Landfill Tax reform threatens EfW uptake, councils warn

That is the message from councils in their response to a 13-week consultation on government proposals to overhaul the Landfill Tax system, which looked at the definition of taxable waste at a landfill site and what waste should qualify for the lower rate of Landfill Tax.

Under the government's proposals, inert material, which is currently charged at £2.50 per tonne for disposal, would be brought into line with the full £40 per tonne levy. This would include materials such as pulverised fuel ash and furnace slags, including slag from waste incineration.

The Treasury unveiled these plans in the Budget 2009 in order to reflect changes seen since the Landfill Tax was first introduced in 1996, such as the European Landfill Directive and the landmark court case on when waste qualifies as disposed of between the Her Majesty's Revenue and Customs and Northamptonshire-based Waste Recycling Group (see letsrecycle.com story).

However, councils – and electricity generation firms – have argued that there will be an increase in bottom ash produced as more and more councils pursue incineration as a waste treatment method and reclassifying it would be “contrary to the aims of the tax”, which is intended to increase the diversion of waste from landfill.

And, other respondents also called for outputs from mechanical biological treatment (MBT) plants to be kept at a lower rate of tax, in order to “reward good environmental behaviour”.

These two points echo the main issues highlighted by the Local Authority Recycling Advisory Committee in its consultation response published at the end of July (see letsrecycle.com story).

Transition

Respondents to the consultation – who were drawn from local authorities, a wide-range of businesses, landfill operators, environmental groups, members of parliament and regional assemblies – were also asked at what pace the lower rate should be brought into line with the standard rate.

The government had suggested a transitional move, as it would allow companies and councils to assess alternative waste treatment approaches and reduce the financial impact of the changes.
The proposal was “broadly supported” by the consultees, although there was much deviation on how long the timeframe should be and what the incremental rise in cost should be, with £5-£10 being suggested.

Respondents also said that, if any material stream were to benefit specifically from the transitional rate, it should be incinerator bottom ash and pulverised fuel ash.

In an impact assessment published by the Treasury alongside the original consultation document, it stated that the move to reclassify material from the lower rate to the higher rate of tax could cost up to £160 million based on current Landfill Tax rates.

Taxable

The consultation also assessed when material entering a landfill site should be classed as taxable. This came as part of a response to the HMRC v WRG court case, and looked to also bring the UK interpretation in line with the EU Landfill Directive definition.

Proposals to establish a tipping area, where taxable disposal takes place, were presented and 79% of respondents claimed that there was no activity currently taxed that would no longer be taxed under the proposals.

However, some respondents suggested that activities such as temporary engineering work and landfill cover should be exempt.

The government intends to publish its response to the consultation in spring 2010. This is intended to inform the development of the Finance Bill 2010.