Environmental Taxes

Centurion has a very strong and well-respected pedigree in environmental taxation, with team members who have contributed to government policy and advised some of the largest infrastructure projects in the UK and EU.

Such is the nature of these taxes that we also have links with all affected sectors including waste management and resource sectors, energy generation and supply, and various energy intensive manufacturing sectors. Furthermore, having contributed to national and regional government policy around environmental taxation, our rounded experience and profile in this field is class leading.

Our engagement with affected sectors

The highest-profile environmental taxes in the UK currently are climate change levy (‘CCL’) (the nearest we have to a carbon tax so far), landfill tax (‘LFT’) (now devolved to Scotland and Wales) and aggregates levy (‘AGL’) (a resource tax that can increase substantially the cost of any infrastructure project). The main aim of all environmental tax is to increase the cost of environmentally damaging behaviours (by industry, the public sector and indeed the general public) to the extent that more environmentally friendly alternatives are adopted.

But each tax must also raise revenue for HM Treasury and this dual role has led to increasing complexity in the design and operation of environmental taxes. In these circumstances, paying the right amount of environmental tax can be very challenging and, as can be seen from the case summaries below, ensuring that environmental tax is not overpaid can be critical to a project’s viability. In this spirit of ‘getting it right’, we have engaged with clients in almost all commercial and public sectors.

Some environmental tax issues (a non-exhaustive list)

Climate change levy (CCL)

  • Are reliefs and exemptions properly applied to downstream supplies and is adequate evidence held in support of this?
  • An additional ‘carbon price support’ rate is applicable where certain fossil fuels are used to generate – is this properly applied?
  • Relief is available for certain energy-intensive sectors, and where energy commodities are used for their non-energy properties – has this been identified and claimed?
  • Landlords supplying energy to tenants may, potentially, access reliefs on their behalf.

Landfill tax (LFT)

  • The standard rate is over 30 times higher than the reduced rate (for qualifying material). Has the correct rate been applied?
  • Material put to certain uses on a landfill site may be tax-free. As a site operator, have you identified these? As a waste producer, is this tax-free treatment recognised in your disposal costs? 
  • LFT is calculated according to weight. Water content can sometimes be excluded from this calculation – do you have a water discounting agreement with HMRC? 
  • Depositing material anywhere (not just on a licensed landfill site) is subject to LFT doing so would require a permit. Have you placed spoil or other material on your land unaware of this requirement?

Aggregates levy (AGL)

  • Anyone commercially exploiting rock, sand or gravel must account for AGL. Have you accessed material in the course of development works and used it, or removed it from the site, incurring an AGL liability?
  • Using aggregate material for construction work brings it into the scope of AGL, but certain groundworks and reclamation activities may not be taxable – but the supplier needs to be told before you can benefit.

How Centurion can help

We have the experience and knowledge to help clients in all aspects of these taxes including:

  • Resolving disputes with HMRC or HM Treasury regarding compliance or tax liabilities.
  • Conducting reviews of an organisation’s environmental tax costs and potential for reliefs, exemptions or other savings.
  • Analysing infrastructure and development plans to establish where environmental tax costs may arise and report on the potential for savings.
  • Dealing with enquires from HMRC in relation to any of these taxes, including where the Environment Agency (or regional equivalents) have raised concerns.
  • Advise energy generators and suppliers of the CCL and LFT responsibilities, compliance requirements, records and systems, supply agreements.
  • Assist energy-intensive sectors to pursue CCL relief where energy commodities are used for their non-energy characteristics.

Related Services

Open the tabs below to see how each service is specialisedto Environmental taxes.

Training

We offer bespoke training in environmental taxation tailored to meet their specific needs. Training is not limited to finance personnel but can be equally relevant to commercial, engineering, legal and operational teams.

Consultancy

Across all environmental taxes we can help with the following:

  • developments and infrastructure projects – evaluating environmental tax risk and reliefs;
  • liability analysis of activities including energy generation and supply, waste management activities, waste production, mining, and quarrying;
  • accounting systems adaptations to ensure environmental taxes are properly captured and declared on a timely basis;
  • interaction with HMRC, Environment Agency (and devolved departments), and;
  • general advice regarding the environmental tax implications of commercial and non-business projects.

Where tax savings or refunds are identified and our work is capable of maximising these, we will consider undertaking a project on a contingency fee basis.

Dispute Resolution

The relative complexity and specialised nature of each of these taxes, often leads to fundamental challenges by HMRC into the principles applied by taxpayers. Also, where disputes arise, they frequently involve large tax values. A further complexity arises where other agencies are involved in a dispute, including devolved governments or the Environment Agency (or equivalent agencies in devolved administrations). Our experience of managing environmental tax disputes includes dealing with HMRC, HM Treasury, and various other relevant agencies allowing us to provide comprehensive help and advice for clients having to navigate their way through a dispute.

Meet the Team

Our environmental taxes offering is led by Mike Trotman.

Mike Trotman
Mike Trotman

Associate Director

Email Mike

Our environmental taxes offering is led by Mike Trotman. With over 35 years’ experience of indirect taxes and 25 years dealing with environmental taxation, Mike has a wealth of knowledge in this sector. After implementing environmental taxes regimes in a multi-utility and infrastructure group, Mike retained his environmental specialism when he returned to the accountancy profession where he provided technical advice and policy guidance on these taxes to the corporate sector and government departments, working with major infrastructure groups, the waste industry, utilities and SMEs caught by the increasing complexity of all indirect taxes.

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Case study

AGL and coastal developments

Port development usually requires some degree of land reclamation and coastal defence work using rock, sand or gravel. Using such material for construction purposes renders it subject to AGL at a rate of £2 per tonne. A project to expand capacity at a major UK port was set to incur an AGL cost in excess of £6M but after a detailed review of the project’s technical specifications it was possible  to reduce this to less than £500k by negotiating an agreement with HMRC which recognises that substantial volumes of material will also be used for other, non-construction purposes.

CCL – biomass and renewable generation

Certain waste streams arising from specified manufacturing processes are eligible for the lower rate of LFT, provided relevant conditions are satisfied. HMRC jealously guard this relief and challenged a large manufacturer’s use of the relief, raising a multi-million assessment. It was essential to understand the complicated manufacturing process and HMRC’s challenges. Having concluded that there were good grounds for applying the relief, the client was helped to consult tax Counsel with a view to reaching a negotiated settlement with HMRC.

CCL – biomass and renewable generation

CCL exemption for energy generated from renewable sources generally ended in August 2015, so the imposition of CCL on facilities that generate from biomass, waste, oil and renewable sources has led to confusion in some sectors. Having been appointed by a generator investing in four facilities which used a variety of technologies and fuel sources, it was possible to advise them specifically where CCL will arise, which rates apply and whether any reliefs are available, allowing them to use these assets tax efficiently.

AGL – Nuclear waste storage bunker development

When a development partnership realised that their project to construct a number of large buildings for underground waste storage would yield large volumes of exploitable rock, they took advice about the AGL implications. Their objective was not to profit from the rock – in fact it was something of a burden – so they made use of it around the development site and, as planned, to bury the constructed bunkers. But ‘commercial exploitation’ for AGL purposes is defined very broadly and includes using material for construction, so the much of the excavated material was vulnerable to AGL. Alternative arguments were presented to HMRC to successfully persuade them that AGL should apply only to parts of the project and not to the main development.

LFT – liability of incineration waste

Waste is increasingly used to generate electricity or is incinerated to reduce the quantities being sent to landfill. Residue from both activities is subject to LFT once it arrives at a landfill site, but, in a complicated piece of legislation, the applicable LFT rate depends upon the nature of the original material and the method of capturing the residue. It’s not difficult to make mistakes here. Following initial enquiries by the EA into the operations of a large waste management group, the group reviewed its LFT costs to discover that it may be exposed to additional tax as a consequence of misunderstanding or misapplying these complicated rules. The operations also proved to be complicated but once they were understood it was possible to better identify the true LFT liability, mitigate the historic LFT risk and improve processes (including LFT certification) to avoid future problems.

CCL – Refunds of oil duty

The ‘double taxation’ principle applies to environmental taxes as much as any other UK tax, requiring that a taxpayer should not incur tax twice on the same income source. CCL is a tax on energy supply and generation (including self-supply) so when applied here it means that where certain generating activities use oil that has attracts both hydrocarbon oil duty and CCL, then HMRC should rebate one of these. HMRC generally accept this and have approved refunds to clients where adequate proof has been provided.

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