For the uninitiated, the ‘qualifying fines regime’ allows mixtures of residue from recycling to benefit from the lower rate of landfill tax which currently stands at £4.05 per tonne. The application of the lower rate to residues supports the positive economics of recycling but also provides opportunity for fraud, as ‘fines’ are made up of very small particles which are difficult to trace back to source. Fraudsters can process and hide ordinary wastes within recycling residue or manufacture ‘fines’ entirely from non-qualifying material. The financial incentive is obvious with standard rate landfill tax currently set at £126.15 per tonne.
There is also, it should be noted, scope for innocent error and wilful ignorance. Whilst some recycling operations will generate a residue stable in its composition that always qualifies, others will be subject to day-to-day variation that is difficult to track and monitor. Where the composition varies the producer might proceed on the assumptive basis that all consignments qualify unless proven otherwise. As to where the dividing line sits between innocent error and wilful ignorance - that is difficult to determine.
The landfill tax legislation recognises that fines can contain a small or incidental amount of non-qualifying material without losing the entitlement to lower rate tax and a ‘loss-on-ignition’ testing or ‘LOI’ applies to selected consignments by a landfill operator. The LOI test identifies the organic content of the waste, which would be non-qualifying, with a test of less than 10% organic then permitting it to be recognised as lower rate.
