Environment Tax

Landfill tax – the creature from the black lagoon



There are plenty of horror stories around tax and you don’t need to be a tax specialist to have heard them. The role of the monster in these stories is usually played by high profile ‘actors’ like corporation tax and VAT, but there are some more obscure taxes with needle sharp teeth and a habit of biting their victim just as they think it’s safe to go back in the water.

Landfill tax (‘LFT’) has the capability and cunning to be such a nightmare.

Introduced in 1996, LFT was the first of a number of behavior changing environmental taxes introduced in the UK. Like most environmental taxes, its aims were fairly straightforward: if you put waste into landfill rather than reuse or recycle it you will be taxed by the tonne (or fraction of), and if that waste is anything other than inert, you will be taxed at very much greater rate … so stop sending stuff to landfill and recycle more. As the years have passed, so the rates of tax have increased to create an ever greater incentive to reduce, reuse and recycle, and, to a large extent, the tax has been successful. When you look at the rates, its not hard to see why. At introduction, the standard rate (for non-inert waste) was £7 per tonne, today its £91.35 per tonne and rises to £94.15 per tonne in April. The lower rate (for inert material generally) has risen from only £2 per tonne to £3 per tonne over the same period. How many tax regimes have a standard rate that is 30 times greater than a reduced rate?

However, like many environmental and behavior changing taxes, there is arguably, a fundamental flaw in their design.

LFT receipts increased steadily up to 2014 and have been slowly falling since then. The decline in receipts has been attributed to the increase in diversion away from landfill into alternative treatment methods like incineration and generation and to an increase in recycling (finally). This highlights the flaw: if a tax designed to change behavior is successful in that objective, it will inevitably result in less tax revenue. If the behavior being taxed reduces, then so will the amount of taxed raised unless the rates of tax continue to spiral upwards, or the reach of the tax is extended.

The life and times of LFT

So what has actually happened over the relatively short life of LFT? A surprising amount:

  • Obviously the rates have risen at a scary rate. Recent increases have been in line with RPI so future increases seem unlikely to be as dramatic as in the past.

  • Devolution – LFT has been devolved to the Scottish and Welsh governments over recent years but the rates (and general principles) of the tax have remained consistent with England.

  •  Caselaw has driven a coach and horses through some of the basic principles of the tax and HMRC and HM Treasury have had to redesign some of the fundamentals for it to continue to function.

 LFT caselaw (or ‘why didn’t anyone in HMRC / HMT think of this in the first place?’)

LFT was originally designed to apply to material discarded as ‘waste’ at a licensed landfill site. Reliefs were available for certain sources of waste and the lower rate could be applied to less hazardous material, but in principle, the tax looked solid. Until the larger waste operators looked in detail at what they actually did with this material and what their licence and planning permission required them to do and it became clear that a large volume of material taken into a landfill site was not actually discarded as waste, but was put to use for engineering purposes such as building site roads and lining the cells in the landfill ‘void’. Hence it wasn’t true ‘waste’ and ought not to have been taxed – was the argument - an argument that the High Court eventually agreed with resulting in many £millions of tax refunds.

Something had to change.

Also, there was (and is) an increasing concern about the rise of ‘fly-tipping’ and the cost of cleaning it up. The term ‘fly-tipping’ no longer seems appropriate. It implies a small scale (but really annoying) operation where the local ne’er do well throws a mattress into the bushes. That certainly needs to be stopped, but the scale of major illegal and unregulated waste dumps has grown to a point where only this week, it is being linked to organised crime.

So LFT has been evolved so that the ‘waste’ criteria for the tax applying was removed in April 2018. Also the requirement that the material is deposited at a licenced or permitted site has also been removed.

In practice this means that disposing of any material, anywhere in the UK, in a manner that would require a permit (but may not yet have one), is caught by the tax.

Also, only the standard rate of LFT applies these disposals – there is no recourse to apply the reduced rate. In Wales there is an even higher rate of LFT for these ‘unauthorised disposals’ of £137.00 per tonne.

 So will only the villains of the piece be bitten?

Let’s see. Consider these situations (some real): 


A landowner, in the course of landscaping works on his estate, temporarily leaves about 1,000 tonnes of excavated material in the corner of a field while he considers what can be done with it.


If depositing the material in this way requires a permit from the EA or a relevant authority, then, even if no actual permit has been applied for or issued, the landowner may be required to account for LFT on the weight of material deposited.


1,000 tonnes => £91,350 tax 


A business produces ‘waste’ material as a by-product and a waste operator is contracted to remove the material. The operator’s charges include an amount in recognition of the LFT that will arise when the material is taken to landfill. In practice, the operator finds a use for the material on his site – because of its inert qualities perhaps – and legitimately does not account for any LFT on it.


Waste operators could maintain that their skills in finding a purpose for the material entitles them to reap the benefits of not having to account for LFT in it. But, in a commercial market, has the operator overcharged their customer and if so, does the customer have any recourse to request / demand a rebate of some of the disposal charge?


A landowner discovers that a third party has been ‘dumping’ material on his land.




The Environment Agency (‘EA’), SEPA (in Scotland) and NRW (in Wales) are increasingly working in tandem with HMRC and it is likely that once the EA (or other agencies) is alerted to this matter then HMRC will also become involved. HRC will seek to charge LFT at the higher (standard) rate where an unauthorised site is used for waste deposits and they will pursue any person who knowingly caused or permitted the disposal to take place – which could include the landowner, the haulier who transported the material to the site, or the initial waste producer.

 All of these could be held jointly and severally liable for any tax arising.  


A landlord of an industrial estate where a seemingly legitimate tenant has been using a leased warehouse to ‘store’ thousands of used tyres.



As above, HMRC will seek LFT here on the basis that a permit would have been required. It is also likely that the landlord will be asked to provide evidence to HMRC that he took all reasonable steps to prevent this unauthorised disposal and, in the absence of being able to do so, he could be held jointly and severally liable for any LFT arising. 


HMT acknowledges that the revenues from LFT are less than they should be. HMRC have taken up the challenge of finding the missing tax with a vengeance and, with the help of the EA et al, it seems that they are pursuing this tax gap quite aggressively. In our experience, the innocent (and less well informed) businessman and landowner is getting drawn into disputes and finding themselves with assessments and penalties that are difficult to challenge.

At Centurion we have extensive experience of LFT, the risks it poses and how best to manage disputes. If you would like advice about LFT or any other environmental tax, please contact a member of the team at emailus@centurionvat.com.

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