Under the Finance Act 1996, Landfill Tax applies differently depending on whether a disposal takes place at:
- A registered landfill site, or
- A non‑registered (unauthorised) site
HMRC makes clear that any disposal made at an unauthorised site is fully taxable and liability falls on any person who makes, causes or knowingly facilitates the disposal.
What many operators do not realise is that breaching the conditions of a waste exemption (such as U1) can cause the site to lose its exempt status, which in turn means any waste deposited is treated as having been disposed of at an unauthorised site for Landfill Tax purposes.
This presents a major tax risk.
How this happens in practice: The U1 exemption example
The U1: Use of Waste in Construction exemption allows certain quantities and types of waste to be used for specific construction purposes (e.g., noise bunds, tracks, bridleways, drainage, landscaping as part of a construction project).
However, the exemption has strict conditions, including:
- Maximum tonnage/volume limits depending on the activity (typically 5,000 tonnes or 1,000 tonnes)
- Waste must be specific listed types (‘relevant waste’) and “suitable for the purposes” (i.e. of construction specified by the exemption)
- Waste must not be stored for more than 12 months prior to use
- Exemption cannot be used for standalone land-levelling or raising land levels -i.e. activities that are functionally disposal/ land raising, not “construction” within U1’s scope
- Only one activity per exemption registration
If an operator exceeds any of these conditions, the activity ceases to be covered by the exemption and becomes a regulated waste operation requiring an environmental permit.
If no permit is in place, the site becomes an unauthorised site in regulatory terms.
Why This Automatically Triggers Landfill Tax Liability
HMRC’s rules on unauthorised sites (as referenced in LFT1 Section 24) apply whenever waste is disposed of at a site without a valid permit or exemption.
The moment a U1 exemption is breached:
- The site is no longer legally exempt.
The U1 applies only within precise waste limits and activity conditions. Anything outside these must use a permit.
- Any further use or deposit of waste becomes a disposal at an unauthorised site.
HMRC guidance states that all disposals at unauthorised sites are taxable, regardless of material type or intention.
There is no lower-rate eligibility at unauthorised sites.
- Liability may fall on multiple parties:
- Waste operator
- Landowner
- Contractor
- Transporter
- Anyone who “knowingly causes or facilitates” the disposal
- The standard rate always applies.
No reference to qualifying materials or qualifying fines is permitted at an unauthorised site – the law deems all disposals at the standard rate.
Practical example relevant to operators
Scenario:
An operator registers a U1 exemption for building a noise bund (limit for 17 05 04 soil and stones 1000te).
Over time, the contractor/ site operator brings in 2,000te of soils – i.e. double the permitted amount.
Consequences:
The U1 exemption conditions are breached.
The site becomes a non‑exempt waste operation requiring a permit.
As there is no permit, HMRC considers all waste deposited taxable at the standard rate (Landfill Tax regime for unauthorised sites).
Waste operators, contractors and landowners may all be pursued for tax.
This is exactly the type of scenario the Environment Agency and HMRC investigate where the activity or quantities used mean that it is not a recovery operation within the scope of U1 but an activity requiring a permit instead.
Key point for landfill operators & waste operators
A registered exemption is not a safety net.
The moment you exceed its limits, you risk becoming, in HMRC’s eyes, an unregistered landfill site, with full Landfill Tax liability at the standard rate.
This risk exists even where the operator’s intention was reuse, not disposal, and there is no environmental impact.
Section 24 of HMRC’s Excise Notice LFT1 becomes critical where a registered waste exemption is breached, because it explains how HMRC determines liability for disposals at unauthorised sites and the evidence it will rely upon when doing so. A breach of an exemption, such as U1, means the activity is no longer lawfully exempt under the Environmental Permitting Regulations and any waste placed on the land may be treated as a disposal at an unauthorised site, which LFT1 makes clear is liable to Landfill Tax.
Section 24 does not create a defence or remove liability. Instead, it sets out the evidential considerations HMRC will examine to establish whether a party falls within the charge to tax or whether they can demonstrate that they did not make, knowingly cause or knowingly facilitate the disposal.
“Safeguards will be put in place to ensure that landowners and people in the waste supply chain who, in spite of carrying out all reasonable due diligence, were unknowingly involved in the illegal dumping won’t be assessed for any tax or penalties.”
This evidential focus reflects the wider HMRC position, confirmed in its public guidance, that since 1 April 2018, liability for unauthorised site disposals can extend beyond the person physically depositing the waste to anyone in the chain who knowingly causes or facilitates the disposal.
Our specialist team can support you with compliance awareness so that you do not get caught out. Contact John Dyne today for help.