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HM Revenue and Customs Brief 18/12

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Issued 1 June 2012

Landfill tax: further clarification onIssued 1 June 2012 Revenue & Customs Brief 15/12

1. Purpose of this Brief

This Brief should be read in conjunction with Revenue & Customs Brief 15/12 which was issued on 18 May 2012 and seeks to provide further clarification on a number of issues covered in the earlier Brief. We are issuing further guidance as we are aware that there has been a misunderstanding of the original Brief. This has created difficulties in the market, causing the costs of waste transfers to rise unnecessarily. The current rules relating to the disposal of different types of waste have not changed. Further clarification may be issued as necessary.

In summary, this Brief confirms that:

  • Material within the so-called reverse or top fluff layer falls within the scope of the Landfill Tax. The rate of tax applied to this material would be dependent on whether the material could be demonstrated as being material as listed in the Landfill Tax (Qualifying Material) Order 2011 (SI 2011/1017) ('the 2011 Order'). Based on our understanding of so-called fluff layers and the nature of claims received we would expect that the material contained in these layers would not be material as listed in the 2011 Order and would therefore be liable to tax at the standard rate. Only if material were listed in the 2011 Order and that could be clearly evidenced would tax be chargeable at the lower rate.

  • In respect of rocks and soils, where waste:

    • is of materials that are listed within the 2011 Order
    • meets the relevant conditions
    • and can be demonstrated as being listed and meeting the conditions with the appropriate evidence

    They were and remain liable for the lower rate of Landfill Tax. However, where such materials are contaminated with materials such as asbestos, metal, wood and plastic, or contain elevated levels of chemical contaminants (heavy metals, hydrocarbons), they would fall outside the conditions required in the 2011 Order and therefore be liable to the standard rate.

  • In respect of materials from waste transfer stations and from recovery facilities that are sent to landfill, now, as before, the lower rate will apply if the materials:

    • are as listed within the 2011 Order
    • meet the relevant conditions
    • and can be demonstrated as within the Order and meeting the conditions with the appropriate evidence

Materials that fall outside those listed within the 2011 Order, or fail to meet the necessary conditions (for example, if they contain contaminants such as those described above), or are not accompanied with the suitable evidence, would continue to be liable for the standard rate of Landfill Tax if disposed to landfill.

The remaining or residual materials from this process by their very nature are variable. There are instances where residual fines will be made up from materials all of which qualify for the lower rate and, providing the necessary evidence of eligibility to lower rating can be demonstrated, such fines would continue to qualify for the lower rate in these circumstances. But in other circumstances the residual material would not be material as listed in the 2011 Order and would therefore, as has always been the case, be liable for the standard rate of Landfill Tax if disposed to landfill.

2. Background

Landfill Tax contributes to the Government’s general and 'green' taxation objectives, including the Government’s commitment to work towards a 'zero waste' economy. It is the key component of the drive to divert waste from landfill to ensure EU targets are met in 2013 and 2020.

Revenue & Customs Brief 15/12 sought to provide landfill site operators and their advisers with further clarification on the Landfill Tax treatment of material used on a landfill site and also the evidence needed when considering whether to apply the lower rate of Landfill Tax to certain wastes.

As a result of enquiries and feedback, it has become apparent that there is some misunderstanding regarding the content of Revenue & Customs Brief 15/12 and that further clarification is required.

3. Material used on a landfill site

Revenue & Customs Brief 15/12 sought to provide clarification in respect of the tax liability of materials which are said to be used to protect or provide a suitable stable substrate for the overlying layers at the top of a landfill cell.

HM Revenue & Customs (HMRC) has received a number of claims from landfill site operators and their advisers that relate to materials which are said to be used in this way and which is often referred to as a 'landfill reverse fluff layer' or 'top fluff layer'.

Revenue & Customs Brief 15/12 set out that following discussions with site operators and the Environment Agency ('EA'), HMRC has concluded that the so-called reverse or top fluff layer constitutes careful placement of soft waste that should not cause damage to the cap or regulating layer placed above and should be (and always should have been) liable to Landfill Tax, as the waste material is disposed of with the intention of discarding it and the disposal does not constitute a use of that material.

Revenue & Customs Brief 15/12 also confirmed that HMRC accepts that the material placed to form the regulating layer (by providing protection to the overlying geo-synthetic engineered cap) would constitute a ‘use’, up to the time the Landfill Tax (Prescribed Activities) Order 2009 (SI 2009/1929) came into force on 1 September 2009.

Revenue & Customs Brief 15/12 therefore set out to confirm that material within the so-called reverse or top fluff layer fell within the scope of the Landfill Tax. The rate of tax applied to this material would be dependent on whether the material could be demonstrated as being material as listed in the Landfill Tax (Qualifying Material) Order 2011 (SI 2011/1017) ('the 2011 Order'). Based on our understanding of so-called fluff layers and the nature of claims received we would expect that the material contained in these layers would not be material as listed in the 2011 Order and would therefore be liable to tax at the standard rate. However, if an operator can demonstrate that the material is wholly material that qualifies for the 2011 Order, the lower rate would apply.

Revenue & Customs Brief 15/12 also confirmed that where operators have not paid tax in accordance with the clarifications set out within the Brief, and where they do not take steps to do so following this clarification, HMRC will make assessments to ensure that all landfill site operators pay the correct amount of tax, ensuring fair and equitable treatment across the industry. The matter will be litigated if necessary. HMRC will enforce these assessments and penalties may also be applicable in such cases.

4. Classification of waste: determining the Landfill Tax liability

Revenue & Customs Brief 15/12 also sought to clarify the classification of waste, and the evidence required to qualify for the lower rate. It explained that to qualify for the lower rate, the waste transfer note, which is required to accompany most movements of waste in the UK, must accurately describe the waste so that it can be related to the terms used in the 2011 Order, which came into force on 1 April 2011. In other words the load must not only be of material listed in the Order, but also described in a manner that clearly evidences that fact on a waste transfer note and/or any other commercial documentation. This requirement applies to all scenarios regardless of whether the load concerned may be considered to contain an ‘incidental’ amount of standard rated waste.

4.1 Rocks and soils

The Brief explained that material must be listed in one of the groups within the Schedule to the 2011 Order and meet the specified conditions, using Group 1 ‘Rocks and soils’ as an example. This group comprises only naturally occurring rock, clay, sand, gravel, sandstone, limestone, crushed stone, china clay, construction stone, stone from the demolition of buildings or structures, slate, sub-soil, silt and dredgings.

The Brief sought to make a distinction between naturally occurring rocks and soils as listed within Group 1 and other materials, which may contain contaminants such as construction soil and soil from demolition of buildings or structures. Soils from previously developed land can often contain contaminants such as asbestos, metal, wood and plastic or contain elevated levels of chemical contaminants (heavy metals, hydrocarbons).

This Brief seeks to make further clarification.Issued 1 June 2012

Where waste is of materials that are listed within the 2011 Order, meet the relevant conditions and can be demonstrated as such with the appropriate evidence, they were and remain liable for the lower rate of Landfill Tax.

Where materials fall outside those listed within the 2011 Order, or fail to meet the necessary conditions (for example, if they contain contaminant materials or chemicals such as those described above) or are not accompanied with the suitable evidence, then these materials, were and remain liable for the standard rate of Landfill Tax.

4.2 Transfer stations

The Brief clarifies that mixed loads, for example, containing residues from waste transfer stations, trommel fines and screenings are variable in their nature and it is difficult to determine their exact content and origin. These therefore are not qualifying materials listed in the Order. We are aware from studies undertaken by the EA that fines and other residues from waste transfer operations and construction and demolition waste processing, contain variable quantities of organic waste, sometimes significant quantities of gypsum and other contaminants including asbestos.

Revenue & Customs Brief 15/12 also sought to provide clarification requested by the industry on the liability of residual waste transfer fines (the residual waste left over after waste has been processed and sorted into different materials).

The Brief explained that often a number of waste streams can be treated at waste transfer stations and material recovery facilities. These wastes will have originated from a number of sources.

Waste transfer stations and material recovery facilities Issued 1 June 2012will process this waste with the aim of sorting the waste into separate materials. Some of this material will be able to be recycled, so diverting it away from landfill, while some of it will go to landfill.

The processing, segregating or sorting of waste creates an amount of residual material. We are aware from studies undertaken by the EA that fines and other residues from waste transfer operations and construction and demolition waste processing, contain variable quantities of organic waste, sometimes significant quantities of gypsum and other contaminants including asbestos.

Feedback from the industry suggests that there has been some misunderstanding of the clarification contained within Revenue & Customs Brief 15/12 and that some businesses had concluded that all material going from waste transfer sites to landfill would now automatically be liable to the standard rate.

This Brief seeks to make further clarification.

Now, as before, the rate of Landfill Tax will depend on whether the materials are as listed within the 2011 Order, meet the relevant conditions and can be demonstrated as such with the appropriate evidence.

Where material processed at waste transfer stations and material recovery facilities falls within the list of materials in 2011 Order, meet the relevant conditions and can be demonstrated as such with the appropriate evidence, they would be liable for the lower rate of Landfill Tax if disposed to landfill.

Materials that fall outside those listed within the 2011 Order, or fail Issued 1 June 2012to meet the necessary conditions (for example, if they contain contaminants such as those described above) or are not accompanied with the suitable evidence, would be liable for the standard rate of Landfill Tax if disposed to landfill.

The remaining or residual materials from this process by their very nature are variable. There are instances where fines will be made up from materials all of which qualify for the lower rate and in these circumstances the fine would qualify for the lower rate providing the necessary evidence could be demonstrated. But in other instances the residual material would not be made up of material as listed in the 2011 Order and would therefore, as has always been the case, be liable for the standard rate of Landfill Tax if disposed to landfill.

Revenue & Customs Brief 15/12 confirmed that inspection of loads is the responsibility of the landfill site permit holder. The inspection should ensure that the waste description on the transfer note matches the material delivered to the site. In determining whether the landfill operator has applied the appropriate rate of Landfill Tax, HMRC will refer in particular to how the waste is described on any waste transfer note that accompanied the waste to the site and any other commercial documentation.

The Brief also confirmed that if HMRC discovers instances where landfill operators do not hold appropriate evidence to support the lower rate of Landfill Tax, they will make assessments to bring the under-declared tax into charge and will enforce these assessments. Penalties may also be applicable in such cases.

5. Correction of errors

Section 15 of Notice LFT1 explains how to correct Landfill Tax errors. Landfill site operators who deliberately fail to correct an under-declaration of Landfill Tax, may be liable to a civil penalty for dishonest evasion, a civil penalty for deliberate inaccuracy or criminal prosecution.

6. Further information

Where you are in any doubt about the correct Landfill Tax treatment, please phone the Excise and Customs Helpline on Tel 0845 010 9000.


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Article Published/Sorted/Amended on Scopulus 2012-06-13 17:15:35 in Tax Articles

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