Welsh Landfill Disposals Tax consultation launched

The Welsh Government is consulting on radical changes to the lower rate of Landfill Disposals Tax. The consultation runs through to 15 September 2024 and views are sought on three options for changing the lower rating.

Landfill tax was devolved to Wales, where it became Landfill Disposals Tax (LDT), back in 2018. With some technical exceptions, particularly around the operation of exemptions, it has remained largely on all-fours with UK Landfill Tax (which applies in England and Northern Ireland) and Scottish Landfill Tax (the product of an earlier devolution). In particular, the standard and lower rates for the three taxes have remained the same since devolution. The rates for the current tax year are £103.70 per tonne for most wastes and £3.30 per tonne for ‘qualifying materials’ such as rock, ceramic materials, minerals and certain types of ash – as well as the sometimes problematic ‘qualifying fines’ produced by waste treatment processes.

Although the UK has already published a 21.6 percent standard rate rise to £126.15 from 1 April 2025 (with the lower rate rising to £4.05), Wales and Scotland have not yet announced their 2025 rates. 

The Welsh Government commissioned an independent review of LDT which was published in July 2023. Uncontroversially, that review found that the significant difference between the lower and standard rates of tax contributed to instances of waste misdescription, prompting the current consultation.

The consultation seeks views on three alternative proposals for lower rating:

• To abolish the lower rate, potentially in phases;
• To substantially increase the lower rate; or
• To change the materials to which the lower rate applies.

The intention of the Welsh Government is to discourage what it perceives to be waste misdescription whilst simultaneously using the tax to support its commitment to Wales becoming a Zero Waste Nation by 2050.

This issue will not just affect operators of landfill sites in Wales. It could impact upon, for example:

• Local authorities;
• Waste management companies – without the tax break offered by lower rating will waste producers continue to invest in new technologies?;
• Site operators outside Wales – will they benefit from more business or find that changes in Wales disrupt the status quo and bring changes elsewhere?; and
• Land remediation projects – a substantial rise in the lower rate could also result in some waste streams not going to landfill at all. It is possible to envisage a brownfield site awaiting clearance becoming uneconomical to remediate.

In short, any of the Welsh proposals could prompt changes to UK and Scottish Landfill Taxes and will, even if limited to Wales, have an economic impact on waste producers including those in the remediation and demolition sectors. For example, any significant change to the lower rate in Wales is likely to result in so-called ‘waste tourism’, where waste producers will dispose of material elsewhere if the overall cost of doing so (taking into account transport and other costs) is cheaper.

The potential for unintended consequences of a major change to lower rating should not be downplayed. 28 years of UK Landfill Tax has demonstrated the economic sensitivity of landfill taxes, with enormous changes having been brought about by both the introduction of Landfill Tax in 1996 and later by rapidly escalating rates.

This consultation should not be regarded as an esoteric exercise for a handful of Welsh landfill site operators. It could have a much greater impact on the UK waste management industry and all parties in the waste chain. Perhaps even ‘nimbys’ may think about how it might affect their environment. The key thing to do is to read the short consultation document and, if moved to do so, respond.

The KPMG environmental tax team is here to help with any questions about LDT and its practical operation. Please get in touch with the authors or your usual KPMG in the UK contact if you would like help formulating your own response in advance of the 15 September deadline.

For further information please contact:

• Barbara Bell
  
• Sufyan Bhatti