UK companies exporting refuse-derived fuel (RDF) to Europe could be forced to pay almost £50 million* extra in VAT if a no-deal Brexit goes ahead, a major exporter has warned.
Steve Burton, director of Andusia Recovered Fuels Ltd, said that if the UK leaves the EU customs union, those sending RDF to energy from waste (EfW) plants in member states would be charged VAT on top of gate fees.
At present, exporters of RDF supply EfW plants with their UK VAT registration number and do not pay VAT, which is charged at around 20-25% depending on the recipient country.
While this money can be claimed back from individual member states, he said that the process was arduous and could take up to a year to get back – causing what he described as a “permanent cash drain” on businesses and potentially deterring some from exporting RDF altogether.
However, others in the sector have played down the impact of the change, describing it as one of a number of administrative burdens that operators will need to adapt to post Brexit.
Mr Burton’s comments come after he raised his concerns over VAT on RDF exports at a Brexit meeting organised by Defra on October 3 (see letsrecycle.com story).
At the meeting, Mr Burton asked if HMRC would be doing anything to mitigate these excess costs.
He said: “It will be a permanent cash drain on businesses. It will change the cash requirements for RDF exports by around £50 million – just to continue what we are doing today.”
“This will discourage people from sending RDF and will result in more waste being sent to landfill.”
Responding to this question, HMRC told delegates about the VAT situation for RDF exports and said that, while it was putting measures in place to help importers with regards to VAT, it was powerless to help those exporting material.
A spokesman for HMRC said: “The incineration of RDF is considered to be a “service” which RDF exporters purchase. Therefore, when the UK leaves the EU, exporters of RDF who pay for their RDF to be incinerated will have to pay VAT in the EU Member State where the service is provided. VAT incurred on the incineration service can be reclaimed, but we are unable to comment on the duration of VAT recovery processes in other EU Member States.
“The VAT will not be collected by HMRC, but rather the tax administrations of other Member States. Therefore, HMRC do not have the power to make any changes to the associated VAT processes.”
HMRC stressed that it had taken measures to alleviate the impact of VAT on imported services post Brexit, explaining that “HMRC have the power to make changes to the VAT system on these imports, but there isn’t an equivalent that can be applied to the RDF incineration service as the VAT is incurred in an EU Member State.”
HMRC do not have the power to make any changes to the associated VAT processes”
The spokesman added that exporters would have to prepare for the change and to “consider the costs involved with any changes to export processes as a result of EU Exit as part of their contingency planning.”
Established in 2012 when the RDF market was in its infancy, Hertford-based Andusia exports around 250,000 tonnes a year to countries including Germany, the Netherlands, Greece and Norway.
At present, Mr Burton explained that exporters of RDF only pay VAT in Norway, because Norway is not part of the EU customs Union. He said this gave him a good idea of the “administrative burden” involved in recovering the money and what it would mean post-Brexit.
He said: “Our VAT registration in the UK will not be valid in other countries if the UK is not in the customs union, so we will have to use a manual system to claim money back.
“So, if you trade with six different countries, you will have to get a refund from all six countries.”
However, another exporter of RDF told letsrecycle.com that it was less concerned by the potential VAT change – claiming that it was already familiar with paying VAT in Norway.
The exporter said that the change was “not ideal”, particularly for companies only involved in RDF export, and would require time to adjust to, but that it was just one of many new administrative burdens expected to arise post Brexit.
The exporter commented: “In general Brexit is such a difficult scenario for any company to plan for. The adjustments are going to take time.”
At present, the UK currently exports around three million tonnes of RDF a year to energy-from-waste plants in Europe.
*figure based on the export of three million tonnes of RDF a year, a gate fee of €60 a tonne and VAT charged at 25%
This year’s RDF conference, organised by letsrecycle.com and the RDF Industry Group will be held on 28 November 2019. More details here.