HMRC consults on amended Landfill Tax Regulations

Her Majesty’s Revenue & Customs (HMRC) has released new draft guidance and legislation for consultation relating to waste fines.

The Landfill Tax (Qualifying Fines) Order 2015 and The Landfill Tax (Amendment) Regulations 2015, coming into force on 1 April 2015, make provisions for information to be provided to HMRC about waste fines that are to be disposed of by means of landfill to support decisions about liability to Landfill Tax.

They also outline further details of the loss-on-ignition (LOI) testing for waste fines to qualify for the lower rate of Landfill Tax. It is thought that this testing to determine biological content, confirmed in central government’s Autumn Statement, will assist mechanical treatment plant and landfill site operators in England, Wales and Northern Ireland determine the correct Landfill Tax liability of fines – whether they should be taxed at £2.50 a tonne (the lower rate for ‘less polluting’ waste), or £80 a tonne (the current higher rate – though this is set to rise in line with the Retail Price Index from April 2015). Scotland is not covered by this regime, as it will have its own Landfill Tax from April 2015.

Qualifying fines

According to the draft legislation, fines that qualify for the lower rate are:

qualifying fines for lower-rate landfill tax

However, they must not:

  • result from any deliberate or artificial blending or mixing of any material prior to disposal at a landfill; or
  • be hazardous waste.

Those accepting delivery of waste fines will need to undertake a visual inspection of the qualifying fines and retain an audit trail to show that they have been inspected. If a visual inspection indicates that the waste does not qualify, then the standard rate should apply.

Pre-acceptance checks must be undertaken with waste processors before fines are accepted and should include, at a minimum:

the type of operation the waste has come from;

  • details of the waste handled;
  • details of process types (including any details of shredding and/or blending);
  • procedures for storing, procedures for handling hazardous waste (and other materials such as gypsum and plasterboard); and
  • tonnages of qualifying fines likely to be sent to the landfill site operator.

A declaration that all the information provided is true and correct must also be provided.

Loss-on-ignition testing

HMRC consults on amended Landfill Tax Regulations

After 1 April 2015, landfill operators will also be required to conduct LOI tests on qualifying (lower-rate) fines received from every waste processor disposing fines at the landfill site, and for each of their processes producing qualifying fines.

The sample of fines tested must be representative of the whole quantity and must:

  • be taken from across the whole quantity of fines (i.e. top, middle and bottom);
  • include a composite (master) sample from a mix of random subsamples taken from at least six or more places across the whole quantity of fines; and
  • ensure sub-samples are thoroughly mixed to ensure that a representative one kilogramme (1kg) composite mix is sent for testing.

A second representative sample of the fines will also need to be taken to retain in records.

The LOI test must then be undertaken to determine the organic content of material and will inform whether the waste is liable to the lower rate of landfill tax or not (however, this is not the only determining factor).

For this test, the 1kg sample must:

  • be air dried until ‘constant mass’ is achieved;
  • be coned and quartered to establish a 100 gramme sub-sample that must be ground to a particle size of 2 millimetres or less to produce a homogenous sample; and
  • subjected to a standard LOI test on 20 grammes of the homegenous ground sample, at a temperature of 440 degrees Celsius for five hours.

The standard calculation must then be taken to determine the percentage loss of organic material. For disposals between 1 April 2015 and 31 March 2016, the LOI threshold for qualifying lower-rate fines is 15 per cent. For disposals from 1 April 2016, the LOI threshold will be 10 per cent.

Tests must be taken at the following frequencies:

low risk LOI testing

medium risk LOI testing

High risk LOI testing

A single retest may be taken for fines coming no more than 0.5 per cent above the LOI threshold, but this must involve the original sample and be conducted within a period of 21 days of the date of disposal of the waste.

Declarations to HMRC

Any fines that come in at the standard rate must be declared to HMRC, and landfill operators will then be obliged to review the pre-acceptance checks for the waste producer; increase the frequency of testing; and notify HMRC of the LOI test result.

Anyone found to not hold the relevant evidence or failing to notify HMRC of fines failing the lower-rate test will be liable to a fixed penalty of £250.

HMRC is calling on stakeholders to comment on these draft regulations by email or by post (to Helen Horton, HMRC, 3W Ralli Quays, 3 Stanley Street, Salford, M60 9LA) by 10 March 2015.

‘Misclassification of waste fines has been so costly to responsible operators’

The Environmental Services Association (ESA), a trade association for the UK’s resource and waste management industry, welcomed the consultation, with Sam Corp, ESA’s Head of Regulation, saying: “ESA and its members have been working closely with HMRC and Treasury officials over the last two years to develop a practical and objective testing regime for trommel fines and I am pleased that this work is finally paying off.

“It is vital that once implemented, HMRC enforces the regime robustly to ensure the scheme’s success and to prevent the misclassification of waste fines which has been so costly to responsible operators and to the UK’s economy.

“I hope the draft legislation and guidance provides some clarity to operators about how the scheme will work in practice. We will of course be going through the documents in detail to ensure that the proposals match our expectations.”

Read the draft legislation and guidance on LOI testing of waste fines.

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