Landfill Tax is an environmental tax administered in England and Northern Ireland by the Commissioner of Customs and Excise, HMRC Central Unit (‘Landfill Tax’).
But who is liable to pay it?
Usually, the person liable to pay Landfill Tax is the landfill site operator (‘the operator’). The operator is the permit holder for a landfill site or the person who should have a permit for sites where material is disposed of.
If the permit holder has no direct involvement in operating the site, the liability to pay tax widens to include the ‘controller’ of the site. The controller is the person who decides what material is allowed to be disposed of at the landfill site. If the permit holder fails to pay the tax, the controller will be jointly and severally liable for the debt.
A person is liable to pay tax charged on a taxable disposal not made at a landfill site if the person:
- makes the disposal, or
- knowingly causes or knowingly permits the disposal to be made.
Knowingly causes or knowingly permits the disposal to be made – the perils!
It is this latter part above which can cause issues for those who say they were not aware of the disposal but can come under scrutiny by HMRC due to their connection to the site, for one reason or another, resulting in them being potentially held jointly and severally liable for payment of the Landfill Tax; unless, of course, they can show HMRC that they did not knowingly cause or permit the disposal.
A person is deemed as a person who knowingly causes or knowingly permits the disposal to be made unless it is shown to the satisfaction of the Commissioners that the person did not do so.
According to Section 41(6) of the Finance Act 1996, a person is deemed to be someone who knowingly causes or knowingly permits the disposal to be made if, before the time of the disposal of the material in question, the person:
- took any action with a view to the disposal of the material,
- was party to a contract for the sale of the material, or
- facilitated the transport or storage of the material.
Additionally, according to Section 41(7) of the Finance Act 1996, a person is deemed to be someone who knowingly causes or knowingly permits the disposal to be made if at the time of the disposal the person:
- is the owner, or a lessee or occupier, of the land at which the disposal is made,
- controls, or is able to control, a vehicle or trailer from which the disposal is made, or
- is an officer of a body corporate or unincorporated association that is within the previous subsections
Showing HMRC you did not knowingly cause or permit the disposal.
Even if HMRC suspect a person has knowingly caused or permitted the taxable disposal at an unauthorised landfill site, fret not, all is not lost!
We have seen first hand that persons falling within this category can submit representations supported with evidence to successfully convince HMRC that they have not knowingly caused or permitted the taxable disposal.
Section 24.7 of ‘Excise Notice LFT1: a general guide to Landfill Tax’ states the following:
[A person can show that they did not knowingly cause or knowingly permit a disposal at an unauthorised site if they take all reasonable steps to ensure that a disposal at an unauthorised site does not happen. We intend to consider the criteria set out in the Defra Waste Duty of Care Code of Practice. For Northern Ireland, the Department of Agriculture, Environment and Rural Affairs publishes their Waste Management The Duty of Care – A Code of Practice.
We expect a person to:
- make reasonable checks that the next waste holder is authorised to take the waste material
- ask the next waste holder where they are going to take the material and obtain proof if possible
- provide an accurate description of the material when it is transferred to another person
- as a company director or partner, be directly engaged or responsible for decisions made regarding the disposals of material by that business
- as a landowner, ensure that any lease or rental agreements state clearly what the premises or land may or may not be used for
- as a corporate body, to include risk management procedures within your company’s risk assessment to take steps to prevent criminal facilitation of Landfill Tax evasion through your business]
Demonstrating this requires a comprehensive account to HMRC of the key events, knowledge of the person under suspicion and the actions they took before, during, and after the disposal; such representations will need to address the suspicions and be supported with evidence – but is achievable!
We encourage those who this article is particularly relevant to read ‘Excise Notice LFT1: a general guide to Landfill Tax’, with particular focus on Section 24, ‘Landfill Tax and unauthorised sites’.
Contact James Edes today for advice.