“Complex” landfill tax rules costing businesses millions, law firm says


Landfill tax

Many businesses face investigations, extra tax and penalties because of a specific and technical legislative regime that can “confuse” landfill taxpayers, law firm Pinsent Masons has said.

The law firm has said these extra costs are “potentially worth millions of pounds”. Sam Wardleworth, Senior Associate at Pinsent Masons, said that landfill tax can be difficult for businesses to report correctly as parts of the regime are complex and difficult to apply in practice.

Landfill tax is imposed on waste disposed of in landfill and is designed to encourage waste reduction and recycling.

The law firm highlighted how, what it called the HMRC’s “literal interpretation” of technical language describing waste materials, can increase the liability of waste and result in penalties.

This is because landfill businesses often report landfill waste to HMRC using the Environment Agency’s terminology, the law firm said, which can lead to the “wrong or insufficient detail” on waste transfer notes and potentially result in higher rates of tax and fines.

The law firm said the use of “industry jargon” on waste transfer notes had led to businesses being charged at the standard rate of £102.10 per tonne instead of the £3.25 per tonne rate they were eligible for.

Landfill tax errors might be amongst the most costly errors in the entire UK tax system.

HMRC has collected £1bn in extra revenue from investigations into underpaid landfill tax over the past 5 years, with £281m collected in the last year, according to Pinsent Masons.

The law firm called for a unified set of rules between the Environmental Regime and the landfill tax system. Currently, the categorisation and labelling of waste used by the Environment Agency and HMRC are different.

Sam Wardleworth, Senior Associate at Pinsent Masons, commented: “Landfill tax errors might be amongst the most costly errors in the entire UK tax system. If you’re disposing of ten thousand tons of waste, the wrong description can cost almost a million pounds in extra tax and fines.”

“Making sure employees and drivers fill in forms correctly to ensure the correct rate of tax is payable can be very difficult in practice. There is a level of subjectivity in what constitutes an accurate description of material and HMRC’s interpretation is strict.”

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