Landfill tax and the re-use of soils: What is the current HMRC position?

Soil waste disposal

This includes many sites where excavated soil has been re-used without the full implementation of either a suitable waste permitting exemption or under a fully compliant and declared CL:AIRE Definition of Waste Code of Practice (DoWCoP) Materials Management Plan.

With the EA and HMRC targeting construction sites, SOCOTEC’s Contaminated Land team offers guidance on how organisations can ensure full compliance with soil reuse scenarios to reduce your risk of enforcement action and landfill tax costs.

What were the most recent changes to landfill tax in the UK?

The main aim of landfill tax – first introduced in 1996 – is to make waste disposal to landfill less attractive to organisations, encouraging the minimisation of waste volumes and alternative routes of disposal that pose less of an impact on the environment.

Illegal disposal of waste is now backed by enforceable penalties and costly sanctions. Not only will those responsible for illegal waste disposal be at risk of penalties and prosecution for non-compliance with environmental legislation, they can now also face the significant charges associated with landfill tax.

Extending landfill tax to unauthorised waste sites enables the Environment Agency (EA) in England, Natural Resources Wales and HMRC – in an operational partnership – to charge and penalise those with a disregard to compliant waste management and the relevant Codes of Practice.

With landfill tax rates increased yearly (most recently from 1 April 2021), the policy change provides further clarity on what material is considered to be taxable. The EA has stated that they will be specifically targeting construction sites where soil has been deposited outside of full compliance with the DoWCoP or without a waste permitting exemption. Those construction sites will be referred to HMRC for landfill tax. 

If non-compliant, the financial penalty and legal burden of being subject to prosecution by the EA is likely to be far greater than the initial costs of being compliant with the DoWCoP from the outset. It is expected that an increased number of non-compliant sites will be affected over the coming months and years.

What is defined as illegal disposal of waste?

The definition of waste is established in European and UK law and includes soil arising from construction sites that are undertaking excavation and earthworks.

Waste can be deposited legally under a suitably applied and registered waste permitting exemption, following recovery and conversion to a non-waste (for example, under the WRAP protocol) or under the full and correct application of the CL:AIRE Definition of Waste: Code of Practice. If this is not the case, the deposit of waste – including soils arising from construction sites – will be an illegal waste deposit.

As well as reducing Treasury tax receipts, unregulated waste disposal can cause significant environmental harm, which is why disposing of waste without a permit (or one of the above options) is illegal and subject to significant penalties.

For example, some organisations stockpile their material waste long term, or create their own landfill by disposing of waste on site to avoid the costs of disposal and landfill tax.

If the EA or HMRC choose to audit an organisation, there must be relevant documentation and reports available to validate that the correct procedures have been followed when disposing of or reusing waste material. Without this, organisations could be penalised.

Who is affected?

Anyone who produces waste (including developers and contractors involved on construction sites) or is involved in the waste management industry may be affected by the updates to landfill tax. However, only those who are non-compliant in their waste management will be penalised.

If all reasonable due diligence has been carried out, legitimate waste management companies can be assured by the following statement issued by HMRC: “Safeguards will be put in place to ensure that landowners and people in the waste supply chain who, in spite of carrying out all reasonable due diligence, were unknowingly involved in the illegal dumping [of waste] won’t be assessed for any tax or penalties.”

How can I ensure that my organisation is compliant?

If you are responsible for the disposal of waste or the management of an earthworks or construction site – whether as an individual or on behalf of your organisation – you are responsible for keeping waste to a minimum, storing it safely and securely and ensuring that your waste carrier is registered and legal.

Effective waste management is the first stage to ensuring compliance. The waste hierarchy is often used across a range of industries to support the evaluation of waste management processes. The five stages to consider are:

• Prevention
• Reuse
• Recycling
• Other recovery
• Disposal.

By correctly managing your waste, classifying it before sending to permitted off-site waste receivers and paying the appropriate landfill tax for the waste being disposed, you are likely to be compliant for the waste you are sending off site. If you are reusing any materials (especially excavated materials) and do not have a suitable permit, exemption or DoWCoP declaration and materials management plan in place, you may not be compliant for your on-site activities. For further clarification and support in waste management, waste consultancies can often provide advice on environmental permits and waste reuse assessments, as well as disposal.

I currently pay a considerable amount to send my waste to landfill. How can I reduce my costs?
 

Landfill tax is currently in place to mitigate waste being sent to landfill and to encourage waste disposers to seek alternative routes to disposal such as material management, material reuse or treatment. 

There are two types of landfill tax rates:

• Less polluting material – known as ‘inert’ – costs £3.10 for every tonne that is sent to landfill
• All other wastes are £96.70 per tonne (correct for tax year 2021/22).

The hefty cost implications associated with the higher tax band can soon accumulate and become an unexpected financial spend for projects such as remediation works. Not only will reusing and recycling materials save on the landfill tax, it can also minimise your environmental impact.

If material is directly suitable for reuse, it may be reusable (on site or via transfer to another site) under the CL:AIRE Code of Practice using a Materials Management Plan or a suitable exemption, such as U1. If you are to avoid potential prosecution and a hefty landfill tax bill, you must follow certain steps when using re-material under a U1 Exemption ,  the CL:AIRE Code of Practice or under the WRAP Protocol.

What are the different options for compliant material reuse?

A U1 Exemption requires you to register the exemption with the EA, keep suitable records to demonstrate your compliance and ensure that the materials meet the requirements of the exemption. The volume limit for soil is 1,000 tonnes.

Under the CL:AIRE Code of Practice, you should ensure that you have a legitimate reason to reuse the material and that the material in question is suitable for that purpose. A Materials Management Plan (MMP) must be prepared to detail the whole process of assessment, tracking, reuse and verification, with a formally Qualified Person in place to review and declare the MMP. A verification report must then be produced and submitted to CL:AIRE, as the EA may audit the site and landfill tax may be payable if there is no verification record.

The WRAP Protocol applies to the creation of recycled aggregates from inert waste and outlines that waste should receive source approval testing and follow a waste recovery process to meet protocol requirements. Records must also demonstrate that the end of waste criteria was met. If there is a reason that the material cannot be directly reused – due to potential contamination or because it is not required – the material can either be treated (under an appropriate permit) to make it suitable, or it can be classified and disposed of.

If you do not have a legitimate use for your material on site, there may be other options available as opposed to sending it to landfill. This includes sending the waste to a properly permitted fixed soil recycling centre, which will potentially treat and ultimately find a suitable use for some or all of the material on a third party site.

If you are unsure as to how to reduce your costs, using a waste management consultancy can support you in compliant, cost-effective waste management and materials re-use.