Landfill Tax: Whether to bring illegal waste sites within the scope of Landfill Tax UNITED RESOURCE OPERATORS CONSORTIUM LIMITED ( UROC ) Q1. Trade Body representing independent waste and resource operators. Q2. UK representation. Q3. NA Q4. Are you aware of any circumstances where it would be difficult to distinguish between a site that is illegally operating without a permit or licence, and a site that is exempt? The Environmental Permitting regime is clear in its application and any site operating without a permit ought to be clearly identifiable. If there is an exemption in place it should only be for small scale activities and therefore obvious to the regulator whether it should be permitted or not. It is however important to distinguish sites that are using material for a specified purpose. If the material is not waste it will be for the operator to demonstrate that it is a product and or has met the Waste Framework Directive for reaching end of life status. If there is dispute between the regulator and the operator the matter may need to be brought before the court in order for it to be determined. Q5. Do you agree the above definition would provide a good starting point for HMRC? Can you suggest any other hallmarks that should be included? In relation to the proposed definition, UROC is concerned about the term multiple loads as it is not clear if this would mean two or several hundred. Early intervention by regulators, utilising all existing powers available to them, should ideally prevent an illegal waste site from becoming a large-scale operation. It is often the case that landowners are not necessarily alive to the fact illegal activities are occurring on their land. There have been cases where there have been large deposits of waste over a short period of time and therefore may not necessarily be run as a business i.e. over a long period of time. Any illegal deposit of waste, whether it be one load or a thousand should be caught within the definition. 1
Q6. What do you think about the proposal to tax all of the material deposited at an illegal waste site, regardless of whether the person making the deposit intended to dispose of that material? UROC strongly disagrees that the definition can capture any material which has been deposited without the benefit of a permit. The suggestion that the revision to the Finance Act 1996 can include any material that is deposited irrespective of proving that it is not waste is against the principles enshrined in environmental legislation in terms of moving up the Waste Hierarchy through recovering materials and meeting end of waste criteria. The very definition of waste is centered on the intention of the holder of material, therefore to remove this would be at odds with existing legislation. Q7. Are there any risks or wider consequences we should be aware of with this deemed disposal approach? The wider consequences would be to potentially deprive a person from proving what could be a legitimate and beneficial activity. It appears that the definition would be wholly at the discretion of regulators without the risk of any challenge being mounted. Q8. What are your views on how HMRC should deal with the possibility of double taxation? If it can be proven that the material deposited is waste and should be sent for disposal at landfill the payment of the tax due on the disposal should be paid by the offender as any innocent landowner should not be subject to bearing the cost of removal and disposal as well as paying the landfill tax, which would be charged by a landfill operator in order for it to pay over the tax liability to HMRC. Q9. Do you think a credit system would be workable? It would be unfair for the tax to be charged to the innocent party and then accounted for by a landfill operator if HMRC is able to recover it from the offender. It is highly likely that regulators would be involved in an incident involving an illegal waste activity, i.e. in order for it to be deemed illegal, therefore there would be traceability in terms of the removal of any deposit. A credit system could work, however, consideration would need to be given as to whether it would extend to the entirety of the waste deposited at the legitimate waste site or if it would be limited to whatever amount was ultimately recovered by HMRC, i.e. the amount disposed of lawfully may be more than what is actually accounted for by HMRC under the illegal waste provisions. 2
Q10. What evidence could be produced that the material had been taxed under the illegal waste provisions? The duty of care regime would be applicable for all waste transferred from an illegal site to a landfill site. The legislation could include the provision of each load being accounted for, which is usual practice by way of weighbridge tickets. As this system, by in large, is already in place, it would not add any additional burden on landfill operators to produce the tickets, which should be clearly identified as illegal waste. Q11. Do you think a credit system could be exploited? If so, how? There is scope for the credit system to be exploited, i.e. producing more illegal waste tickets than actual tonnage received at a legitimate landfill site, however, it would be prudent for regulators to establish an estimate of the amount of material deposited at an illegal waste site. The Environment Agency, for example, already maintains sophisticated LIDAR equipment and technology which can accurately calculate the waste volume. Therefore, a survey of the waste before it is transported could be conducted to establish the parameters of the credit. Q12. We are interested in your views on whether it would be appropriate to extend the liability to people other than the illegal waste site controller? Where it can be established that there have been several separate individuals or entities involved in an illegal waste activity it would be appropriate to extend liability to all those involved in the chain. Q13. Other than the illegal waste site controller, who in the supply chain do you think should be liable for the Landfill Tax? How far up the supply chain do you think liability should be extended? Anyone that has been deliberately involved in the illegal activity could be captured in the definition, which could include; producers, carriers, brokers, landowners. Q14. We are interested in your views on due diligence, and whether the examples above are representative of the types of steps that a responsible person should take. Do you think due diligence provisions could be strengthened without adding unnecessary burdens and/or any present opportunities that could be exploited? UROC shares similar concerns to those expressed in terms of extending the liability to innocent parties. The duty of care regime is designed to ensure that those involved in the management and 3
transfer of waste conduct due diligence checks on the next holder of the waste. The DEFRA guidance is appropriate and should be applied, however, it can be difficult in practice for operators as it is not practicably possible to effectively follow each and every load. What has become apparent in organised crime is that offenders may well transfer a volume of waste to a legitimate landfill site, and then divert some waste to illegal sites. Therefore, the due diligence checks conducted by operators can, on their face, satisfy an operator that the next holder of the waste is legitimate. Care needs to be exercised in extending the liability and if an operator can demonstrate that appropriate checks have been conducted in line with legislation and guidance penalties should not be imposed. Q15. Can you provide any practical suggestions for how HMRC could estimate the weight of material at illegal waste sites? As detailed at Q11 a survey could be conducted to provide an accurate volume of waste on a site, which could then be converted to tonnage (depending on the waste type and using appropriate conversion factors) to determine the tax liability. Q16. Do you agree that it would be reasonable to apply the standard rate of Landfill Tax to all material disposed of at an illegal waste site? If not, can you suggest a method for determining the standard and lower rated materials? It would be appropriate to charge tax applicable to the material type. There is a sampling methodology already prescribed in legislation which should be used to determine the nature of material. Whilst, charging all material deposited at standard rate would act as a deterrent, in the interests of fairness it is our view that the deposit of predominately inert material, e.g. qualifying fines, does not present the same environmental risks as depositing mixed general waste. The courts adopt a reduced sentencing approach for offences that are not as serious as others. Further, it is important to consider that if there has been an illegal activity the financial gain will be commensurate with the nature of the material deposited and therefore the practicality of recovering standard rate will probably be unachievable as it is highly unlikely to be available. Q17. Do you agree that it would be appropriate to extend the penalty provisions to illegal waste sites? In theory, the application of up to 100% penalty would act as a deterrent, however, as above the practicality of recovering the full financial gain and the additional penalty is likely to be very limited. 4
Q18. Do you think that the above mix of civil and criminal sanctions presents a strong deterrent to tackling the risk of tax loss at illegal waste sites? If not, can you suggest any other ways HMRC could strengthen its response? It is important to establish what regime would come first and what regulator would take action. The Environment Agency can apply to the court to attach a Confiscation Order to criminal proceedings, i.e. if an offender enters a guilty plea or is found guilty. It is important, in our view, that justice is kept paramount as there are a plethora of legal cases which have resulted in operators being found not guilty for waste related offences. If the criminal test, i.e. beyond reasonable doubt, is replaced by the civil test, on the balance of probabilities, there is a real risk that innocent operators will be unnecessarily penalised. It is UROC s opinion that the existing powers of environmental regulators are sufficient to tackle waste crime and early intervention in suspected waste sites would have a preventative effect rather than large scale illegal activity, resulting in significant disposals of waste, which could be stopped and result in the overarching objective of environmental protection being achieved. The Sentencing Council Environmental Offences Definitive Guide provides an excellent framework for sentencing offenders. Therefore, if the criminal route is followed and an offender brought to justice - Step One is Compensation which states; The court must consider making a compensation order requiring the offender to pay compensation for any personal injury, loss or damage resulting from the offence in such an amount as the court considers appropriate, having regard to the evidence and to the means of the offender. Where the means of the offender are limited, priority should be given to the payment of compensation over payment of any other financial penalty. Therefore, loss of revenue in relation to tax evasion, could be recovered by HMRC through this route. Step Two is Confiscation which states; Confiscation must be considered if either the Crown asks for it or the court thinks that it may be appropriate. Confiscation must be dealt with before any other fine or financial order (except compensation). Therefore, the Environment Agency could recover any proceeds of the crime as it already maintains powers to investigate an offender's finances and find the profits they have made if they try to hide them. It can apply for a restraint order to stop the offender disposing of any of their assets while investigators identify their illegal profits and present evidence so the court can make a confiscation order. We believe that this system is the most effective and could facilitate a fair approach to punishing offenders and ensure that there is equality between regulators in respect of how recovered funds are distributed between respective agencies. 5
Q19. While it is too early to assess the impact of these approaches, we would be interested in whether there are any aspects of the Scottish and Welsh approaches that you think we should consider further? The definition of knowingly caused or permitted is useful for determining the person liable for tax as this definition is already adopted in environmental legislation. Scotland s emphasis on landfill being the only realistic destination for the illegal waste is beneficial in terms of encouraging transfer of material to facilities where it could potentially be treated. Q20. Are there any unintended consequences that we need to be aware of to help inform our understanding of the impacts? It is important to have certainty in the law and the addition of illegal deposits within the scope of Landfill Tax could blur the distinction between environmental and tax legislation. 6