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HMRC: illegal sites face retrospective action on landfill tax

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Legal experts have warned that the waste sector may be caught unawares over new landfill tax rules that can be applied retrospectively to illegal sites.

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Legislative measures to apply landfill tax on waste at illegal sites came into force on 1 April.

HM Revenue & Customs (HMRC) has confirmed that, under the Finance Act 2018, any material considered to be ‘disposal’ dumped at an unauthorised site since 1996 would also potentially be liable for charges under landfill tax.

Jonathon Bell, a solicitor at Dyne Solicitors, said the retrospective measures were clearly laid out in the Finance Act.

He said: “It has been fairly well reported about the landfill tax, but nobody is mentioning this retrospective power. No-one seems to have noticed this thing which is tucked away.”

Bell said that although the legislation was designed to deter waste criminals, there was nothing to stop HMRC going after legitimate operators that inadvertently fall foul of the rules.

“An example of where this could go terribly wrong is for exemptions to use waste material for construction purposes.

“There is a U1 exemption for a certain type of soil and stone for, usually, 1,000 tonnes. If someone made an honest mistake of thinking it was 10,000 tonnes, and had done so any time since 1996, HMRC can get its calculator out and consider it 9,000 tonnes of taxable illegal deposit.”

Bell, who issued a freedom of information request to HMRC to confirm the meaning of the retrospective clauses in the Act, also highlighted a demand from the tax office that operators of illegal sites should declare any taxable materials by 30 April.

An HMRC leaflet has been sent to illegal waste sites for which the Environment Agency has the details on a database. Operators found not to comply with the declaration could face penalties. But Bell questioned the effectiveness of the leaflet.

Laura Tainsh, a partner at Davidson Chalmers, said she was “surprised” that HMRC had chosen to apply the legislation retrospectively and that the sector did not seem to be examining the possible effect of the rules.

She added: “Perhaps this is a good thing from a criminality perspective. HMRC could make a big play of this and get people on the hook for significant sums relating to illegal disposals. That is something which the industry in England would welcome.

“The risk for legitimate business is there, but it would be difficult to police and accurately calculate retrospectively unless the EA has information on specific instances of ‘unauthorised’ disposal.”

Scotland has had the ability to apply landfill tax on unauthorised sites for a number of years but has yet to take any action.

Tainsh said: “Is this another opportunity to question why this power is not being utilised against waste criminals in Scotland, given its potential financial impact on them when compared with fines alone?”

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