Policy paper

Revenue and Customs Brief 11 (2015) - reinstatement of certain Aggregates Levy exemptions

Published 23 July 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This policy paper was withdrawn on 12 January 2017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This publication was withdrawn on 12 January 2017.

1. Purpose of this brief

Revenue and Customs Brief 6 (2015) announced that the government intended to reintroduce exemptions from Aggregates Levy that had been suspended on 1 April 2014 while they were under investigation by the European Commission. It indicated that the exemptions would be reinstated with effect from the day they were suspended, so that businesses could reclaim any levy paid since 1 April 2014 on the materials covered by the exemptions being reinstated. This brief confirms that legislation has been introduced to give effect to these changes and outlines the steps businesses need to take to reclaim the tax they have paid.

2. 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. This includes slate, clay and the spoil from the extraction of china clay, ball clay and a range of industrial minerals.

3. Background

On 1 August 2013, the UK received notification that the 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 EU. 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) explained that there was an obligation on the UK to suspend the exemptions on the commercial exploitation of the materials under investigation pending the Commission’s decision, but that all the exemptions found to be lawful by a Commission decision would be reinstated and any levy paid by businesses on these materials as a result of the suspension would be refunded. The exemptions under investigation were suspended from 1 April 2014.

The Commission announced its decision on 27 March 2015, concluding that the Aggregates Levy as a whole and all of the exemptions (with the exception of part of the shale exemption) were lawful. Revenue and Customs Brief 6 (2015) announced that the suspended exemptions would be reinstated with effect from the day they were suspended, with changes to the shale exemption to reflect the Commission’s decision.

The Summer Budget on 8 July 2015 announced that the legislation to reinstate the exemptions would be included in the Summer Finance Bill 2015. The bill was published on 15 July 2015.

4. Reinstatement of exemptions

The following exemptions will be reinstated:

• 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

The full exemption for shale will not be reintroduced. However, shale that is extracted as by-product of the extraction of some other untaxed materials (eg, coal) will be exempt as spoil from the separation of rocks after extraction (see above) and shale used in ceramic processes (such a brick-making) will continue to be a relieved industrial process. Where shale is used with limestone in the production of cement it will continue to be used in an exempt process. There will be a new exempt process for shale that is used for a purpose other than construction purposes.

Legislation in the Summer Finance Bill 2015 will give effect to these changes, which will be deemed to have taken effect on 1 April 2014. Claims for repayment of tax can be made after the legislation comes into force on 1 August 2015.

5. Reclaiming tax paid on exemptions found to be lawful

Making the reinstatement of lawful exemptions retrospective to the date the exemptions were suspended will enable businesses that have paid levy on these materials to reclaim that levy. This includes shale but only insofar as the exemption has been found to be lawful. Interest will be paid on claims.

Claims should be made in writing and submitted in accordance with the usual repayment rules (see sections 5 and 6 of Excise Notice AGL1: Aggregates Levy) to:

HM Revenue and Customs
Aggregates Levy Team
Chillingham House
Room BP4002
Benton Park View
Longbenton
Newcastle upon Tyne
NE98 1ZZ

Businesses should not adjust their Aggregates Levy returns to reflect the sum due to them. They must send the following evidence to show that Aggregates Levy was paid at the full rate on the aggregate that has been found to be lawful:

• the name and address of business, and Aggregates Levy registration number
• a copy of the original Aggregates Levy return on which the levy was accounted
• a copy of the sales ledger identifying the entry for which the claim is being made
• identification of the entry or entries for which a credit is sought
• a copy of the sales invoice
• documentary evidence showing the nature of the material that was commercially exploited
• confirmation from the business that they did not pass on the cost of the levy to their customer or, if they did, that they will reimburse those customers with the levy charged

When the exemptions were suspended, businesses were advised by HM Revenue and Customs (HMRC) to keep records to demonstrate that they would not gain financially from any repayment. Businesses will need to confirm when submitting their claims that they did not pass on the cost of the tax to their customers, retaining the records they kept as evidence. Where a business has passed on the cost to a customer, they should not now seek to reclaim the tax.

HMRC may check records if necessary, to ensure that any business that passed on the cost of the levy to its customers will not be unjustly enriched by any repayment. HMRC may also check the customer’s records to ensure that the relevant amounts have been credited to them.

Claims for repayment will need to be signed by an officer of the company, or by the business owner (in the case of a sole trader or partner). They must be submitted within 4 years of the date of the time when the aggregate was originally accounted for.

Upon receipt of a claim, HMRC will make any reasonable enquiries necessary to confirm its accuracy and validity. If incomplete documentary evidence is provided with any claim for a repayment, further information may be sought and the repayment may be delayed. Repayment will be made as soon as HMRC is satisfied with the claim and subject to the claimant having no outstanding tax debts. If all relevant information is provided and there are no other debts, HMRC will normally pay claims within 30 days of receipt.

Where a business has merged with another company since April 2014, the merged company can make a claim.

6. Deregistering for the levy

A business must notify HMRC in writing within 30 days if, at any time, it ceases to have the intention to exploit taxable aggregate commercially and is no longer liable to be registered. Penalties apply for late or non-notification.

In addition to the Finance Bill legislation, on 9 July 2015 the government laid a statutory instrument to remove the liability to register in relation to exemptions that are being reinstated. The instrument will come into force on 1 August 2015. Businesses that were required to register for the levy solely on the basis of a liability arising from the suspension of one or more of the exemptions found to be lawful should make clear when writing to reclaim tax that they no longer have a continuing Aggregates Levy liability and wish to be deregistered.

7. Who can I contact for further information?

If you have any questions about this brief, please contact the Environmental Taxes Unit of Expertise or telephone on Tel: 03000 557 496 .