In this year's Programme for Government, and against a background of continued focus on sustainability and delivering their strategy and objectives in respect of the circular economy, the Scottish Government has set out a commitment to introduce an Aggregates Levy Bill for a Scottish Aggregates Levy that will replace the existing UK Aggregates Levy. The introduction of the devolved tax is anticipated to take place on 1 April 2025.
The background to the new levy is that in 2014 the Smith Commission was established and had as its function the reaching of agreement between the political parties on the devolution of further powers to the Scottish Parliament. In its recommendations, published in November 2014, the Commission proposed that that the power should be afforded to the Scottish Parliament to legislate introducing a new tax on the commercial exploitation of aggregates in Scotland, replacing the UK Aggregates Levy, once the litigation already underway in respect of the UK Aggregates Levy was concluded. That power to legislate is contained in the Scotland Act 2016, and with that litigation having now been resolved, the Scottish Government is now consulting to inform the terms of a Bill on the new Scottish levy, which it wants to be "distinctive", suggesting some degree of divergence from the current UK Aggregates regime. That consultation is open until 4 December 2022, with the link provided here:
By way of reminder, a few key points to note about the current UK Aggregates Levy are set out below:
- The tax is applicable to rock, gravel or sand, and anything incorporated within these or which naturally occurs mixed with these, that has been:
- dug from the ground;
- dredged from the sea in UK waters; or
- imported.
- Where a business exploits aggregate in the UK, that business is required to register with HMRC. This is, therefore, particularly relevant if, for example, your business operates a quarry, undertakes quarrying activities or imports these materials.
- The amount of aggregate produced or sold must be reported to HMRC each quarter.
- Every quarter, businesses must tell HMRC how much aggregate has been produced or sold.
- For each tonne of sand, gravel or rock produced or sold, £2.00 is due to paid to HMRC as the levy. Less than £2.00 will be due for smaller amounts, e.g. £1.00 per half tonne.
- Payment is still due to HMRC where the materials have been imported.
- Certain exemptions and reliefs are available, and further information on those is available here:
https://www.gov.uk/topic/business-tax/aggregates-levy
The consultation document is clear that rates will not be set out at this stage, or in the Bill, but will follow later, via secondary legislation. For businesses currently operating in this area, and those who are likely to do so in the future, it will be a worthwhile exercise to take the time to consider and respond to the Scottish Government's consultation, particularly insofar as it invites views on:
- the matters that should be taken into account when rates are being set in the future;
- the definition of the terms "aggregate" and "commercial exploitation";
- the scope of the tax and, in particular, the extent of the exemptions and reliefs which the new Scottish Bill should accommodate, and whether, how and why those should be different from those in place under the UK regime;
- the interaction between the new Scottish levy and the existing levy, which will be of particular interest to companies with cross-border interests;
- the taxation approach to importation;
- the establishment of a sustainability fund; and
- the approach to compliance and monitoring/safeguarding compliance.
Our tax, construction, projects, and government, regulation and competition colleagues will be delighted to provide support and advice on responding to this consultation. If we can help, please get in touch.
Contributors
Director of Corporate Tax
Partner
Partner & Solicitor Advocate
