The Taxing Question of Waste Crime

The Environment Agency estimates that waste crime costs the UK economy £1 billion every year, and that most waste crime goes unnoticed and unreported. Waste crime is said to be linked to organised criminal gangs who can make huge profits from disposing of waste illegally and thereby undercut properly managed and reputable waste management companies who bear the cost of environmental compliance and correctly applied landfill taxes, such as UK Landfill Tax, Scottish Landfill Tax and the Welsh Landfill Disposals Tax.

The problem is now said to be so serious that waste crime is routinely linked to other types of criminal activity, such as drug and illegal firearm dealing, money laundering and modern slavery. To tackle this, back in 2020, the Government set up the Joint Unit for Waste Crime (JUWC) which now comprises of, amongst others, various law enforcement agencies, the Environment Agency, Natural Resources Wales, the Scottish Environmental Protection Agency, HMRC, Revenue Scotland and the Welsh Revenue Authority. The JUWC is believed to be the first multi-agency taskforce of its kind, bringing together environmental regulators and tax authorities with law enforcement powers.

Waste crime is a wide-ranging concept and includes everything from metal theft, fly-tipping, illegal waste exports, fraudulent producer responsibility claims and the misdescription of waste. Fly-tipping, for example, can range from the casual dumping of redundant white goods in lay-bys to sophisticated schemes where premises are rented from legitimate landlords, filled with waste over a period of time and then abandoned, leaving the landlord with an obligation to clear his site and bear all the costs of disposing of the waste legally, including the standard rate of landfill tax which is currently £103.70 per tonne (rising to £126.15 per tonne from April 2025). The fact that the reduced rate of tax for certain qualifying materials including rock, concrete, glass, some types of ash and chemically inert substances is so much lower at £3.30 per tonne (rising to £4.05 in April 2025) also gives the unscrupulous an incentive for misdescription.

Waste crime has many victims, including the environment itself, communities impacted by the illegal disposal of waste, modern slave workers and the legitimate waste industry which cannot compete with the low waste disposal costs offered by waste criminals. The economy also suffers as illegally dumped or misdescribed waste also results in the underpayment of landfill taxes.

The JUWC is working to reduce waste crime by sharing information amongst its members who then work together to identify and tackle the problem. Whilst the pandemic appeared to slow down its public-facing activities, a survey was undertaken last year by the Environment Agency and Crimestoppers with a view to encouraging the reporting of waste crime. Most recently, the JUWC together with HMRC, Revenue Scotland, the Welsh Revenue Authority and the Environment Agency have invited businesses and other organisations to attend an educational webinar on 25 September to learn about how waste crime can impact on legitimate businesses.

This is a novel approach and signals a need for all those involved in the waste industry to adopt a really high level of due diligence when entering into contracts. The invitation to the webinar on 25 September includes a warning that “if it is found that the waste company you use is disposing of your waste illegally, you could become liable for the evaded landfill tax plus interest and penalties”.

Whilst everyone involved in disposing of waste should review their agreements, critically assess any ‘too good to be true’ prices and build a proper understanding of the waste supply chain of which they are a part, this is of paramount importance to those on the front line – the legitimate landfill site operators. They will come under scrutiny first, as some operators are already aware, and they will need robust records of the waste they receive and landfill. In particular, this extends to waste ‘fines’, small particles of mechanically processed waste which sometimes benefit from the lower rate of tax and where the tax liability decision is based not just on transfer note descriptions but on Loss on Ignition testing and a visual inspection. Some legitimate operators have faced costly and long-running reviews by the tax authorities into their fines operations where better record-keeping at the outset might have provided the tax authorities with the assurance they required and allowed them to move on to investigate other businesses.

KPMG in the UK’s Environmental Tax team is led by Barbara Bell who has been advising on landfill tax since its introduction in 1996. We can help with all landfill tax matters.

For further information please contact:

• Barbara Bell
• Sufyan Bhatt