Feedback to the consultation, which was published yesterday (December 9), highlighted a number of issues surrounding the consistency and scope of how the LOI test would be implemented.
The regime was proposed earlier this year as a way of deciding whether a waste material should qualify for a lower or standard rate of landfill tax – which will stand at £2.60 and £82.60 per tonne respectively from April 2015.
The test involves heating a sample of a waste load in laboratory conditions to establish how much mass is lost. At the time of the spring Budget, it was announced any load containing trommel fines must produce an LOI of 10% or less to be considered for the lower rate of tax.
However, in its Autumn Statement last week the Treasury confirmed there would be a 12-month grace period meaning trommel fines will only have to produce an LOI of 15% in order to meet the lower tax threshold. This will revert to 10% from April 2016 (see letsrecycle.com story).
Consistency
Now, HMRC has announced further changes to the regime – allowing a second LOI test to be undertaken if there are doubts over the results achieved on the first.
If a second test is conducted, landfill operators will have to accept the lower of the two results as the basis for calculating the tax liability.
[testimonial id = “125” align=”right”]
The amendment has been issued in response to ‘alleged discrepancies’ in the consistency of sample testing between different laboratories – although HMRC is working to develop a ‘standardised’ test that aims to reduce inaccuracy.
The HMRC response reads: “On the question of waste operators being able to appeal against the result of an LOI test carried out by a landfill site operator, it is agreed that where a second test on the same composite sample is undertaken, the lower LOI rate achieved will be taken as the applicable result.
“To address concerns expressed over the alleged discrepancies in the results produced by laboratories currently undertaking LOI tests, HMRC will specify a standard procedure to be followed in all cases and this should ensure the same test is undertaken irrespective of where it is being undertaken.”
Scope
Respondents to the consultation also expressed concern that mixed waste loads would be excluded from the scope of the testing regime – suggesting that trommel fines tested should not be limited solely to qualifying materials from Groups 1 and 2 of the Landfill Tax Order.
Under the current system, materials recycling facilities are designed to accept a mix of construction and demolition and commercial and industrial waste streams – making it likely that other non-qualifying materials will be present in the load as well as those found in Groups 1 and 2.
In response, HMRC has stated that qualifying fines must comprise ‘predominantly’ of materials listed in Groups 1 and 2 – allowing an ‘incidental’ amount of standard rate material.
Meanwhile, the amount of time samples will need to be stored by operators has been reduced from a minimum of 6 months to 3 months – as an LOI retest becomes invalid as the material deteriorates.
Next steps
HMRC concludes that it will continue to meet with waste industry members to produce best practice guidance for waste operators to comply with the testing regime in advance of its introduction in April 2015.
And, the government will also produce draft primary and secondary legislation on LOI testing, which will be put forward for consultation in December 2014 and January 2015 respectively.
Subscribe for free