Higher landfill tax for recycling residue

The fine soil-like waste left over from waste treatment and recovery activities does not qualify for the lower rate of landfill tax even if it is inert, the HMRC has confirmed

Since the introduction of the Landfill Tax (Qualifying Material) Order 2011, which defines materials eligible for the lower tax rate, there have been differing interpretations as to how to classify the residual waste transferred to landfill from recycling and recovery plants.

In a new briefing note clarifying landfill tax rules, the HMRC states that as it is impossible to identify exactly what is in such waste, it cannot be classified as eligible for the lower rate and that all waste sent to landfill from waste transfer stations should be taxed at the standard tax rate, now £64 per tonne, rather than the lower rate of just £2.50 per tonne.

The HMRC’s announcement was followed by protests in London, with skip hire companies using lorries to block Parliament Square. The protesting firms warned that the massive cost increases would ultimately be seen as a tax on recycling.

However, others welcomed the news, including SITA UK’s chief executive David Palmer-Jones who said: "This has been a grey area, which I know some companies have exploited to great commercial effect.”

Waste industry trade body the Environmental Services Association (ESA) said it was right that the HMRC had clarified the situation.

“There had been too much confusion in the past about what rate of landfill tax applied to the residue from some recycling operations,” said Matthew Farrow, ESA director of policy. “The clarification is not a ‘recycling tax’, but about trying to ensure that material that is landfilled is categorised in the right way.”

However, the ESA said it will be looking to the HMRC to consider what provision could be made for companies with “genuinely inert materials” to ensure they are paying the “correct rate” of landfill tax.

The HMRC also clarified that waste used in layers by landfill owners to prevent damage to drainage liners or materials capping disposal sites are also subject to landfill tax. The briefing makes clear that the HMRC does not consider such action as a “use” of materials and exempt from the tax, as had been the case for the some of these “regulatory” layers before the Landfill Tax (Prescribed Landfill Site Activities) Order 2009.