Policy paper

Revenue and Customs Brief 6 (2015): reinstatement of Aggregates Levy exemptions, exclusions and reliefs

Published 27 March 2015

This policy paper was withdrawn on 12 January 2017

This publication was originally archived on 12 January 2017.

This publication was withdrawn on 12 January 2017.

Purpose of this brief

This brief summarises the outcome of a State aid investigation into the aggregates levy exemptions by the European Commission and announces that the government intends to reintroduce exemptions that were suspended in April 2014 while they were being investigated.

Who needs to read this?

Businesses responsible for commercially exploiting materials in the UK which became liable to the aggregates levy on 1 April 2014 as a result of the opening of the Commission’s State aid investigation (SA.34775). This includes slate, clay, shale and the spoil from the extraction of china clay, ball clay and a range of industrial minerals.

Background

On 1 August 2013, the UK government received notification that the European Commission had decided to open a formal investigation into whether certain exemptions were compliant with State aid rules which are designed to ensure fair trade across the European Union. This followed an earlier decision by the Commission not to raise objections to the levy when it was introduced in 2002.

Revenue and Customs Brief 31 (2013): suspension of certain Aggregates Levy exemptions, exclusions and reliefs explained that the government was obliged to suspend the exemptions on the commercial exploitation of the materials under investigation pending the Commission’s decision. The government indicated that it would reinstate all those exemptions found to be lawful and refund any levy paid by businesses on these materials as a result of the suspension.

The Commission’s decision

The Commission announced its decision on 27 March 2015. As well as reaffirming the lawfulness of the aggregates levy, the Commission ruled on all the exemptions under investigation. With the exception of shale aggregate in specific circumstances, the Commission has found all exemptions to be lawful.

Lawful

The Commission decided that exemptions for the following were lawful:

• clay, coal, lignite and slate
• spoil from the separation of coal, lignite and slate from other rock after extraction
• spoil, waste or other by-products (not including the overburden) from china clay and ball clay extraction or separation
• other industrial minerals, namely:
  • anhydrite
  • ball clay
  • barites
  • china clay
  • feldspar
  • fireclay
  • fluorspar
  • fuller’s earth
  • gems and semi-precious stones; gypsum
  • any metal or the ore of any metal
  • muscovite
  • perlite
  • potash
  • pumice
  • rock phosphates
  • sodium chloride
  • talc and vermiculite
• spoil from the separation of the above industrial minerals from other rock after extraction
• material that is mainly but not wholly the spoil, waste or other by-product of any industrial combustion process or the smelting or refining of metal
• shale material not commercially exploited as aggregate, including that which is:
  • extracted as by-product of coal extraction
  • used in ceramic processes
  • used in place of clay, slag or other materials as a source of aluminosilicate in the manufacture of cement
  • otherwise demonstrably used for other than aggregate purposes

Unlawful

Where shale was used in the following circumstances the Commission has decided that there was unlawful State aid:

• material wholly or mainly consisting of shale that is deliberately extracted for commercial exploitation as aggregate, including shale occurring as by-product of fresh quarrying of other taxed materials; and
• aggregate consisting wholly of the spoil from any process by which shale that is deliberately extracted for commercial exploitation as aggregate has been separated from other rock after being extracted or won with that other rock

The Commission has ordered the government to recover the unlawful aid from businesses which produced this type of shale aggregate between 2002 and 2014, although the decision makes clear that aid below specified thresholds does not need to be recovered where relevant conditions are met.

Reinstatement of exemptions

As a result of the decision, the government intends to reinstate all the exemptions found to be lawful and to exempt shale in a way that reflects the Commission’s decision. It intends to consult in summer 2015 on the secondary legislation needed to do this and to make the reinstatement retrospective to the date the exemptions were suspended (1 April 2014). In the meantime, the materials remain taxable and businesses will need to continue to account for levy on them until the reinstatement comes into force.

Reclaiming tax paid on exemptions found to be lawful

Making the reinstatement retrospective to the date the exemptions were suspended will enable businesses that have paid levy on these materials since 1 April 2014 to reclaim that levy, with interest. Further details on the repayment process will be announced in the summer.

When the exemptions were suspended, businesses were advised by HM Revenue and Customs to keep records to demonstrate that they would not gain financially from any repayment of tax made to them following a reinstatement of the exemptions (i.e. that they did not pass on the cost of the tax to their customers or, if they did so, that they will reimburse those customers with the tax charged). Businesses should continue to keep such records up until the point the exemptions are reinstated.

Shale aggregate

The government is carefully considering the implications of the Commission’s recovery order. It will work with the Commission and businesses to reduce the impact of the order, consistent with the UK’s legal obligation to recover any unlawful aid. More information will be made available once the government has discussed with the Commission.

Who can I contact for further information?

If you have any questions about this brief, please contact the Environmental Taxes Unit of Expertise on Telephone: 03000 557496 or Email: environmentaltaxesuofe@hmrc.gsi.gov.uk.