Official estimates of the Landfill Tax gap are evidence of the continuing scale of tax evasion in the recycling and waste treatment sector, according to the Environmental Services Association (ESA).
The Landfill Tax Gap is the difference between the tax that is collected and that which is “theoretically due” – the tax that should in theory be collected if all operators were compliant.
Across the 2022 to 2023 tax year, the Landfill Tax gap was 14.5% of the theoretical Landfill Tax liability or £100 million in absolute terms, the ESA said.
The gap has increased from 3.3% in 2005/6 to 14.5% in 2022/23. There was a spike to 29% in 2018/19, which HMRC attributed to the introduction of unauthorised waste sites into the scope of Landfill Tax legislation.
Although the tax gap estimate has reduced from this temporary high, the ESA said it remains “unacceptably high” at £100 million annually.
The ESA said it believes that the real-world figure is higher than £100m, based on anecdotal evidence and the findings of the Environment Agency’s most recent waste crime survey.
HMRC recognises in its official figures that there is a “high” degree of uncertainty in the estimated scale of Landfill Tax evasion.
In the waste crime survey, waste industry respondents estimated that 1 in 4 organisations involved in handling waste material falsely described waste.
The ESA said that operators that do this can evade 35% of their Landfill Tax bill on average. If this perception reflects reality it would equate to a Landfill Tax shortfall of £245 million, the ESA said.
A focus on tackling the Landfill Tax gap would both help plug another gap in the country’s finances as well as helping to create a level playing field for operators in our sector.
Head of Regulation at the ESA, Sam Corp, commented: “It appears to legitimate operators that perpetrators of landfill tax fraud are operating with impunity and regulators must get a grip and tackle this issue once and for all, with stronger and more effective enforcement and increased collaboration between revenue and environmental regulators.
“We have heard from several political parties in the run-up to the General Election of the need to close the UK’s tax gap to fund manifesto and other political commitments.
“A focus on tackling the Landfill Tax gap would both help plug another gap in the country’s finances as well as helping to create a level playing field for operators in our sector – driving investment in new facilities and jobs to turn more waste into a valuable resource.
“ESA will strongly urge the new government, of whatever political colour, to focus on addressing the Landfill Tax gap as a top priority – alongside wider regulatory reforms to clamp down harder on criminals.”
The Environmental Services Association is the trade association representing the UK’s recycling and waste treatment industry.
