06 October 2025
Zizhen Yang and Joshua Stevens take a look at environmental taxes, in particular landfill tax and the forthcoming carbon border adjustment mechanism (CBAM).
1:30 Background to environmental taxation. The primary objective is policy rather than revenue raising – to discourage activities deemed environmentally harmful.
3.56 Landfill tax (introduced 1 October 1996). Introduced with the intention to drive waste up the waste hierarchy away from disposal and towards recycling, reuse, and prevention. This indirect tax is levied at a lower rate (non-hazardous, inert waste) and standard rate (hazardous or active waste) and charged by the tonne. The level of taxation under the standard rate has increased significantly since 1996. Review of case law: WRG; Patersons; Biffa, Devon Waste Management & Veolia. Devolution of the legislation within the UK. Revised legislation in 2018 to discourage illegal waste disposal at non-landfill sites.
17:32 Consultation on the reform of landfill tax (April 2025). Proposes alignment of the lower rate with the standard rate and aims to cut back/eliminate exemptions and reliefs. This supports net zero and other environmental goals. Explanation and analysis of the proposed reforms and summary of the response thus far.
40:00 Carbon border adjustment mechanism (CBAM) is an entirely new tax from January 2027. Intended to tackle carbon leakage and level the playing field for UK producers (thus preventing production moving abroad where there are fewer/no restrictions on carbon production). EU already has a transitional scheme. CBAM is an import tax on products coming into the UK within 5 categories – aluminium, cement, fertilisers, hydrogen, iron and steel. It will be paid by importers who will need to register and submit CBAM returns. How is it calculated and what are the difficulties going to be? UK exporters should already be taking the EU CBAM into account which is similar but has differences to the UK CBAM.
54:20 The future for taxes aimed at protecting the environment?
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Case citations and legislation
Legislation
- Part III and Schedule 5 of the Finance Act 1996
- Section 42 and Schedule 12 of the Finance Act 2018
- EU Landfill Directive (1999/31/EC)
- Consultation on Reform of Landfill Tax in England and Northern Ireland (April 2025)
- Paris Agreement 2015
- s1 Climate Change Act 2008Renewed Agenda for European Union – United Kingdom cooperation common understanding (May 2025)
- Environment Act 2021
- The Environmental Targets (Residual Waste) (England) Regulations 2023, regulation 2
Cases
- Waste Recycling Group Ltd v HMRC [2008] EWCA Civ 849; [2009] STC 200
- Patersons of Greenoakhill Ltd v HMRC [2016] EWCA Civ 1250; [2017] 1 WLR 1210; [2017] STC 225
- Devon Waste Management Ltd v HMRC [2021] EWCA Civ 584; [2021] 4 WLR 89; [2021] STC 990
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