UK defers aggregates levy changes

The aggregates levy is a UK tax on the commercial exploitation of rock, sand and gravel, first introduced as an environmental tax to encourage the recycling of aggregate. In addition to applying to the quarrying industry, however, it often applies when aggregate is extracted over the course of an infrastructure project.

The deferral, announced last week as part of the spring Budget, concerns two changes to the levy: the introduction of a general exemption for aggregate incidentally extracted as part of a construction project, which will replace piecemeal existing exemptions; and a new limit to the existing exemption for aggregate which is extracted from ‘borrow pits’ – temporary sites used to extract aggregate for a specific purpose – before being returned, unmixed, to the same sites.

The generalised incidental extraction exemption, which was originally proposed by Pinsent Masons in response to a government consultation, will be welcomed by businesses in the infrastructure industry. This is because it reduces the arbitrary dividing lines for construction by-products and makes administration of the levy simpler and less burdensome. However, Steven Porter, tax expert at Pinsent Masons, said : “The delay is frustrating for construction groups who had been making adjustments to their approach and models in anticipation of the change.”

The reaction to the delay to the limitation on the exemption for borrow pits is more mixed.

Sam Wardleworth of Pinsent Masons said: “The change is unwelcome for infrastructure and construction businesses since it will increase the cost of their projects where borrow pits are utilised. Although the delay means that this cost will not be added to those projects for a further 6 months, many businesses had been making preparations and factoring the cost into financial models since its announcement in September and will therefore be frustrated at the time and effort involved.”