Tax officials are finally due to issue a keenly awaited third clarification of landfill tax - but industry chiefs warned the fresh guidance will not fully resolve the issues and “challenging” months lay ahead.
A fresh draft of the guidance has been drawn up by Her Majesty’s Revenue and Customs and is expected to be published imminently - it had been expected last week.
The draft, seen by MRW, 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 - in line with what sector chiefs told MRW earlier this month.
It added: “The lower rate also applies where the consignment consists of a number of different qualifying materials, including qualifying materials from different Groups within the Order.”
But HMRC has also pledged to produce further guidance “in due course” on the evidence required of firms wishing to dispose of waste and pay only the lower rate, rather than the top £64 tax rate reserved for active material.
The move follows the Environmental Services Association (ESA) raising fresh questions on the issue.
An ESA statement said: “It remains unclear where the onus to prove that [material is eligible for the lower rate] falls, and what evidence would be deemed sufficient by HMRC.”
Sector experts told MRW the next couple of months could prove “challenging” despite the fresh guidance and the changes could continue to have a “significant impact on some areas of recycling”.
Phil Conran, director at consultancy 360 Environmental said: “There is clearly now great nervousness amongst landfill operators as to whether they may be liable for back payment if the evidence is not considered robust enough to qualify.
He added: ““The next couple of months could prove challenging in the uncertainty and potentially have a significant impact on some areas of recycling.”
Chartered Institution of Wastes Management (CIWM) chief executive Steve Lee said: “We support the role of the Landfill Tax as an effective driver in diverting ‘active’ waste from landfill, but we believe decisions must be based on the actual composition of the fines and the system must not disincentivise investment in high value processing and separation infrastructure
“If, for example, the qualifying criteria is applied solely at the point of origin, many mixed loads may end up being sent straight to landfill with no processing.
“This is because by virtue of being derived from mixed materials, any output, however well separated, would be automatically excluded from the lower tax rate. CIWM recognises that developing robust methodologies to test output characteristics is a much more challenging task but would argue that our continued efforts to drive waste up the hierarchy will increasingly require more sophisticated approaches.”
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.