Opinion on the correct application of the lower rate of landfill tax has polarised the industry in recent weeks. The opinions of UROC, the ESA and SITA UK are all valid and understandable. We all have an interest in the outcome of the guidance consultation and we should be clear and honest about that.
I think it is important to start by remembering the origins of landfill tax, which was introduced to help the UK meet its obligation under the Landfill Directive. The objective of the Directive was to prevent or reduce as far as possible negative effects on the environment from the landfilling of waste, by introducing stringent technical requirements for waste and landfills. Any future guidance on taxation should then help us meet the objectives of the Directive.
Despite all the column inches being dedicated to it which I appreciate I am adding to! It seems to me that this issue should not be difficult to resolve. Firstly we need absolute clarity on how we classify material. Secondly, if this should result in a change to the existing interpretation, we must find a way to transition in a manner which will minimise the impact on peoples livelihoods and broader efforts to stimulate the economy. One thing is quite clear, we must avoid any more half-baked guidance which is overly complex and raises more questions than it answers
Classification
As an industry we tend to stray from the technical requirements for waste as referred to in the Landfill Directive. We have become blinkered by process and technology as the means by which we determine the classification or quality of a product. In this case our focus has become the use of trommels and screens. But, are we asking the wrong question? The point is not the capability of the machinery but the specification and quality of the output. The use of LOI or TOC testing provides a simple and clear method to determine whether material should qualify for the lower rate or not. To then complicate this further, as detailed in the working examples in the latest guidance makes little sense. We end up eliminating product solely on the process used despite its quality and environmental impact being exactly the same as other qualifying material.
I would also suggest that we introduce a set of physical acceptance criteria to include examples of acceptable and non-acceptable material as well as clear guidance on what constitutes incidental contamination. This would be useful to landfill operators at the gate and ensure a consistency of approach.
The potential impact of a change in application for the lower rate is going to be quite significant. In many cases we will see builders skips increase by 150. These increased costs seem to fly in the face of initiatives such as the governments Help to Buy scheme, which has been introduced to stimulate house building market and the UK economy.
If final guidance does result in a new interpretation of the lower rate then we must ensure that this is introduced in a controlled manner. We shouldnt continue with something which is not right solely because that is what we have always done. But likewise we must not destroy peoples livelihoods overnight. We have worked with a landfill tax escalator for the standard rate of tax for sometime now and a similar policy, which gives a long-term view and commitment, should be implemented for material which may now attract a higher rate of taxation.
A recent communication from HMRC stated that is was unlikely new guidance would be issued by the planned date of 11th of November. I believe that HMRC should utilise this time to continue the dialogue with stakeholders and help to ensure that we do not descend from a state of confusion to chaos.
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