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This publication is available at https://www.gov.uk/government/publications/landfill-tax-disposals-not-made-at-landfill-sites/landfill-tax-disposals-not-made-at-landfill-sites
Who is likely to be affected
Individuals or companies involved in the disposal of waste in England and Northern Ireland.
General description of the measure
This measure extends the scope of Landfill Tax to disposals made at sites without an environmental disposal permit, and brings clarity to what material is taxable at sites that do have a permit.
At sites without a permit, the person disposing of the waste and anyone who knowingly facilitates the disposal may be liable for the tax. All parties involved could also be liable to penalties for non-compliance or face criminal prosecution. Safeguards will be put in place to ensure that landowners and people in the waste supply chain who, in spite of carrying out all reasonable due diligence, were unknowingly involved in the illegal dumping won’t be assessed for any tax or penalties.
At sites with a permit, all material disposed of will be taxable unless expressly exempt. New exemptions will be introduced so that Landfill Tax is not charged at permitted sites on material currently outside the scope of the tax. Notification requirements have also been removed for certain activities undertaken on permitted landfill sites.
This measure incorporates the changes to the definition of a taxable disposal for Landfill Tax for which a tax information and impact note (TIIN) was published in December 2016 and which was intended for inclusion in the summer Finance Bill.
Our spring consultation on whether to extend the scope of the tax to illegal sites was met with support from respondents and so to ensure the simplest transition for the industry to the new rules, the government has decided to combine the legislation on the revised scope with the previously announced changes to clarify what material is taxable. As a result, the legislation planned for the summer Finance Bill will be incorporated into the winter Finance Bill. There will be a common implementation date of 1 April 2018.
The measure will deter non-compliance by making the illegal disposal of waste less profitable, and reinforce the principle of ‘the polluter pays’.
These changes will support and complement the activity undertaken by the environmental protection agencies who work closely with HM Revenue and Customs (HMRC) to tackle non-compliance in the waste sector. The changes will provide HMRC with an effective means of pursuing and penalising those involved in the evasion of Landfill Tax, and supporting the legitimate waste management industry.
For legitimate operators, the measure will also simplify the tax system, providing greater clarity and certainty to landfill operators and put beyond doubt when there is a charge to Landfill Tax on material deposited at their sites.
Background to the measure
Landfill Tax was introduced on 1 October 1996 as a disincentive to landfilling material and to encourage the switch to more environmentally friendly alternatives. Since the introduction of the tax, the amount of waste sent to landfill in the UK is down by more than 60%.
In response to ongoing challenges by a number of landfill operators, Budget 2016 announced a consultation on changes to the criteria for determining when Landfill Tax is due. A consultation paper was published in May 2016 setting out proposals to amend the criteria, acknowledging that a number of new exemptions would be required to avoid inadvertently extending the scope of the tax. HMRC shared a list of proposed exemptions with key stakeholders during the consultation period and subsequently shared a simplified list reflecting feedback from the consultation.
The summary of responses to the consultation was published on GOV.UK on 5 December 2016.
At Budget 2017, the government announced it would consult on whether to extend the scope of Landfill Tax to disposals of material at sites operating without the appropriate environmental licence or permit. These illegal waste sites operate outside the scope of Landfill Tax which makes the activity attractive to those who wish to exploit the disparity of tax treatment to undercut legitimate operators.
The government published a consultation paper in May 2017, which set out the reasons for extending the scope of Landfill Tax to these non-permitted sites, and asked for responses on a number of areas including how to define an illegal waste site and who should be liable for the tax.
Following support from the industry to the proposed changes, the government confirmed its intention to legislate to extend the scope of Landfill Tax to illegal waste sites from 1 April 2018. The government will publish a summary of the responses to the consultation on GOV.UK on 13 September 2017.
Unifying the above changes into one Finance Bill and aligning the commencement dates will create the simplest legislation and help operators pay the right tax at the right time.
HMRC will work with industry to publicise the changes and publish revised guidance, including a clear statement about the responsibilities of innocent parties before they come into effect. As long as the current Defra Duty of Care requirements are complied with, innocent parties will not be penalised.
This measure applies to sites in England and Northern Ireland. Landfill Tax was devolved to the Scottish Parliament in April 2015 and will be devolved to the Welsh Assembly from April 2018. Both devolved authorities provide for material at sites without a permit to be caught within the scope of their landfill taxes.
This measure will have effect from 1 April 2018.
Landfill Tax primary legislation is contained in Part III of Finance Act 1996, with the following areas of interest for this measure:
- Section 40 defines a taxable disposal on which a charge to Landfill Tax can be made
- Section 41 defines the taxable person who is liable for the tax
- Section 42 provides for 2 rates of the tax, with Sections 43 to 45 providing for exemptions to the tax
- Section 47 defines the conditions for notification and registration
- Section 65A allows the Treasury to prescribe in an order activities at a landfill site that are within the scope of the tax
- Section 66 defines a landfill site for the purposes of the tax
Further primary legislation is found in Schedule 5 of Finance Act 1996.
The Landfill Tax (Prescribed Landfill Site Activities) Order 2009 (SI 2009/1929) prescribes a number of activities at a landfill site that are within the scope of the tax.
The Landfill Tax Regulations 1996 (SI 1996/1527) deal with various administrative aspects for the tax, including provisions relating to information areas in paragraph 16A.
Legislation will be introduced in winter Finance Bill 2017 to amend Part III of Finance Act 1996 as follows:
- Section 40 will be amended to remove the waste criteria and the requirement for a disposal to be made by way of landfill, it will also be amended so that all disposals that require an environmental permit are taxable, regardless of where they take place - the definition of a landfill site is moved to this section from Section 66
- Section 40 will also provide exemptions to be set out in secondary legislation so that Landfill Tax is not charged at permitted sites on material currently outside the scope of the tax
- for taxable disposals that don’t take place at a landfill site, the measure will insert a range of taxable persons who will be jointly and severally liable for the tax into Section 41
- Section 47 will be amended to extend the registration provisions to those taxable persons who make disposals at places other than permitted landfill sites - amendments will also give the Commissioners the power to specify the conditions under which HMRC will accept or reject a person’s registration
- further amendments will be made to Sections 42 to 45 so that the lower rate and the various exemptions can only apply to disposals made by registered persons
- Section 50A has been inserted to provide the power for HMRC to manually assess unregistered persons, and sets out the information HMRC must supply alongside the assessment
- the legislation will provide for exemptions from the tax to be set out in secondary legislation
- Schedule 5 of Finance Act 1996 and The Landfill Tax Regulations 1996 (SI 1996/1527) will be amended to remove various notifications that permitted landfill operators are required to make to HMRC, including activities taking place in site information areas and the carrying out of site restoration
- there will also be further consequential amendments to Schedule 5 of Finance Act 1996 and Landfill Tax Regulations 1996
- consequential amendments will be made to Schedule 36 and 41 of Finance Act 2008 and Schedule 23 of Finance Act 2011 to ensure a range of penalties and powers are available to HMRC - the current appeal and review provisions will apply to assessments made under this part
- the Landfill Tax (Prescribed Landfill Site Activities) Order 2009 will be repealed
Summary of impacts
Exchequer impact (£m)
|2017 to 2018||2018 to 2019||2019 to 2020||2020 to 2021||2021 to 2022||2022 to 2023|
These figures are set out in table 2.1 of Autumn Budget 2017 as part of a package of measures called “Waste Sites”. They’ve been certified by the Office for Budget Responsibility. You can find more information in the Autumn Budget 2017: policy costings document.
This measure is not expected to have any significant macroeconomic impacts. Behavioural impacts of the measure and potential associated penalty structures are being considered.
Impact on individuals, households and families
This measure may impose a tax charge on individuals who knowingly cause or permit the illegal disposal of waste.
There will be no impact on individuals or households who are not knowingly involved in the illegal disposal of waste. HMRC will publish clear guidance about the responsibilities of innocent persons ahead of the implementation of the measure.
The measure is not expected to impact on family formation, stability or breakdown.
No equalities impacts in relation to any protected characteristic have been identified in relation to this measure.
Impact on business including civil society organisations
The majority of businesses affected by this measure will be unpermitted small and medium enterprises and sole traders who operate illegal waste sites and evade paying Landfill Tax. These entities will face greater scrutiny as a result of these changes.
This measure is expected to benefit compliant small and medium enterprises who operate waste disposal sites, as it will remove the financial advantage from those seeking to evade Landfill Tax through the illegal disposal of waste.
This measure is expected to have a negligible one-off impact on compliant businesses as they familiarise themselves with the new rules. It is not expected there will be any on-going costs, as due diligence requirements are already in place across the waste sector.
There is no impact on civil society organisations.
Operational impact (£m) (HMRC or other)
HMRC will need to fund additional staff to enforce this change and monitor compliance at an estimated cost of approximately £600,000 per annum. Guidance will also need to be updated, at negligible cost to HMRC.
The Environment Agency will work closely with HMRC, continuing to share information about sites without a permit and ensuring a joined up operational approach to waste crime.
Wider environment impact: this measure will increase the cost of the illegal disposal of waste at sites without an appropriate environmental permit or licence, and incentivise the diversion of waste back into more environmentally friendly waste management operations.
Justice impact test: this measure may have a justice impact. This will be considered ahead of the implementation of the measure.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will form part of HMRC’s compliance risk review processes. The implementation and impact will be measured within the internal governance and risk management processes.
If you have any questions about this change, please contact:
Telephone: 03000 575 578
Andrew Jones MP, Exchequer Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.