legislation in 2017.
Commenting on the proposals, the Environmental Services Association’s head of regulation Sam Corp welcomed attempts by HMRC to clarify the tax. However, he added it was “vital” the new definition did not result in additional taxes being levied on non-waste materials brought on to landfill sites.
He added: “We do also still harbour some concerns that HMRC’s proposed approach will now differ from the approach taken/proposed to be taken in the devolved nations and this could cause confusion for landfill operators, and indeed their customers, operating across borders and potentially cause ‘waste tourism’.”
HMRC had also looked at changing the scope of how hazardous waste is taxed for disposal, which at present attracts a lower rate of tax by being listed in the Qualifying Materials Order.
Respondents objected ‘strongly’ to the standard rate being applied to asbestos waste materials, specifically asbestos contaminated soil – adding it would act as a ‘barrier’ to economic activity in the construction sector.
HMRC says the responses will inform ‘future thinking’ but ‘has no intention to make changes in this area now’.