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HMRC to ‘conclude’ if VAT exemptions distort market

By 31/10/2016News

EXCLUSIVE: HMRC is to review evidence as to whether VAT exemptions offered to councils carrying out commercial waste collections ‘distort market competition’ – ahead of a second legal challenge from the private sector.

In a letter to the Environmental Services Association (ESA) and other interested parties, HMRC has requested data on commercial waste collections by Friday (4 November), which it claims could assist in  relation to the ‘distortion of competition question’.

Since 2011, councils have been exempt from charging VAT on trade waste collections as part of a special legal regime

Since 2011, councils have been exempt from charging VAT on trade waste collections as part of a special legal regime

In its letter, dated 21 October, HMRC notes: “As you know, we are proposing to notify you and others of our concluded view in relation to this issue by the end of January, but we envisage giving you an indication of our thinking before Christmas and inviting your representations.”

Max Recycle

It comes as the Durham Company – which trades as Max Recycle – intends to launch the second stage of its judicial review, which will argue that VAT exemptions offered by HMRC to councils that collect commercial waste “effectively constitute state-aid”.

The North East-based waste business has also submitted an appeal application, after a High Court Judge last month dismissed the first part of its case which argued the exemptions were ‘anti-competitive’.

The Judge said he was “unwilling to assume” that any local authority had been “acting beyond its powers” and ruled that the exemptions were valid under a special legal regime.  The decision was described by the Local Government Association as a “huge victory for councils” (see story).

It is understood that the progress of Max Recycle’s legal challenges could rest on the conclusions drawn by HMRC from its data request.


HMRC has commissioned economic consultancy firm Oxera to gather information on the following:

  • The average prices charged by private commercial waste collection operators
  • A breakdown of revenues by private commercial waste collectors for the period 2008-2015
  • Any studies of the market of commercial waste collection
  • Estimates of the total volume of commercial waste collected by private operators
  • If any new operators entered the market for commercial waste collection after 2011
  • Which customer groups ESA members perceive as ‘key’ to commercial waste collections, and;
  • If prices are negotiated with customers according to market segmentation


When contacted by, HMRC said it was not “conducting a survey on commercial waste collections”.

However, a spokesman confirmed that the revenue body is reviewing data from parties involved in the ongoing litigation regarding VAT on commercial waste collections.

Jacob Hayler, chief executive of ESA, said: “HMRC has asked us some questions relating to the distortion of competition question which remains unresolved in relation to the VAT case.”

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Source: Waste Managment