New landfill tax will benefit communities, says Scottish Government

It is consulting on a model for a Scottish landfill tax, which will replace a UK-wide tax on landfill from April 2015. Under the Scotland Act 2012, the Scottish Parliament will be able to introduce and manage taxes on the disposal of waste to landfill from this date. It will also be given the power over taxes on the purchase or leasing of land and buildings, such as the existing Stamp Duty Land Tax (SDLT).

Finance Secretary John Swinney said that the new tax would be embedded in Scottish law, reflect Scottish values and Scottish circumstances.

“The Scottish Government wants to take this opportunity to ensure that landfill tax, environmental protection legislation, regulation and compliance regimes are all aligned and working in the best interests of our environment and our economy,” he said. “One opportunity now open to Scotland would be to increase the amount that is invested in the Communities Fund to improve surroundings and mitigate against the impact landfill has on communities.”

One of the proposals set out in the consultation is to establish a replacement for the existing Landfill Tax Communities Fund, which provides funding for community or environmental projects in the vicinity of landfill sites through a system of tax credits. The new scheme proposed by the Scottish Government could see operators having to contribute 10% more than under current arrangements.

It is proposed that the new tax be administered by the Scottish Environment Protection Agency (SEPA) on behalf of Revenue Scotland, according to the consultation. Swinney said that associated administrative costs would likely be lower than those proposed by current administrator HM Revenue and Customs (HMRC) for a “like for like” tax.

Landfill tax is a tax on the disposal of waste. It aims to encourage waste producers to produce less waste and to consider sustainable waste management options, including recycling and anaerobic digestion. Since its introduction in 1997, the current tax has contributed to a 32% reduction in the proportion of waste sent to landfill in the UK and a similar increase in recycling, according to figures provided by the Scottish Government.

The current regime will be ‘switched off’ in Scotland in April 2015, together with a corresponding reduction in the ‘block grant’ Scotland receives from Westminster. Under the new Scotland Act, the Scottish Parliament will be responsible for determining the nature of its replacement tax and any rates, thresholds and exemptions. It will also be given responsibility for collecting and enforcing payment of the tax and managing an appeals system.

Infrastructure law expert Graham Wallace of Pinsent Masons LLP, the law firm behind Out-Law.com, said that of particular interest in the consultation was the potential for imposing different tax rates in Scotland with regard to cross-border transfers of waste.

“While the Scottish Government are not proposing to significantly tinker with the structure of the UK landfill tax in the first instance in order to allow for a smooth transition between systems, the consultation makes clear that future divergence is likely in a number of respects once the Scottish tax has bedded in,” he said. “Importantly, the Scottish Government is seeking to explore the implications of imposing different tax rates in Scotland with regard to cross-border transfers of waste. This will be a key issue for the Scottish Government to keep in mind as the proposals develop.”

There are currently 72 landfill sites in Scotland, run by 54 different operators and disposing of around 4.56 million tonnes of waste. Around 36% of Scottish landfill originates from households, with the remainder produced by commerce and industry.