The new Welsh landfill disposals tax

The Welsh Government is gearing up to introduce its own landfill disposal tax (“LDT”) in 2018. This is part of the Welsh Government's ‘Towards Zero Waste’ strategy, which aims to make Wales a high recycling nation by 2025 and a zero waste to landfill nation by 2050.

The LDT will be the second tax introduced by the Welsh Government after the Wales Act 2014 made tax setting possible in Wales. The first was the replacement of SDLT with the Land Transaction Tax, which is also due to come into force in 2018. These will be the first locally administered taxes in Wales in 800 years.

1. When will it be effective?

On 27 June 2017, the Welsh Assembly passed the Landfill Disposal Tax (Wales) Bill, and the Bill is expected to be granted Royal Assent at the first Plenary following this summer’s parliamentary break. Assuming Royal Assent is granted, new system will replace, in Wales, the existing landfill tax from 1 April 2018.

2. What about the existing landfill tax?

This will remain in force in England and Northern Ireland, but will no longer apply in Wales. Scotland has had its own landfill tax since April 2015 when the Landfill Tax (Scotland) Act 2014 became effective.

3. And the rates?

In terms of legitimate waste disposal to landfill, LDT will operate much like the existing landfill tax, with tax being charged on the disposal of waste into landfill, determined by weight (i.e. per tonne) and waste classification (is the waste inert). The tax will continue to be paid by landfill site operators, who will pass the costs onto their waste disposal customers. The LDT regime will continue to use the two rates currently in use in both England and Scotland: a lower rate for “qualifying materials" (essentially inert waste) and a standard rate for other wastes.

Welsh government officials recently confirmed their intention to announce LDT rates by 1 October 2017. It is expected that the two existing rates will remain in line with those in England, Northern Ireland and Scotland, primarily to avoid waste disposal tourism. The rates are currently £2.70 per tonne for the lower rate and £86.10 per tonne for the standard rate, rising to £2.80 and £88.95, respectively, on 1 April 2018.

4. Will there be any differences to the existing landfill tax?

The biggest change is expected to be the introduction of a third rate of tax for “unauthorised disposals". Currently if waste operators making unauthorised disposals are caught there are cumbersome regulatory means to recover the amount of landfill tax that would have been paid had the disposal been made lawfully. The proposed rate for unauthorised disposals (e.g. fly tipping or other wrongful disposal) has not yet been announced but the expectation is that it will be considerably higher than the lower and standard rates. Aims of this further rate are to provide a deterrent to the activity of unauthorised disposal, and to address tax evasion and negative impacts on businesses which abide by the law.

The Welsh Revenue Authority (WRA) will have civil investigatory powers to identify offenders and enforce the rate for unauthorised disposals. Criminal powers of investigation for the WRA, comparable to those of HMRC, are now being consulted on by the Welsh Government.

The Welsh Government also consulted in early 2017 on the possible introduction of powers for Local Authorities in Wales to issue fixed penalty notices to anyone fly-tipping in Wales, the results of which are expected soon.

It will be interesting to monitor in the years to come if landfill tax rates begin to vary between the UK countries and if so whether this, perhaps aligned with greater emphasis on zero waste to landfill in some of the UK countries than others, would become significant enough to give rise to "waste disposal tourism" across internal UK borders.