Some might say that Chancellor Rishi Sunak caught a lucky break being able to present his first, and hastily pulled together, Budget last week; on the very day that Italy announced it was closing its borders. Indeed, even the following day, with Trump announcing a ban on flights from mainland Europe, Budget news was pushed down the page.

While many of the Chancellor’s announcements will impact the sector by default, a few have the potential to impact metal recyclers more significantly. Firstly, Mr Sunak confirmed his plans to remove the tax exemption on red diesel, albeit in two years’ time. While the agricultural, rail, domestic heating and fish farming sectors will be exempt, heavy users such as the scrap sector will not be.

Tax-exempt red diesel, which is used in off-road plant and equipment, is currently some 46p cheaper per litre than regular diesel. For an industry that relies on diesel-powered generators, mobile plant, etc. the cost could surpass £500m a year.

With two years grace before the change is implemented, the BMRA will lobby Government for the metals recycling sector to be included on the exempt industry list given our strategic importance to the nation’s sustainability performance and adoption of a circular economy model.  

Licenses and tax avoidance
A second anticipated announcement was that of hidden economy conditionality, which will target businesses that are not registered for the correct taxes or that fail to declare a source of income.

When this was first mooted, BMRA raised concerns that it would not, in all likelihood, affect the incidents of tax avoidance in the sector as it would only target legitimate, licensed sites that are more likely to be compliant already. Illegal, unlicensed sites will continue to operate business as normal, undetected.

Instead, the Budget confirmed Government’s intention to introduce a tax registration check linked to the licence processes in England and Wales for:

• Scrap metal dealers
• Taxi drivers
• Private hire vehicle drivers and/or operators.

The policy, which comes into effect from April 2022, will affect both first-time licence applications and licence renewals. Licensing bodies will have to direct first-time applicants to guidance about their potential tax obligations. For applicants seeking to renew their licence, licensing bodies will need confirmation that a dealer has completed the check before making a decision on their application. This will be done using a code automatically generated through the existing tax ‘Gateway’ system.  

VAT postponement imports
As part of its plans to re-examine the VAT and excise system following Brexit, Government has announced that, as of 1 January 2021, postponed accounting for VAT will apply to all imports of goods, including from the EU. Postponed VAT accounting means that instead of paying VAT upon import, VAT-registered businesses can account for that VAT on their VAT returns.

Other waste sector changes
Unsurprisingly, the Chancellor confirmed that manufacturers and importers of plastic packaging containing less than 30 percent recycled content will be taxed at a rate of £200 per tonne. Once again manufacturers have until the magic date April 2022 to prepare. The Chancellor stated that the move should “increase the use of recycled plastic and packaging by 40 percent, equal to carbon savings of nearly 200,000 tonnes”.

The Budget also promises an additional £700,000 allocated to establish a packaging Extended Producer Responsibility scheme, designed to encourage producers to make their packaging more recyclable and reduce the amount of unnecessary packaging in their products.

In addition, Government has promised funding for a digital waste tracking system to provide better data on waste transport, as well as £2 million to improve evidence on where fly-tipping happens and the best ways to deter it.