ICAEW Tax Faculty provides analysis of the announcements relating to environmental taxes in the Autumn Budget 2017.
Climate change levy: main rates
The government will set climate change levy (CCL) main rates for the tax years 2020/21 and 2021/22 at Budget 2018, with the exception of the rate for liquefied petroleum gas. To ensure better consistency between portable fuels in the off-gas grid market, this rate will be frozen at the tax year 2019/20 level in tax years 2020/21 and 2021/22.
This follows the announcement at Budget 2016 that main rates of CCL would increase on 1 April 2019 to recover the tax revenues lost by closing the carbon reduction commitment energy efficiency scheme, with changes to the reduced rates payable by businesses in the climate change agreement scheme.
It was also announced that the balance between rates on taxable commodities would be updated to reflect changes in the fuel mix used in electricity generation, starting with an adjustment of the current electricity to gas ratio of 2.9:1 to 2.5:1 in 2019/20. The government also announced its intention to re-balance the rates to an electricity to gas ratio of 1:1 by 2025 to deliver greater carbon savings.
CCL: exemptions for mineralogical and metallurgical processes
As announced at Autumn Budget 2017, FB 2018-19 will make minor amendments to the way the exemptions from CCL for energy used in mineralogical and metallurgical processes are defined.
The scope will remain unchanged, but the changes will ensure the exemptions remain operable after EU exit and address business concerns about how the exemptions apply in landlord/tenant situations. The changes will have effect from spring 2019.
Aggregates levy: rates
The rate of aggregates levy will be frozen for 2018/19. The rate has been frozen since 2009 and the government will return to index linking the levy in the longer term. This follows the announcement at Spring Budget 2017 that the rate of aggregates levy would remain at £2 per tonne in 2017/18.
Aggregates levy: exemption for laying underground utility pipes
The conclusion has been reached that the case to introduce a new aggregates levy exemption for aggregate which is an unavoidable by-product when laying underground utility pipes is not strong enough at this time. This follows consultation in 2016.
A summary of responses to the consultation and the government’s response will be published on 1 December 2017.
Landfill Communities Fund for 2018/19
The value of the Landfill Communities Fund for 2018/19 will be set at £33.9m, with the cap on contributions by landfill operators remaining at 5.3% of their landfill tax liability.
Landfill tax: rates for 2019/20
The standard and lower rates of landfill tax will rise in line with RPI, rounded to the nearest 5p with effect on and after 1 April 2019.
Landfill tax reform
Changes will be made to the criteria determining when landfill tax is due, and to extend the scope of the tax to disposals of material at sites operating without the appropriate environmental authorisation. This follows consultations in 2016 and 2017 respectively.
Draft legislation and a policy paper: Landfill Tax: disposals not made at landfill sites were published on 13 September 2017, when the government also confirmed its intention to legislate from 1 April 2018.
Following consultation, changes have been made to further align the legislation with environmental law and ensure that operators of quarries will not be required to register for landfill tax. Statutory instruments will also be required. Draft instruments will be published in December 2017 and laid after Royal Assent to FB 2017-18.
The changes will have effect on and after 1 April 2018. The measure will apply to sites in England and Northern Ireland. Landfill tax was devolved to the Scottish Parliament in April 2015 and will be devolved to the Welsh Assembly from April 2018.
In support of the National Air Quality Plan published in July, the government will provide £220m for a new Clean Air Fund. This will allow local authorities in England with the most challenging pollution problems to help individuals and businesses adapt as measures to improve air quality are implemented. The government is launching a consultation alongside the Budget on options that could be supported by this fund. This will be paid for by the VED supplement that will apply to new diesel cars first registered from 1 April 2018 and a rise in the existing company car tax diesel supplement from 3% to 4%, with effect from 6 April 2018, for diesel cars which do not meet the RDE2 standards.
Air passenger duty
APD for the long-haul standard rate will be increased to £172 and the long-haul higher rate to £515 on and after 1 April 2019. Short haul rates, and the long haul reduced rate for economy passengers will be frozen at the 2018/19 levels. The long-haul rates for premium economy, business and first class will increase by £16 and for those travelling by private jet by £47. Rates for the 2020/21 will be set at Budget 2018.
Call for evidence on single-use plastics waste
A call for evidence will be launched in early 2018 on how the tax system or charges could help to reduce the amount of single-use plastic waste.
Total carbon price
The government is confident that the total carbon price, currently created by the combination of the EU emissions trading system and the carbon price support, is set at the right level, and will continue to target a similar total carbon price until unabated coal is no longer used. This will deliver a stable carbon price while limiting cost on business.
Revised indicative Carbon Price Support rates have been published for the 2020/21.