Policy paper

Revenue and Customs Brief 41 (2014): Aggregates Levy credits in Northern Ireland

Published 17 November 2014

This policy paper was withdrawn on 12 January 2017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This publication was withdrawn on 12 January 2017.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

This brief gives details about the introduction of an 80% aggregates levy credit for aggregate commercially exploited in Northern Ireland (NI) following its importation from another European Union (EU) Member State. The levy paid on this aggregate must have been accounted for at the full rate between 1 April 2004 and 30 November 2010 (‘the relevant period’) and the originating quarry in the other Member State must have met required environmental standards.

2. Who needs to read this

Anyone who accounted for the aggregates levy at the full rate on aggregate that was commercially exploited in NI during the relevant period following importation from another EU Member State.

3. Background

Introduced on 1 April 2004, the Aggregates Levy Credit Scheme (ALCS) provided an 80% levy credit to operators in NI who commercially exploited aggregate originating there, provided they entered into an agreement with the Department of Environment (DoE) in NI to improve environmental standards at their site(s). The scheme was intended to help aggregates producers in NI cope with the very different market conditions (compared with those in Great Britain) as a result of being the only part of the UK to share a land boundary with another EU Member State.

In response to action taken by the British Aggregates Association, in 2010 the European General Court annulled the European Commission’s 2004 State aid approval for the ALCS. The scheme was therefore suspended from 1 December 2010 while the Commission undertook an investigation. This was outlined in Revenue and Customs Brief 42/10.

4. Commission investigation into the ALCS - decision

The Commission has completed its investigation and published its decision on 7 November 2014. The Commission is broadly content that the scheme complied with the prevailing rules but expressed concern that the tax benefit arising from the ALCS did not apply to aggregate commercially exploited in NI that originated in another EU Member State. The decision requires the UK to correct this distortion.

5. UK’s response to the Commission’s decision on the ALCS

The UK will introduce legislation to provide for credits of aggregates levy for anyone that accounted for the levy at the full rate on aggregate commercially exploited in NI between 1 April 2004 and 30 November 2010 following importation of that aggregate from another EU Member State. The claimant must satisfy the DoE that it obtained the aggregate from a quarry that met specified environmental standards. If they do so, the claimant will be entitled to a credit of 80% of the tax paid (plus interest), bringing their tax liability into line with businesses in NI that participated in the ALCS.

6. When can I claim the aggregates levy credit?

The primary legislation will be included in Finance Bill 2015, with the more detailed provisions set out in secondary legislation. You will be able to submit claims after this legislation comes into force, which we expect to be from 1 April 2015. Claims must be submitted to HM Revenue and Customs (HMRC) within 4 years of the legislation coming into force. Claimants, however, need to obtain a certificate from DoE before they can submit a claim and we would advise you to apply for this certificate as soon as possible after the legislation comes into force (see paragraph 8 below for the process).

7. Can I claim the aggregates levy credit?

You can claim a credit if you either:

• accounted for the levy at the full rate on aggregate that was commercially exploited in NI between 1 April 2004 and 30 November 2010 following importation of the aggregate from another EU Member State
• are the person who was registered for, and paid, levy on the aggregate which is the subject of the claim

8. How do I claim the aggregates levy credit?

You must demonstrate that the quarry in the other Member State from which you obtained your aggregate met environmental standards that the DoE judge to be comparable with the requirements met by ALCS members between 2004 and 2010. To do so, you will need to complete a form providing the DoE with details about the quarry and the aggregate you obtained. If, following investigation, the DoE deem the quarry’s environmental performance to have been satisfactory at the time the aggregate was purchased, it will issue a certificate to support your claim to HMRC for a credit of tax.

More details about this process, including an application form, will be published on the DoE website after the legislation comes into force.

9. What happens after I receive a certificate?

After you receive a certificate from the DoE (see section 8 above) you should apply to HMRC for a credit of any levy you paid at the full rate during the relevant period covering aggregate from the quarry covered by the certificate. You must apply to HMRC no later than four years from the date the legislation comes into force, sending a letter setting out the details of your claim and a copy of the DoE certificate, along with evidence to show that aggregates levy was paid at the full rate on aggregate commercially exploited in NI during the relevant period. The evidence that HMRC will require will be specified in legislation but is likely to include the following:

• a copy of the original return on which the levy was accounted for
• a supporting ledger breaking down the entries in any of the boxes completed
• identification of the entry for which a credit is sought
• commercial evidence of purchase and subsequent importation of the relevant aggregate
• evidence of payment of the levy shown on the return

If any of the above evidence is missing, HMRC will consider alternative forms of evidence to support a claim.

10. Will aggregates imported into NI from other parts of the UK be eligible for these levy credits?

No. As set out above, the ALCS aimed to help those operating in the specific circumstances that applied in the NI aggregates market. If an NI operator bought aggregate from a quarry elsewhere in the UK it would not have been the NI operator that would have had to pay the levy at the full rate but the quarry ‘exporting’ the material to NI. Offering a credit to the operator in Great Britain would not help the NI quarrying sector but the operator in Great Britain. This was not the intention of the original scheme and therefore not the intention of the new credit.

Relief, however, will be claimable by registered quarry operators in the rest of the UK on aggregate obtained from another Member State which then became taxable as the result of becoming subject to an agreement to supply to a person in NI.

11. Why is the Commission still investigating the aggregates levy?

The BAA sought a judicial review of the levy in 2002 and also raised a complaint with the Commission arguing that some of the levy exemptions give an unfair advantage to certain quarry owners and therefore constituted unlawful State aid. Following a number of Court cases, the Commission are now undertaking an investigation to determine whether some of the exemptions constitute unlawful aid (this is separate to the concluded ALCS investigation). The Government suspended the exemptions under investigation from 1 April 2014 pending the outcome.

12. Can I claim a levy credit on materials from NI which were exempt prior to 1 April 2014 but brought into tax as a result of the UK-wide suspension from that date of certain exemptions?

No, since no tax will have been paid on these materials in relation to the relevant period.

13. What if the Commission investigation into the exemptions concludes that tax should have been payable on them - what impact will that have on the credits in NI?

The Government is not expecting the Commission’s decision on the exemptions until 2015 and cannot anticipate that decision at this stage. It will consider whether there are any implications for the detailed arrangements for credits on aggregate commercially exploited in NI between 2004 and 2010 once it has considered the Commission’s decision on the exemptions.

14. Will the Government reintroduce the ALCS now that the Commission investigation into the scheme has concluded?

The Government will come to a final view on whether this is possible once the outcome of the further Commission investigation into the UK-wide exemptions from the levy is known. If it were to seek to reintroduce the ALCS, the scheme would need to be compliant with the 2014 Environmental State Aid Guidelines and need to undergo a formal notification process.

15. Further information

The primary legislation necessary for the credits will be published in draft on 10 December 2014, along with an explanatory note and a tax information and impact assessment. Secondary legislation will also be published in draft at a later date.

A further Revenue and Customs Brief will also be issued when the legislation comes into force giving more details of how to claim credit.

Further information is available from the following web links:

• Treasury announcement
• Commission decision
• Department of Environment website

If you have any further questions about this announcement please contact Catherine Osborne on Telephone: 03000 536971 or email: Catherine Osbourne.

Date issued 17 November 2014