Waste criminals continue to avoid landfill tax despite new rules

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HMRC has failed to recover a meaningful amount of money from waste criminals since it was given powers to tax waste disposed of at unauthorised sites four years ago, E&T can reveal.

Responding to a freedom of information request, HMRC refused to divulge how much landfill tax it had recovered from waste criminals but said there had been “a low number of tax assessments” to date.

The waste industry has expressed its disappointment at the revelations. Trade body the Environmental Services Association (ESA) said the additional powers given to HMRC “held the potential to be a powerful tool in the fight against waste crime, so we are disappointed that they are not being fully utilised”.

Since 2018, any person or business who makes a disposal at an unauthorised waste site, or knowingly causes or per­mits the disposal, has been liable for landfill tax.

When the powers were first introduced, HMRC said the penalties would apply alongside any penalties for environmental offences, “mak­ing the polluter pay the puni­tive costs for defrauding the revenue and harming the envi­ronment”.

The government said HMRC and the Environ­ment Agency (EA) had devel­oped a strong partnership to combat landfill tax evasion, with the EA “exploiting infor­mation exchange gateways to share data and intelligence, and starting to identify and profile unauthorised sites and offenders to target”. It said at the same time HMRC’s tax specialists and criminal investigators were working alongside those of the EA, cap­italising on their combined arsenal of enforcement tools.

However, HMRC told E&T that its landfill tax compliance activity had been impacted “by a number of operational factors, such as ensuring at the outset that teams were properly prepared for visiting potentially hazardous unauthorised waste sites”.

It said more Covid-19 restrictions had also impacted its performance.

In addition, HMRC said many of the initial referrals made to it had been unsuitable for further action, “often because the historic nature of the waste deposit meant that the person responsible could not be traced”.

HMRC said for these reasons there have been a low number of tax assessments raised to recover landfill tax at unauthorised waste sites in England, which meant there was a risk that “the entities our assessments relate to could be identified if we released detailed information about our compliance activity”.

HMRC spent approximately £2.4m on the additional staff required to enforce and monitor compliance under the new rules, it said.

Sam Corp, head of regulation at ESA, said the landfill tax was continuing to perform its primary function of driving more waste material further up the waste hierarchy but that it had also “long presented an opportunity for criminals who will continue to exploit weakness in the system unless the EA and HMRC take a much tougher stance on pursuing prosecutions”. 

“The additional powers given to HMRC enable them to impose the full cost of landfill tax, plus additional penalties, on operators of unauthorised sites. HMRC is also empowered to pursue and penalise those further up the waste chain through ‘joint and several liability’. Combined, this should provide significant deterrent to criminals and incentive to waste producers to comply with their duty of care, but it will only work if the perpetrators fear being prosecuted and, at the moment, it continues to be a soft target,” he added.

HMRC is also currently losing a huge amount of landfill tax due to illegal practices including under-declaring waste, misclassifying waste and waste being dumped illegally.

The department estimates that in 2019 the ‘tax gap’ amounted to £200m but E&T sources say the amount is likely to be much higher.

Phil Conran, director of waste consultancy 360 Environmental, said that it “appeared scandalous that these discrepancies of, potentially, hundreds of millions of pounds of lost landfill tax cannot be explained”.

He said it also questions HMRC’s “ability to police” the plastic packaging tax, which came into force on 1 April, adding that it seemed likely that “widespread confusion would lead to extensive ‘free-riding’ as companies either do not register or submit questionable data”.

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