HMRC reports £100 million Landfill Tax gap as ESA warns of ongoing fraud

HM Revenue & Customs (HMRC) has reported a £100 million gap in Landfill Tax collection for the 2022/23 tax year, representing 14.5 per cent of the theoretical Landfill Tax liability. This figure, released as part of HMRC's annual tax gap estimates, has prompted concern from the ESA about the scale of tax evasion in the recycling and waste treatment sector.

The Landfill Tax gap has seen a significant increase over time, rising from 3.3 per cent in 2005/6 to its current level.

HMRC acknowledges a "high" degree of uncertainty in its Landfill Tax gap estimates, which are based on an experimental methodology using receipts, unauthorised waste sites, and cash collected compliance data.

According to the Environmental Services Association (ESA), the real figure could be even higher. It cites the Environment Agency's most recent waste crime survey, in which industry respondents estimated that one in four organisations handling waste material engage in mis-description of waste, potentially evading an average of 35 per cent of their Landfill Tax bill.

Sam Corp, Head of Regulation at the ESA, said: "It appears to legitimate operators that perpetrators of landfill tax fraud are operating with impunity and regulators must get a grip and tackle this issue once and for all, with stronger and more effective enforcement and increased collaboration between revenue and environmental regulators."

The ESA is calling for the next government to prioritise addressing the Landfill Tax gap. Corp added: "ESA will strongly urge the new Government, of whatever political colour, to focus on addressing the Landfill Tax gap as a top priority -- alongside wider regulatory reforms to clamp down harder on criminals."

The association argues that tackling this issue would not only help to contribute to Government budgets but also create a more level playing field for operators in the sector, potentially encouraging investment in new facilities and jobs.

HMRC's data shows that Landfill Tax liabilities have remained relatively stable over the past five years, ranging between £600 million and £700 million annually. However, the total theoretical liability has decreased from £1.0 billion to £0.7 billion during this time.