The government claims that illegal waste sites are attractive to rogue operators who exploit the disparity of tax treatment to undercut legitimate operators. As an example, in 2016 three people were charged for illegally dumping 6,000 tonnes of waste. While the fines levied through environmental legislation totalled £170,000, this compared to a potential landfill tax bill of £500,000, plus a penalty of up to 100% of the tax, and interest which could have resulted in the illegal waste site operator facing a tax liability of over £1m.

The consultation sets out the reasons for extending the scope of landfill tax; how to define an illegal waste site; the criteria for determining a taxable disposal; the persons liable for the tax; and how to quantify the amount of tax due.

It asks for feedback on how to distinguish between a site that is illegally operating without a permit or licence, and a site that is exempt, and whether the current Environment Agency definition could be used as a hallmark for the proposed new regime.

This defines an illegal waste facility as ‘a site operating without the appropriate permit for the activity being carried out where multiple loads of waste are deposited, treated, stored or disposed of, and where activity is, or appears to us to be taking place in an organised manner. The activities at the site will generally (but not always) be known to the landowner or the legal occupier of the site and will often be run as a business.’

HMRC proposes that when material is disposed of at a site operating without a permit or licence, unless the operator can prove they are undertaking an exempt activity, all the material on the site will be ‘deemed’ to have been disposed, and will be liable to a charge to tax. This will ensure that any extension of the tax to illegal waste sites will likewise avoid any dispute over the intention of the person making the deposit.

The consultation also considers the options to address possible double taxation, whereby material dumped at an illegal site is subsequently disposed of at a legitimate site and therefore taxed. One possibility is to introduce a credit system, so that where there is evidence that a permitted or licensed landfill operator is paying tax which replicates tax already accounted for by HMRC under the illegal waste provisions, the legitimate operator could receive a credit note to reclaim it.

At a licensed or permitted site, the site operator is liable for paying landfill tax. This is normally the person who is named on the permit. HMRC is proposing that at illegal waste sites, it could extend the liability on a joint and several basis beyond the site controller to include for example, a complicit landowner, waste transporter, or waste producer, with exemptions for those able to demonstrate they undertook due diligence before disposing of waste.

HMRC points out that material disposed of at an illegal waste site could have originated from many different sources and it would not be possible to determine the appropriate rate of landfill tax with any degree of accuracy. It is therefore exploring a different approach to calculating the tax due, which could be to assess all waste at the standard rate. It also wants to extend the civil penalty regime to cover illegal sites.

Landfill tax was devolved to Scotland in April 2015, and will be devolved to Wales from April 2018. Both the Scottish and Welsh governments have provisions in their respective legislation for a charge to landfill tax to be made on material deposited at illegal waste sites. If the government pursues a similar policy in England and Northern Ireland, the earliest any changes would come into force is 1 April 2018.

HMRC says it would particularly like to hear from individuals and organisations that may be indirectly or directly affected by illegal waste sites or have a particular interest in landfill tax. The deadline for feedback is 5 May.

Landfill Tax: Whether to bring illegal waste sites within the scope of Landfill Tax is here.