Rogue operators handling waste illegally will have to pay landfill tax from 1 April 2018.
Draft legislation has been published for technical consultation ahead of introduction in the Finance Bill later this year.
The move by HMRC is the latest act from the Government to try to stamp out illegal operations in the waste sector by removing the financial incentive to set them up in the first place.
Andrew Jones, exchequer secretary to the Treasury, said: “Illegal waste sites are a blight on communities and undermine legitimate landfill operators.
”We have listened carefully to concerns raised by businesses and local communities and we are taking action to tackle this crime.”
HMRC will be able to prosecute illegal operators where necessary. They could face large fines and risk a sentence of up to seven years in prison.
Jim Harra, HMRC director general for customer strategy and tax design, said: “These rules will go a long way to clamping down on the use of illegal waste sites, strengthening existing work in this area led by the Environment Agency.
”The impact of these illegal sites on landowners and the environment can be significant. By making the illegal disposal of waste taxable, we will deter the spread of this damaging activity by making it less profitable and reinforce the principle of ‘the polluter pays’.”
The consultation period will be open for six weeks, closing on 25 October. HMRC is encouraging businesses and individuals to respond to ensure the legislation works as intended.