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Landfill Tax – Don’t Let It Bury Your Business!

25th May, 2012

A Brief issued by Her Majesty’s Revenue and Customs (“HMRC”) on 18 May 2012 has revealed two major clarifications to the rules governing Landfill Tax which will inevitably have a considerable impact on the waste industry.

The first clarification states that material used to protect or provide a suitable stable substrate for the overlying layers at the top of a landfill cell (know as landfill reverse fluff layer or top fluff layer) should be, and always should have been, liable to Landfill Tax. This is, says HMRC, because the material is “disposed with the intention of discarding it and the disposal does not constitute a use of the material”. This clarification was expected following a recent legal decision.

For operators who do not comply, HMRC states that it will “make assessments to ensure that all landfill sites operators pay the correct amount of tax” and will use its powers to recover unpaid tax.

More importantly, at least as far as the waste industry is concerned, is the future clarification on determining the Landfill Tax liability for waste. Under the Landfill Tax (Qualifying Material) Order 2011, certain loads of waste benefit from a lower rate of tax of £2.50 rather than the full rate of £64.00 per tonne. HMRC’s clarification states that “waste transfer station fines, trammel fines, fines for landfill cover, grit and screenings” and treated transfer station waste residues are not included in the lower rate. To qualify for the lower rate of tax the load must be of material exactly as described in the Order and be described in a manner which clearly evidences that fact on a waste transfer note and/or any other commercial documentation.

Inspection of loads is the responsibility of landfill site permit holders and if there is no appropriate evidence to support the lower rate tax rate, HMRC states that it will make assessments to bring the under-declared tax into charge and will enforce these assessments and issue penalties as required.

With costs already soaring in the industry, as well as having an effect on the construction and building industry who want to get rid of their waste, many operators in the waste sector may be forced to close their businesses in areas such as recycling and waste processing due to the added financial burden following HMRC’s announcement. If businesses do close it’s important that employers deal with staff correctly. There seems little point making employees redundant to save money and keep the business running, if the money saved then has to be spent on costs in the Employment Tribunal. Employers must ensure that they follow correct procedures and apply such procedures fairly if they are to avoid an unfair dismissal claim by a former employee. Employees who are dismissed by reason of redundancy and who have been continuously employed by the employer for two years will be entitled to a statutory redundancy payment which is a payment based on age, length of service and pay.

Should you require further information or clarification on the Brief and its consequences, please do not hesitate to contact Catherine Kerr in the Employment Team.

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