Landfill tax was introduced on 1 October 1996: the UK’s first tax with an explicit environmental purpose. It is administered by HM Revenue & Customs and collected from landfill site operators. It is charged at a standard rate per tonne on ‘active wastes’ (such as household wastes that decay), and at a lower rate on inactive on inert wastes.  From 1 April 2015, these rates are £82.60 (standard) and £2.60 (lower). Guidance on the tax is published on Gov.uk (HMRC, Excise Notice LFT1: a general guide to Landfill Tax, March 2015.)

Since its introduction, the standard rate of tax has been increased significantly, to increase the tax’s environmental impact; initially the rates of tax were £7 (standard) and £2 (lower). Clearly there are considerable financial implications for site operators when waste meets the statutory test for qualifying for the lower rate (this is set in secondary legislation: SI 2011/1017). Technological developments in the industry have made this process harder. In 2012 HMRC issued two sets of guidance to clarify how certain types of waste should be classified, including waste from waste transfer stations and material recovery facilities (HMRC Brief 15/12, 18 May 2012; Brief 18/12, 1 June 2012). Some of this waste would consist of ‘fines’ – small particles produced by the recyling process. In some cases it would be hard to determine if fines came wholly or mostly from waste subject to the lower rate.  

During 2014 HMRC consulted on introducting a ‘loss on ignition’ test, where the lower rate of landfill tax would apply where fines meet an LOI threshold of 10% or less. In December the Government published draft primary legislation, with a view to the new test being introduced from 1 April 2015. It also announced that there would be a 12 month transitional period when the threshold would be 15% (HMRC, Landfill tax: compliance work in relation to lower rate, December 2014). Section 65 & Schedule 15 of the Finance Act 2015 establish a new category of “qualifying fines” which will be liable to landfill tax at the lower rate and provide for the power to impose requirements with which fines must comply in order to be considered “qualifying fines”. In February 2015 HMRC published two draft SIs, to complete the new testing regime; these were laid before the House on 27 March 2015 (SI 2015/845 & SI 2015/846).

The House approved the first of these Orders on Tuesday June 16th (HC Deb 16.6.2015 cc286-290). This is a revised version (SI 2015/1385), as the original Order was not approved within the statutory time period (see para 3 to the Explanatory Memorandum to this SI).


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