The HMRC Excise Notice LFT1 (‘LFT1’ or ‘notice’) deals with requirements under Landfill Tax legislation. The notice is primarily for operators of landfill sites, but is also relevant to waste producers and others involved in the waste management industry. The notice applies to England and Northern Ireland and is usually updated annually, generally to report the annual rise in the rates of landfill tax.
The April 2018 version replaced the 2017 version and contained a new clause with potential implications for several parties, including AGS members. It should be noted that the April 2018 version has subsequently been replaced by LFT1: November 2018, which contained further minor updates including the annual rise in the rates of landfill tax. This advice note focusses predominantly on the changes introduced in the April 2018 version but accurately reflects the increases in landfill tax rates introduced in the November 2018 version.
The 2018 update
Section 24 of the LFT1 (a new clause added in 2018) presented amendments to the definition of a taxable disposal at authorised landfill sites and disposals made at unauthorised sites. It states that Landfill Tax is now due on disposals of material at unauthorised sites in England and Northern Ireland; this also applies to disposals prior to 1st April 2018 that are still on site from the 1st April 2018. An unauthorised site is any site, or area of land, that should have authorisation (a Permit or Licence) from either the Environment Agency or the Northern Ireland Environment Agency, but does not.
Section 24.4 of the notice states that the following people may be jointly and severally liable for the tax:
- The person who makes the disposal
- Any person who knowingly causes or knowingly facilitates the disposal to be made
When determining the persons who may have knowingly caused or knowingly permitted the disposal to be made, the following persons may be considered, but not limited to:
- The waste broker or dealer involved with the disposal
- The waste haulier involved in the transport of the waste to the unauthorised site
- The landowner
- The waste producer
- Any company officer
Slightly different legislation applies in England and Wales. In England, the landfill tax for unauthorised deposits is applied at the standard rate, which is currently £88.95/tonne (£91.35 from 1 April 2019). However, in Wales a higher charge of £133.45/tonne (£137.00/tonne from 1 April 2019) applies for unauthorised deposits of waste. The lower rate of £2.80/tonne (£2.90/tonne from 1 April 2019) for qualifying materials does not apply to disposals made at unauthorised sites.
HMRC can also charge an additional penalty of 100% of the landfill tax due. If they decide to prosecute a criminal offence, an unlimited fine and/or up to 7 years in prison are possible. These would be in addition to any costs that might apply to remedy the unauthorised disposal if required by the Environment Agency (EA) and any fines or penalties they may look to impose.
There are reports of developers who dispose of spoil arisings from construction sites at unauthorised sites (i.e. to land without a Permit/ Licence, without an exemption or which are not in compliance with the CL:AIRE DoWCoP). The implications of Clause 24.4 for AGS members are that, if they are considered to have facilitated any such disposal, they could be jointly or severally liable for the landfill tax that should have been paid along with the HMRC fine.
HMRC and the EA are working together to actively find unregulated disposal sites and there have already been direct approaches to AGS members from HMRC/EA asking for proof to be provided of compliance with the DoWCoP. The regularity of prosecutions and the value of fines is increasing, with enforcement and prosecution replacing the consultative approach previously adopted by the EA. Chubb report that the average fine by the EA has increased dramatically from £5,000 in 2000 to £178,000 in 2017.
To illustrate the point, a successful 2017 prosecution for depositing 3,920 tonnes of waste on land in breach of a waste exemption attracted a fine of £19,500. Under the further sanctions outlined above (assuming a criminal prosecution is not pursued), HMRC could potentially apply for £350,000 of landfill tax due and a further fine of £350,000 (100% matching of the landfill tax amount). In addition, the site owner may be instructed to remediate the site and may be liable for associated EA penalties or fines.
A person can show that they did not knowingly cause or knowingly permit a disposal at an unauthorised site if they take all reasonable steps to ensure that a disposal at an unauthorised site does not happen. HMRC intend to consider the criteria set out in the Defra Waste Duty of Care Code of Practice in determining such “reasonable steps” (some of which are more relevant to AGS members than others). HMRC expect a person to:
- make reasonable checks that the next waste holder is authorised to take the waste material
- ask the next waste holder where they are going to take the material and obtain proof if possible
- provide an accurate description of the material when it is transferred to another person
- as a company director or partner, be directly engaged or responsible for decisions made regarding the disposals of material by that business
- as a landowner, ensure that any lease or rental agreements state clearly what the premises or land may or may not be used for
- as a corporate body, to include risk management procedures within your company’s risk assessment to take steps to prevent criminal facilitation of Landfill Tax evasion through your business
In terms of the appropriate application of the DoWCoP, six requirements must be met to ensure that materials management complies and waste licensing regulations are not breached:
- Protection of human health and environment
- Suitability of material for its intended use
- Certainty of material use
- Quantity of material for use is appropriate
- Verification reporting
- Competence of practitioners
Although the verification report has always been an essential requirement of the DoWCoP, it has often been overlooked after the Material Management Plan has been prepared and Qualified Person (QP) declaration submitted. Under the current version of the DoWCoP, the verification report is not required to be submitted to the EA nor reviewed by the QP. However, this is likely to change in the upcoming Version 3 of the DoWCoP. As a step in this direction, the current QP declaration form now asks for the identity of the organisation and individual(s) with responsibility for producing the verification report as well as an estimated production date as a reminder that these are required.
Article contributed by Geoffrey Perrett of BuroHappold Engineering and Andy O’Dea of WSP