In 2015, a new loss on ignition (LOI) test for landfill waste was introduced to determine the correct tax liability of fines. The LOI testing regulation came into force through the Landfill Tax (Qualifying Fines) Order.
Under the regulations, samples of waste ‘fines’ must be tested in a laboratory to determine the LOI. Waste with less than 10% LOI qualify for a lower rate of landfill tax, and there was a transitional period for waste with an LOI up to 15%.
When the new testing regime was announced, waste managers were generally sceptical, and many were concerned that the development would create a lot of extra work, and would cost their organisations more. However, despite broad acceptance of the proposals, some experts feared that infrequency of checks and a lack of consistency between samples, as well as uncertainty over who will be administering the tests, could leave the proposed system open to abuse.
But the Environmental Services Association (ESA) embraced the proposals to regulate landfill tax through standardised LOI testing. United Resource Operators Consortium (UROC) also welcomed the proposals, though urged its members to provide data to determine what LOI percentage operators are currently achieving on their trommel fines.
Behind the study
Every week, waste managers come along to our testing facility in Leicester in search for ways to further separate their waste to ensure any remaining value has been extracted.
By using air separation methods, the waste managers we work with can increase revenue and minimise disposal costs – the majority have seen a reduction in their LOI, making them liable for the lower tax amount.
Now the transition period for the 15% threshold is over, and after hearing anecdotal evidence about the pressures the new regulations have created, we decided to take a deeper look at how industry operators have been affected, and what they are doing to mitigate against the higher taxes.
Our study (based on a 14-question survey of 51 waste managers from a range of industries across the UK from September to November 2016) managed to capture the opinions and input from 51 waste managers, who each responded to the questions relating to the LOI regulations, how they have responded to the changes, and their concerns surrounding them. The results confirmed everything we hear day to day in the testing facility – there’s a long way to go, and a lot of money being wasted.
Despite it being compulsory for waste operators to have samples of their waste tested to ensure they are paying the correct amount of landfill tax, 30% of businesses have not yet had their waste ‘fines’ laboratory tested.
Our research revealed that 80% of waste operators have been hit hard with increased tax bills since the loss on ignition regulations were introduced.
These organisations affected by the changes have paid up to an additional 70% in landfill tax since the changes came into force last year. Interestingly, our study showed that the new tax threshold has changed the way waste operators choose to recycle to save money, as 65% stated they are finding alternative waste management solutions.
This included investing in new equipment for further processing such as density separation, additional screening, detailed reviews of waste streams, extracting inerts and strict regulations around the type of waste entering the facility.
The survey also revealed 62% of waste managers would like clearer information about the new tax threshold for waste fines, to enable them to pay the right amount and look at new ways to reduce their tax liability.
We plan to share our findings with the government officials responsible for providing guidance for LOI testing and regulations in order to promote positive change.
Case study: Solutions for waste managers
Waste management companies are reported to be feeling the pinch of the recent LOI regulations and are looking for ways to reduce their tax exposure. This is said to have urged Impact Air Systems to develop its current recycling solutions to help waste operators to reduce their landfill tax exposure and ensure their loss on ignition (LOI) levels are below 10%. The Zigzag Classification Unit (pictured above) was born.
“We wanted to find a way to make the testing process simple, quick and cost-effective, to provide the easiest way of introducing the ZCU to other waste operators in a bid to make the testing process simple, quick and cost-effective, to provide the easiest way of introducing the ZCU to other waste operators in a bid to resolve their waste separation and landfill tax quandary," says Nick Ball, MD of IAS.