Landfill Tax applies to all waste disposed at a licensed landfill site (unless the waste is classed as exempt).
The permit holders for landfill sites (operators) are liable to Landfill Tax in the first instance. If the operator does not have direct involvement with the operation the person who decides what can be disposed at the site (controller) is liable. If the operator fails to pay landfill tax, the controller is jointly and severally liable to pay.
Landfill Tax is charged by weight, with 2 applicable rates.
In April 2018, the government extended landfill tax to disposals of material at sites operating without the appropriate disposal permit. The policy objective was to deter non-compliance by removing the tax advantage that incentivises this type of illegal activity, and to reinforce the principle of ‘the polluter pays’.
In recent years HMRC has produced estimates of the tax gap – the difference between tax that is actually collected and that which is “theoretically due” – if compliance and mistakes did not happen. In June 2022, HMRC published estimates, which put the tax gap at £32 billion for 2020-21, representing 5.1% of total tax liabilities.
A recent parliamentary inquiry discussed the difficulties HMRC had had in prosecuting criminal activity in this area. The Committee report mentioned that HMRC had yet to complete a successful prosecution for landfill tax evasion, and had admitted that it was still learning how to investigate these crimes. However, the Committee also pointed out that HMRC had assured them that their increased compliance work had saved around £1.1 billion in landfill tax which could have been lost through misinterpretation.
The report also looked at the actions of the Environment Agency on tackling landfill tax fraud. It transpired that the Agency had been working more closely with HMRC, and that it had begun investigations on the misdescription of waste. Furthermore, the Agency had tackled waste operators that were seeking to reduce their tax liability by fraudulent water discount claims. The water discount is an offset of the amount of landfill tax paid according to the water content of the waste. The investigation led to a decrease in applications for the water discount and the recouping of some of the estimated £200 million lost.
The impacts of waste crime are widespread, with adverse effects on individuals, businesses, public services, the environment and the economy. For example, illegal waste sites can pollute the environment through the release of noise, dust, surface or groundwater contamination or through unauthorised fires and burning. These sites are unlikely to treat the waste in compliance with environmental best practice. They divert waste from legitimate businesses, reducing their potential income streams, viability and competitive advantage. The cost of remediation of fly tipped waste falls to public services and/or private landowners. Tax revenue is lost if the waste would otherwise have been sent to landfill.
The Environment Agency’s report stated that waste crime costs the economy in England an estimated £1 billion per year. This represented a 55% increase since its last estimate made in 2015 of £604 million per year.
A key recommendation was that HMRC report by the year’s end on how it has improved its approach to landfill tax prosecutions.
Given this close parliamentary scrutiny, it is highly likely that we will see much more investigative activity so far as waste crime is concerned.
We stand ready to advise those facing investigation or prosecution and advise early legal intervention.