Skip firms and Biffa react to landfill tax changes

Changes to landfill tax could have a disastrous effect on the waste management and recycling sectors and some companies may face financial ruin as a result.

This is the message skip hire firms are sending to the government as they react to the landfill tax changes publicised this week. In a letter sent to environment secretary Caroline Spelman and communities secretary Eric Pickles the companies call for the changes to be suspended for six months to allow time for a consultation.

On Friday (May 18) Her Majestys Revenue and Customs (HMRC) announced two changes to its landfill tax rules. Firstly, it said that fines from trommels and screens which have in the past been charged the lower landfill tax rate of 2.50 for inert material will now be charged the full rate of 64 a tonne for active material. Secondly, waste or material used to cover waste in landfill cells before they are capped will also be taxed at the full rate (see letsrecycle.com story). While there are some regulations governing these materials which might mean some would still qualify as inert, the vast bulk of material, because the exact source and content might not be known or be suitable, will attract the 64 rate.

Many skip hire companies and waste transfer station operators are in shock over the changes, which were effective immediately and led to skip hire firms taking to the streets outside Parliament to protest (see letsrecycle.com story).

Letter

The companies named on the letter include: Powerday; GBN Services; Gowing and Pursey; Multi Services Kent Ltd (MSK); Winters; Brewsters Waste Management; RTS Waste Management; Easy Load; Isle of Dogs (IOD) Skip Hire; O’Donovan Waste Disposal; P.B Donoghue Waste Management; Heard Demolition; Sharps Brothers Skip; Elliot Skip Hire; and, Hollywell Haulage. While these are generally in the South East England area, operators in other parts of the UK are also contacting MPs and considering various approaches to government.

In the letter the firms state that the lack of notice given to the industry could see some companies face financial ruin as a result of the price increase.

They said: The financial consequences to these businesses, both large and small, are huge and will, potentially, have disastrous effects on the excellent progress made in recent years in modernising the waste management and recycling sectors.

Waste management and recycling companies who produce this residual material (following recovery of recyclable materials from the waste streams they process), have entered into price agreements with their own customers which cannot possibly be varied to take account of such a price increase overnight. The fact that such an increase has been effectively imposed, without notice, on waste transfer and recycling companies means that those companies could face financial ruin as their own customers will simply not pay such an increase at such impossibly short notice.

In a bid to address the situation the waste firms outline their goal. They include:

• The imposition of the higher rate of landfill tax in respect of inert fines is suspended for a period of 6 months
• Formal consultation takes place between the industry and HMRC, DEFRA, BIS and DCLG
• As part of this consultation exercise, a working group is established, with industry representatives and relevant members of the above departments to discuss and resolve the practical issues of implementing such a change
• The possibility of an intermediate tax rate for inert fines is examined
• Transitional arrangements are developed in order to phase in any increase in landfill tax for inert materials

Crazy

Commenting on the movement, one of the signatories, Mark Doughty, managing director at MSK, said: Ideally we would like it not to go up, but if not then we need more time to prepare for it. For it to go up overnight is just crazy. If we had six months to a year would be better. Most of the companies have got five or six hundred skips out there overnight and they have put them out at a certain costs but they now have to tip them at a higher cost which means a loss in revenue. We have got no choice but to put our prices up.

Coordinating the request from the skip hire firms to MPs for talks is Jack Biel, director of skip hire and waste management firm Gowing and Pursey of Horn Lane, London, W3.

Biffa

However some larger waste firms are positive about the changes. SITA UK chief executive David Palmer-Jones said he wholeheartedly welcomed them (see letsrecycle.com story).

Further support has been offered by waste management company Biffa which has a large number of landfill sites but the company is backing the idea of clarification of the changes. The companys landfill and treatment director Mick Davis told letsrecycle.com: We are supportive of HMRC clarifying tax rules to ensure a level playing field for the industry and therefore are supportive of the general intention of the briefing note.

Mr Davis said he was disappointed at the lack of consultation prior to the changes. He said: Somewhat disappointingly in our view there was no prior consultation and the terminology used is generic rather than specific. For example the note categorises every transfer station as the same, which may prohibit the recycling of construction and demolition wastes. We have already witnessed material which would previously have been recycled being sent for landfill. We can only assume this is an unintended consequence and are urgently seeking clarification from the Government on this in order to address the situation.

The Environmental Services Association, which represents the major waste management companies, was in talks with HMRC over the inert charges prior to the announcement but no public comment was made. The Association said: This was a grey area that needed to be sorted out which we have been discussing with HMRC.

Defra

A spokesperson for the Department for Environment, Food and Rural Affairs (Defra) told letsrecycle.com today (May 25) that the changes would ensure companies accurately describe what they are sending to landfill.

The spokesperson said Landfill tax is a matter for the Treasury and HM Revenue & Customs. The new guidance from HM Revenue & Customs should not affect firms that can demonstrate that they are processing naturally occurring rock, sub-soil or stones and will encourage the waste industry to ensure they are accurately describing the contents of any load they are sending to landfill.