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HMRC publish interim landfill tax guidance

Tax officials have published further guidance on when the lower rate of landfill tax should be applied, designed as an interim solution to the hiatus which has rocked the industry.

The interim guidance, published by Her Majesty Customs & Revenue (HMRC), confirmed ‘inert’ waste listed in the Schedule to the Landfill Tax (Qualifying Material) Order 2011, should be charged at the lower landfill tax rate of £2.50 a tonne – not at £64 a tonne.

The document, Landfill Tax - interim advice on lower rating, is the third guidance note issued by HMRC since May to try to resolve the matter and they have already committed to greater clarification before the end of the summer.  

The guidance said: “The only determining factor as to whether waste is lower rated is whether it is listed in the Landfill Tax (Qualifying Material) Order 2011. Whether or not waste is considered to be inert for environmental protection purposes is not relevant to matters of tax liability.

“Equally, the fact that waste is listed in the [Order] does not mean that the waste is inert for environmental protection purposes.”

On trommel fines, the guidance said: “The lower rate will apply only where the fines that come out of the trommel/automated process constitute those materials or a mix of those materials included within the 2011 Order. By a mix of materials we mean a mix of qualifying materials from different groups within the 2011 Order.”

As MRW exclusively revealed, the interim note is only a temporary measure and that is why HMRC has pledged to provide further guidance.

HMRC hopes to produce further draft guidance before the end the end of the summer “on a number of issues”, including:

  • The definition of “naturally occurring” in Group 1 of the 2011 Order
  • More objective evidential requirements, including those relating to ‘incidental’ amounts of non-qualifying material in a load that is essentially of qualifying material
  • Guidance on the conditions that must be met where lower rated waste, used for the purposes of filling existing or former quarries, qualifies for exemption from Landfill Tax.

Industry chiefs welcomed the guidance as a good first step.

Mick Davis, landfill managing director, Biffa said: “We are pleased that HMRC has listened to the concerns expressed by many in the industry and issued  workable guidance which can be readily implemented without detriment to  proper construction recycling initiatives.”

Paul Levett, former deputy chief executive of Veolia, said: “The latest HMRC document represents real progress in reinstating the lower rate landfill tax for those recyclers and construction companies which produce inert trommel “fines” .

“Such materials clearly are not biodegradable and don’t contribute greenhouse gases or other environmental problems. I am also pleased to see that future consultation will involve those businesses who pay the tax and not just the landfill companies who collect it.”

But Phil Conran, director of consultancy 360 Environmental, called for a full review of the Qualifying Materials Order and raised questions around how the regime will be policed.

He said: “The new guidance changes nothing in terms of what qualifies, but it also adds nothing to the practicalities of how waste sorting facilities can relate output to specific evidenced loads of input.

“Surely the time has come to review the Qualifying Materials Order and to create a Waste Acceptance Criteria standard that qualifies for inert status rather than relating it to specific material types.  

“There is also an issue on policing as the Environment Agency will only be looking at the environmental aspects of the waste and its accompanying transfer note, not the HMRC requirements to substantiate the Qualifying Materials Order criteria. How will this therefore be enforced?”’

How the saga began

So-called “inert” fines from trommels and screens (material that is not going to contaminate landfill and does not count towards the EU biodegradable landfill targets) were charged at the lower landfill tax rate of £2.50.

But an HMRC briefing that sparked controversy, published on 18 May, appeared to suggest merchants would have to pay the same full rate of £64-a-tonne to landfill which is levied on “active” material, including non-inert fines that can be biodegradable and create methane.  

In addition, material used to cover waste in landfill areas before they are capped would also be taxed at the full rate. This had previously been regarded as “engineering material”, such as bund walls and caps and was charged at the lower rate.

The move related to a judgement in the HMRC v Waste Recycling Group (2008) case.

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