Aggregates Levy: changes affecting aggregate from construction sites
Published 20 July 2022
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This publication is available at https://www.gov.uk/government/publications/aggregates-levy-changes-to-exemptions/aggregates-levy-changes-affecting-aggregate-from-construction-sites
Who is likely to be affected
Businesses involved in construction and civil engineering works.
General description of the measure
Aggregates Levy is an environmental tax on rock, sand and gravel (aggregate) extracted for use as bulk fill in construction.
This measure makes two changes affecting the treatment of aggregate extracted in the course of construction.
Firstly, the exemption for aggregate which is returned, unmixed, to the site from which it was won will be limited to certain circumstances. To be exempt, the aggregate will have to be returned to the original site for a purpose connected to winning aggregate or other minerals (such as building haul roads or ramps). This will mean that taxable aggregate extracted from a ‘borrow pit’ on a construction site and used for general construction purposes on that site will no longer qualify for this exemption. A borrow pit is a temporary extraction pit which provides aggregates for a specific construction project. This change will not affect aggregate extracted and used unmixed on the same site, or a related site, for agricultural or forestry purposes, which will continue to be exempt.
Secondly, a new exemption will be introduced for aggregate arising unavoidably as a by-product of construction. This will replace several existing exemptions for unavoidable by-product from specific types of construction, and so will simplify the tax. The new exemption will also extend the scope of what is exempted to by-product aggregate from infrastructure projects not currently covered, in line with the rationale of the tax.
Policy objective
The changes are in response to concerns raised by different sectors affected by Aggregates Levy.
The first part of this measure will ensure fairness by taxing borrow pit aggregate extracted for construction use in the same way as commercially-produced construction aggregate. This will restore the intended scope of the levy.
The second part of the measure will expand on, and simplify, the exemptions for unavoidable aggregate arising as a by-product of construction. This will ensure fairness across different types of infrastructure building and, in particular, ease burdens for utility providers whose activities are only partly covered by exemptions at present.
Both parts of the measure will strengthen the levy’s environmental objective to encourage the efficient extraction and use of all aggregates. By exempting recycled and by-product aggregate, the levy encourages the use of these materials in place of primary virgin aggregate.
Background to the measure
In 2019, the government carried out a comprehensive review of Aggregates Levy with a wide range of stakeholders. In response to concerns from different sectors raised during the review, HMRC consulted in 2021 on two proposals relating to aggregate from construction sites.
The first proposal, in response to concerns raised by the aggregates industry, was to amend the levy so that taxable borrow pit aggregate extracted for use on a construction site could not avoid the tax. Following support for the proposal from the industry, the government announced in its response to the consultation, published in November 2021, that it would publish draft legislation to implement the change in a future Finance Bill.
The consultation also proposed a new exemption for by-product aggregate from laying underground utility pipes. This was in response to a request from the water and wastewater industry, who said that they faced additional burdens because Aggregates Levy exemptions only covered by-product from some of their activities.
The government agreed with many respondents that there was a good case for this new exemption. However, it also considered an alternative suggestion from a respondent to replace some existing exemptions with a general one for by-product aggregate from a construction project. The government announced that HMRC would carry out further work and consult informally on this idea.
After informal discussions with affected stakeholders, the government is publishing draft legislation on both the borrow pits issue and the general exemption for by-product aggregate from construction.
Detailed proposal
Operative date
The measure will have effect on and after 1 April 2023.
Current law
Primary law for Aggregates Levy is contained in Part 2 of Finance Act 2001, sections 16 to 48 and Schedules 4 to 10. Section 17 sets out exemptions from Aggregates Levy. Section 19 defines ‘commercial exploitation’ of aggregate, which is the point at which the levy applies. Section 19 also sets out when exploitation of aggregate is not ‘commercial’ which means that the levy does not apply in those circumstances.
Relevant secondary legislation is contained in the Aggregates Levy (Registration and Miscellaneous Provisions) Regulations 2001 (S.I. 2001/4027) as amended.
Proposed revisions
Legislation will be introduced in Finance Bill 2022-23 to amend Finance Act 2001 as follows:
Section 17 will be amended to remove the exemptions for unavoidable aggregate resulting from:
- laying foundations, pipes or cables on the site of a building or proposed building
- building or improving a highway
- building or improving a railway, tramway or monorail
- street works carried out under specified legislation
The definition of “highway” will also be removed. A new exemption will be inserted into section 17 for unavoidable aggregate resulting from the construction or improvement of any, or any proposed:
- structure
- infrastructure relating to transportation or utilities
Section 19 sets out that aggregate that is returned, unmixed, to the site from which it was won is not commercially exploited (so no levy applies). This will be amended so that, for there to be no commercial exploitation, the aggregate must be returned, unmixed, to the site from which it was won for a purpose connected with winning aggregate or other minerals from the site.
The amendments will also ensure that there is no change to the position for aggregate returned unmixed to the same site, or to another site within the same business, for agricultural or forestry purposes. The additional requirement will not apply in these circumstances.
The Aggregates Levy (Registration and Miscellaneous Provisions) Regulations 2001 will be amended so that there will be no requirement to register for Aggregates Levy in respect of any aggregate falling under the new exemption in section 17.
Summary of impacts
Exchequer impact (£million)
| 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 | 2027 to 2028 |
|---|---|---|---|---|---|
| Empty | Empty | Empty | Empty | Empty | Empty |
The table has been left empty as the final costing will be subject to scrutiny by the Office for Budget Responsibility and will be set out at the next fiscal event.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There is expected to be no impact on individuals as this measure only affects businesses. There is expected to be no impact on family formation, stability or breakdown.
Equalities impacts
HMRC does not hold information about the protected characteristics of those individuals involved in these sectors, but it is not anticipated that there will be impacts for those in groups sharing protected characteristics.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on an estimated 50 businesses or fewer each year who may in future need to either register for the levy because borrow pit aggregate now falls within the scope of the levy, or who may no longer need to register for the levy because aggregate arising from specific purposes will now be covered by an exemption.
One-off costs would include familiarisation with the changes and could include registration and setting up systems to account for the levy. Continuing costs could include the cost of completing returns for borrow pit aggregate that is liable for the levy. For some, a continuing saving could include no longer having to complete a return due to the broadened exemption.
Customer experience could be negatively impacted for those businesses who may be required to register for the levy, given the associated administrative burdens they might experience. However, to support these businesses HMRC would include clear and targeted guidance to advise them of the changes. The changes are not expected to impact civil society organisations.
Operational impact (£million) (HMRC or other)
It is not anticipated that implementing this change will incur any additional costs or savings for HMRC.
Other impacts
This measure supports Aggregates Levy’s objective to incentivise the use of recycled and by-product aggregate over primary virgin aggregate, to encourage the efficient extraction and use of natural mineral resources.
Other impacts, including carbon impacts, have been considered and no significant impacts have been identified.
Monitoring and evaluation
The measure will be monitored through information collected from registrations and tax returns, as well as through communication with the quarrying and construction sectors.
Further advice
If you have any questions about this change, email: aggregateslevyconsultation@hmrc.gov.uk.