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HMRC internal manual

VAT Government and Public Bodies

Other local authority activities: miscellaneous (N to Z): waste collection and disposal

Background

Waste issues are covered by the Environmental Protection Act 1990. They are statutorily divided into collection, management and disposal functions. Many local authorities will be the waste collection authority for their area and some are also the waste management authority. However, only the larger authorities have a role as a waste disposal authority. Waste itself is categorised as domestic, commercial and industrial.

Domestic waste

As well as the normal weekly household collections, domestic waste includes special arrangements for bulky items and garden material.  The waste collection authority has a duty to arrange for the regular collection of domestic waste for which it cannot make a charge as the cost is covered by the Council Tax.  Special collections must be undertaken at the request of a householder but the authority can charge for the service.

It is common for local authorities to contract out normal and special collections to a private-sector waste-collection company. The contractor’s services are supplied to the authority rather than to the householder.  Therefore any charges for special collection services, even if the contractor collects and retains the payment from the householder, relate to a non-business activity of the authority.  However, payments that are retained by the contractor form part of the consideration for its standard-rated supply to the authority.

The authority may make related supplies for which it charges.  For example the provision of special dustbins necessary to fit the collection vehicle, or specially marked rubbish sacks.  These are also  non-business except when the local authority sells standard unmarked bags, which are standard rated.

Commercial waste

Commercial waste covers collections from all forms of commercial premises and non-private dwellings such as prisons, hospitals and royal palaces, but not from industrial premises as defined in the Environmental Protection Act 1990.

As with domestic waste there is a duty for the collection authority to have arrangements in place for the collection of commercial waste. However, there is no obligation to provide a routine service, but it must respond to any request. Collection services are required to be charged for but charges can be waived in some circumstances.

Commercial waste collection by local authorities is governed by the Environmental Protection Act 1990. As this is part of a special legal regime, this is a non-business supply under section 41A of the VAT Act. HMRC is being challenged on this point, but at present has no reason to believe this liability is incorrect. Once litigation is completed, we will amend this guidance.

Waste transfer notes

The VAT treatment for a local authority completing a waste transfer note will depend upon whether the collection of commercial waste and the completion of the note are separate supplies or a single supply. If the activities are distinct supplies, completing the note will be a taxable supply. If there is a single supply, completing the note will be treated in the same way as the collection of waste.

The outcome will be determined on the facts of each case and any contractual arrangements that exist between the local authority and the customer. Refer to the VAT Supply and Consideration Manual on guidance on single and multiple supplies (see VATSC80000).

If you are unable to decide whether there is a single or multiple supply then a Technical Advice Request (TAR) may be appropriate.

Industrial waste

Due to the potential environmental impact of industrial waste its collection is much more closely controlled. The disposal authority licenses collection and movement. The Secretary of State determines the level of fees for collection licences which are non-business as they can only be issued by section 33 bodies (see VATGPB4000).

Many collection authorities are not licensed to collect industrial waste and so it is undertaken by specialist private sector companies. Collections are therefore always by way of business and standard rated.

Clinical waste

The VAT treatment of clinical waste collection by local authorities will depend on how specific collections are classified.

The general position is clinical waste collection is classified as industrial waste (standard rated). There are exceptions however where clinical waste collection is classified as either household (outside the scope of VAT) or commercial (outside the scope of VAT).

The legislation governing the classification of clinical waste is:

  • England and Wales - Schedule 1, paragraph 3, item 12 of the Controlled Waste (England and Wales) Regulations 2012.
  • Scotland - Controlled Waste Regulations 1992.
  • Northern Ireland - Controlled Waste Regulations (Northern Ireland) 2002.

Waste disposal

Only local authorities can act as a waste disposal authority and the activity is governed by the Environmental Protection Act 1990.  Charges made by waste disposal authorities to waste collection authorities are outside the scope of VAT.