ESA backs HMRC guidance on landfill tax

The Environmental Services Association has backed guidance which aims to provide clarity on the definition of naturally occurring waste sent to landfill.

But, the association, whose membership includes companies which run most of the UK’s landfill sites, has called for further information over how trommel fines should be tested to determine which landfill tax rate applies.

The ESA comments come in response to views expressed by members of the skip hire sector last week. Through their trade association, UROC, they had argued that proposed guidance on landfill tax, put forward by the government in September, had the potential to drive up costs for the skip hire sector (see letsrecycle.com story).

A consultation issued by Her Majestys Revenue and Customs (HMRC) on guidance notes for landfill tax changes is drawing to a close with a deadline for submissions of October 20. The proposed changes are due to come into force from November 11 2013 (see letsrecycle.com story).

The ESA said this week that the guidance only acts to clarify the rules around which materials should be subject to the standard or lower rate of landfill tax, and does not represent a change in the regulations.

Speaking to letsrecycle.com, ESA director general Barry Dennis called for further clarification on the testing method that firms are required to carry out to ensure that they fully comply with the legislation. He explained that there is concern within the industry that visual tests, which are currently used to determine what rate of landfill tax should be applied, are open to exploitation.

Fines

The tightening up of the rules covering trommel fines, first announced by Her Majestys Revenue and Customs (HMRC) in May 2012, sees fines from trommels and screens which would once have been charged the lower rate of landfill tax of 2.50 for inert material, charged the full rate of 72 a tonne for active material.

The proposals would also see inert materials used to cover landfill sites before capping, such as stone and soil, taxed at the full rate.

Mr Dennis said: ESA was interested to read comments at the end of last week on landfill tax. It must be remembered that the rules regarding landfill tax have not changed; they have merely been clarified, so that all industry stakeholders are more aware of their responsibilities under the legislation.

In the meantime, ESA does however believe that some further clarification in HMRCs draft guidance is necessary and is responding to the consultation in the normal way.

When asked what should be included in the draft guidance, Mr Dennis added: We would like to see a testing regime put in as I referred to, such as the objective loss on ignition (LOI) testing for trommel fines. The industry is aware of what is involved in LOI testing and this would help the operators and the landfill operators in deciding whether material was in fact able to qualify for the lower rate of tax.

Testing

The call for LOI testing was backed by waste management company SITA UK, which last year welcomed clarification of the rules, arguing visual tests had been exploited to great commercial effect (see letsrecycle.com story).

David Palmer-Jones, chief executive of SITA UK, said: We are calling for an LOI test, which measures the biodegradable element that is in waste. We think that this should be done at the premises of the transfer station that is trommeling and sorting this kind of material. In our view, waste that has not been tested properly should not be allowed to be deposited in landfill.

The LOI has been proposed by industry and heavily supported by ESA members. This will take away the opportunity for tax to be avoided and will also help to ensure more waste is recycled and recovered for its energy content.

The interim guidance, published by HMRC in July last year, sets out to clarify the definition of naturally occuring material which qualifies for the lower rate of landfill tax, as well as objective evidential requirements relating to incidental amounts of non-qualifying material in a load primarily made up of qualifying material.

It goes on to state that a lower rate of landfill tax can only be applied to material listed within the Landfill Tax (Qualifying Material) Order 2011, and appropriate evidence can be provided to demonstrate eligibility to the lower rate. HMRC establishes this by carrying out risk-based compliance checks and by sharing information with the environmental regulators.

Consultation

Meanwhile, UROC, continues to urge industry responses to what it calls the informal consultation released by the HMRC.

UROC spokeswoman Jenny Watts said: In order for any guidance to have any meaningful effect it is essential that our sector reports on how it can demonstrate that trommel fines can meet the evidential burden of demonstrating that they qualify for disposal at the lower rate landfill tax of 2.50 as opposed to the standard rate of 72 per tonne which is still on an escalator of 8 per year until 2014 at least and could have huge consequences to our sector.