Housebuilders and steelmakers sound alarm over £1bn landfill tax raid

Times

5 days ago

A shake-up of landfill tax that could amount to a corporate tax raid of more than £1 billion has sparked outcry from industry leaders.
The Treasury is consulting on proposals to scrap exemptions and reduced rates for the tax, which is collected on the government's behalf by landfill operators.
The move was one of several quietly pushed out by the Treasury in April. City sources said that some officials in Downing Street were taken by surprise as industry leaders sounded the alarm.
A government source insisted that the proposals had been 'cleared by No 10 on publication in the normal way'. They added that tax policy is not cleared by government departments before publication.
Landfill tax was introduced in 1996 to encourage companies to reduce waste and promote recycling. The tax rose in April and the standard levy is £126.15 a tonne, while a lower rate of £4.05 a tonne applies to less polluting materials. Certain sectors have exemptions and discounts.
Of the 19.1 million tonnes of waste put into landfill in the 2024-25 fiscal year, 4.7 million tonnes were charged the standard rate, according to HM Revenue & Customs. Some 6.9 million tonnes were levied at the lower rate and 7.5 million tonnes were deemed exempt.
One example of how scrapping the lower rate could affect business is the housebuilding industry. At present housebuilders pay the lower rate to dispose of topsoil. If this was scrapped it would mean that companies would face a 30-fold increase in landfill tax. If all the lower rate landfill was taxed at the higher level, this alone would add £840 million to the amount collected by the Treasury. Adding in even a fraction of the tonnage that is at present exempt would take the figure beyond £1 billion. One large housebuilder estimated that its bill could rise from single-digit millions to more than £100 million.
This is 'potentially catastrophic' for housebuilders, according to senior industry sources who point out that they are helping Labour deliver on its target to build 1.5 million homes in England during this parliament.
Steelmakers are also aggrieved. The proposal would mean that iron slag, a heavy non-recyclable residue, would be subject to landfill tax.
Likewise, the phasing out of water discounts — where a dispensation is granted for heavy industry that mixes dust and other harmful particles with water for safer transportation — would create problems.
The change would impinge especially on British Steel. The company is owned by the Chinese firm Jingye but controlled by the UK government after ministers stepped in this year to prevent the closure of the remaining blast furnaces.
Bosses from the trade body UK Steel warned the Treasury that the changes 'overlook the technical and regulatory realities of steel production'.
'Increasing the cost burden on these essential and responsibly managed wastes will further damage the competitiveness of UK steelmaking, risk offshoring production, and undermine efforts to decarbonise and regenerate industrial regions, without delivering a proportionate environmental benefit,' UK Steel said.
It added: 'These proposals run counter to the forthcoming steel strategy which aims to provide a competitive, streamlined business environment for the UK steel industry. The outlined changes simply come across as a straightforward revenue-raising measure with little heed paid to the impact … this will have on our industry and other key sectors of the economy.'
The timing of the proposal is particularly bad because, despite hopes of a trade deal with the US, British steelmakers could face a 50 per cent tariff imposed by Donald Trump on exports to America.
The Treasury said: 'The consultation on landfill tax reform is still open, no decisions have been made. We are committed to working with businesses to understand the impacts of the proposals.'