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Essential Guide to Landfill Tax for UK Businesses

  • By George Rebstrum
  • Published 04/20/2012

Landfill tax is an environmental tax obligation that all businesses in the UK face. The Government’s objective in applying this financial pressure is to minimise waste being sent to landfill and encourage business recycling solutions instead.

The following guide will explain exactly what landfill tax entails and give you some helpful advice on the criteria for exemptions and credits.

Landfill Tax Charges

First introduced in 1996, landfill tax has risen every year under mounting pressure for the UK to reach EU targets. In April 2007 landfill tax amounted to £24 per tonne, but only 3 years later in 2012, the landfill tax had doubled to £48 per tonne.

The tax is charged according to weight – there are two types of rates:

  • Standard rate for active waste has risen from £56 per tonne in 2011 to £64 per tonne since this month (April 2012).
  • Lower rate for inactive waste (such as rocks and soil) is £2.50 per tonne for 2011/2012.

Your VAT charge will apply to your full waste disposal fee, inclusive of the landfill tax.

In addition, the government announced in its 2010 Emergency Budget that:

  • The standard rate of landfill tax will increase by £8 per tonne each year from 1 April 2011 until at least 2014.
  • There will be a cap under the standard rate at £80 per tonne, meaning the tax rate will not fall below £80 per tonne from April 2014 until at least 2020.

Thus, it is evident that landfill tax poses an exorbitant cost to many UK companies, giving rise to the imperative need to reduce waste being sent to landfill through business recycling and waste management solutions.

How Landfill Tax Works

Businesses and local authorities who want to dispose of waste using a landfill site will need to pay landfill tax in addition to normal landfill fees.

Landfill tax applies to all waste that is disposed of at a licensed landfill site since 1 October 1996, with the exception of waste that is specifically exempt (see the blow paragraph for waste exemptions).

You will need to register for Landfill Tax with the HM Revenue & Customs (HMRC) if you’re a landfill operator making or intending to make taxable disposals. Unlike VAT, there is no registration threshold. The registration process involves completing certain forms, which will also depend on the circumstances and needs of your individual business. See the HMRC website for further details.

Once you’ve made the registration, the HMRC will send you a return, usually every three months. It must be completed and sent back to them with your landfill tax payment.

To make things easier, in addition to your normal business records, it’s advisable to keep the following documentation relating to your landfill tax to hand:

  • Landfill Tax account – this is a quarterly summary of the total Landfill Tax your company owes, detailing any tax credits and/or adjustments.
  • Temporary disposal account.
  • Record of credits
  • Bad debt relief account.
  • Invoices
  • Any additional records that apply to your company’s individual circumstances, such as using a special scheme to handle your landfill tax.

Landfill Tax Exemptions and Credits

Exemptions

Waste that arises from the following activities is exempt from landfill tax:

  • Certain dredging activities
  • Quarrying and mining
  • Pet cemeteries
  • Reclamation of contaminated land
  • Inactive waste used for filling quarries.

Do bear in mind however that these exemptions are subject to meeting certain conditions.

Tax Credits

There are tax credits available for waste that landfill operators send for recycling, incineration, reuse or to another landfill site. This credit covers the amount of landfill tax that is charged to the customer, so landfill operators may be able to claim a tax credit if a customer does not pay the charges for landfilling their taxable waste.

In addition, the Landfill Communities Fund (formerly the Landfill Tax Credit Scheme) enables landfill site operators to claim tax credits for contributions they make to approved environmental bodies that carry out projects which benefit the environment. These environmental bodies are approved if they’re enrolled with Entrust, which is the regulatory body for the Landfill Communities Fund scheme.

Conclusion

While landfill tax has the honourable aim of reducing landfill waste because of its damaging effect on the environment, it puts a heavy strain on business budgets, especially in these trying economic times. For this reason, effective business recycling and waste management is now a crucial issue that every company in the UK needs to take seriously.

About the Author: George Rebstrum is an independent consultant on business recycling.

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