The European Commission have today (Friday 27 March) announced that all but part of one exemption from the aggregates levy are lawful. Their decision reaffirms the Commission’s earlier conclusion that the levy as a whole is lawful and is a major achievement for the UK government after almost 13 years of litigation.
The aggregates levy is an environmental tax on commercially exploited aggregates that are used to provide bulk in construction. The levy exemptions were designed to encourage the use of less environmentally damaging sources of aggregate.
The Commission originally approved the levy exemptions when the tax was introduced in 2002. However, the Commission were forced to re-evaluate this decision after a European General Court judgment of 2012, which followed the British Aggregates Association’s claims that a number of the exemptions provided unlawful state aid. In April 2014, the government had to suspend these exemptions while this examination by the Commission took place.
Today, the Commission have again agreed with the UK government that the levy exemptions are in line with state aid rules, with the exception of part of the exemption for one material. These lawful exemptions will be reinstated as soon as possible in the new Parliament, with effect from the date of the suspension. This will allow the government to repay businesses any tax that they have paid on these materials as a result of the suspension.
The exception to the decision is part of the exemption for shale aggregate, which the Commission have now deemed to be incompatible with state aid rules – a reversal of their original decision after almost 13 years. The government is now obliged to narrow the scope of the original shale exemption. Additionally, the Commission have ordered the government to recover the unlawful aid provided by this part of the exemption.
The government is carefully considering what the Commission decision means for businesses that produced this type of shale between 2002 and 2014, and notes that aid below the relevant de minimis threshold does not need to be recovered. It will seek to work with the Commission and businesses to reduce the impact of the Commission’s recovery order, consistent with the UK’s legal obligation to recover any unlawful aid.
In addition, HMRC will continue to offer Time to Pay arrangements for businesses that face difficulty paying other taxes as a result of this decision, allowing them to spread payments over a longer period.
Exchequer Secretary to the Treasury, Priti Patel, said:
I am pleased that the Commission decision confirms once again that the levy is lawful. The decision will enable the government to reinstate the exemptions and repay businesses, as we promised we would do, in the new Parliament. The decision also removes the uncertainty for the overwhelming majority of businesses that were affected by the Commission investigation.
However, I am extremely disappointed that the Commission have changed their mind on part of the exemption for shale. We will work closely with the industry and do everything in our power to minimise the impact on the businesses affected.
More information for businesses affected can be found in the Brief on Reinstatement of Aggregates Levy Exemptions, Exclusions and Reliefs.