Finance Bill 2002: EXPLANATORY NOTE
CLAUSE 129: AGGREGATES LEVY: MISCELLANEOUS AMENDMENTS
SUMMARY
1. Clause 129 introduces a number of amendments in respect of the aggregates levy to take effect from 1 April 2002.
DETAILS OF THE CLAUSE
2. Sub-section (1) brings into effect Schedule 37, which makes amendments to the provisions contained in Part 2 of the Finance Act 2001 (aggregates levy).
3. Sub-section (2) amends section 197(2) of the Finance Act 1996 to correct an omission.
4. Sub-section (3) brings the provisions contained in the clause into effect from 1 April 2002.
BACKGROUND
5. The changes effected by this clause cover a number of technical amendments and clarification of policy, which have arisen largely through ongoing consultation on the aggregates levy with the quarrying industry.
SCHEDULE 37: AGGREGATES LEVY AMENDMENTS
SUMMARY
1. Schedule 37 makes various amendments to the provisions in the Finance Act 2001. The schedule:
- changes the reference to the word ?levy? in the charging provisions in section 16(1) to the word ?tax?;
- makes amendments to what is deemed to be aggregate and taxable aggregate for the purposes of the levy in respect of section 17;
- amends section 18 in respect of exempt processes;
- introduces alterations to Section 19 to clarify the meaning of commercial exploitation in certain circumstances;
- clarifies that for the purposes of the levy, a ?business? includes any activity of a Government department, local authority or charity;
- ensures that the Commissioners of Customs and Excise may, if they think fit, register premises which are used for mixing;
- removes references to interim or provisional insolvencies from the aggregates levy insolvency provisions;
- introduces new provisions to allow persons who are exempt from registration not to have to notify the Commissioners of Customs and Excise of their activities; and
- removes references to interim and provisional orders in respect of the insolvency procedures listed in the restrictions on powers to provide for set-off provisions.
DETAILS OF THE SCHEDULE
1. Paragraph 1 introduces the amendments to the provisions of Part 2 of the Finance Act 2001 (c.9) (aggregates levy), which are contained within Schedule 1 of the Finance Bill 2002.
2. Paragraph 2 changes the first reference to the word ?levy? in the charging provisions in section 16(1) of the Finance Act 2001 to the word ?tax?.
3. Sub-paragraph 3(2) inserts a new paragraph (d) to section 17(2) of FA2001 (meaning of taxable aggregate) to provide that aggregate subjected to commercial exploitation shall be taxable aggregate, except to the extent that it was removed from its originating site before the commencement date, or from any site which is required to be registered under the name of a person who is the operator, or one of the operators of the originating site.
4. Sub-paragraph 3(3) amends section 17(3)(d)(ii) of FA2001 by replacing the words ?otherwise than wholly or mainly? with the word ?not? in order to qualify beyond doubt that any aggregate arising from a highway construction project can only be exempt from the levy if it is a necessary by-product of that project and does not arise even partly as a result of the intentional extraction of that aggregate.
5. Sub-paragraph 3(4) amends section 17(4)(d) of FA2001 to ensure that both onshore and offshore drill cuttings arising from activities under licences issued under the Petroleum Act 1998 or the Petroleum (Production) Act (Northern Ireland) 1964 are exempt from the levy.
6. Sub-paragraph 4(2) amends the provision in section 18(2)(c) of FA2001, which defines the production of lime and cement from limestone or limestone and some other substance as an exempt process, to ensure that the production of lime and cement from limestone or limestone and anything else is classed as an exempt process.
7. Sub-paragraph 4(3) amends the provision in section 18(3) of FA2001 to remove the references to ?calcite? at (d) and ?flint? at (h) from the list of relevant substances.
8. Sub-paragraph 5(2) amends section 19(2)(b) of FA2001 in order to restrict the tax free movement of aggregate between sites, to movement of aggregate between sites which are registered under the same name.
9. Sub-paragraph 5(3) inserts a new subsection (3A) to confirm that for the purpose of the levy, ?business? includes any activity of a Government department, local authority or charity.
10. Sub-paragraph 5(4) amends the exemption in section 19(4) of FA2001 to remove the reference to ?adjacent land? and replace it with ?other land?, to achieve the effect that any aggregate won from farm land or forestry land may be exempt, if used unprocessed on that same site or any other land provided that both are occupied by the same person.
11. Paragraph 6 clarifies that for the purposes of the levy, a ?business? includes any activity of a Government department, local authority or charity.
12. Paragraph 7 inserts a new paragraph (ca) after Section 24(6)(c) to allow the Commissioners of Customs and Excise to register premises which are used for mixing (otherwise than in permitted circumstances).
13. Paragraph 8 removes paragraphs (g) to (j) of section 37(7) of the FA2001 with the effect that the appointment of an interim receiver and other interim or provisional orders will not be regarded as insolvency procedures for the purposes of the levy.
14. Sub-paragraph 9(2) replaces sub-paragraph (1) of Paragraph 1 of Schedule 4 to FA2001with three new sub-paragraphs (1), (1A) and (1B). Sub-paragraph (1) provides for an unregistered person who is required to be registered for the purposes of the levy, or who has formed the intention of carrying out taxable activities that are registrable, to notify the Commissioners of that fact. Sub-paragraph (1A) provides for an unregistered person who would be required to be registered except for an exemption from registration, or who has formed the intention of carrying out taxable activities that would be registrable but for such an exemption, to notify the Commissioners of that fact, in such cases or circumstances as prescribed in regulations. Sub-paragraph (1B) clarifies that for the purpose of these provisions, taxable activities are deemed to be ?registrable? if a person carrying them out is, by reason of doing so, required to be registered for the purposes of the levy.
15. Sub-paragraph 9(3) ensures that reference to the new sub-paragraph (1A) is made in sub-paragraphs (2) and (5) of Paragraph 1 of Schedule 4 to FA2001, in respect of penalties for failure to comply with these provisions.
16. Paragraph 10 removes paragraphs (f) to (h) of paragraph 11(2) of Schedule 8 to the FA2001 with the effect that interim or provisional orders will not be regarded as insolvency procedures for the purposes of the levy, and therefore will not be covered by provisions on restriction on powers to provide for set-off.
BACKGROUND
17. Many of these amendments have arisen through consultation with the quarrying industry.
18. The change at paragraph 2 above is necessary to remove inconsistencies with references to the expression ?tax? in other legislation and avoid potential problems with cross references to the expression ?tax? in other Acts.
19. The amendment detailed at paragraph 3 above protects against forestalling of the levy by disallowing the tax-free movement of aggregate from the originating site to a connected site prior to the commencement date.
20. The amendment at paragraph 4 above clarifies the restrictions of the exemption for aggregate necessarily arising from highway construction or maintenance, whereas the amendment at paragraph 5 widens the scope for the beneficial use of drill cuttings as alternatives to virgin aggregates in line with the aims and objectives of the levy.
21. The amendment detailed at paragraph 6 above clarifies that all inputs into lime or cement manufacture are exempt.
22. The amendment detailed at paragraph 7 above removes the outright exemption for calcite, to avoid distortion of the market for calcium carbonates. Instead, the non-aggregate applications of calcite may be relieved under Section 30(1)(c) of FA 2001. This paragraph also removes the outright exemption for flint, so that the aggregate use of flint is taxable, and non-aggregate use may instead be relieved under Section 30(1)(c) of FA2001.
23. The change detailed at paragraph 8 above will help maintain accurate audit trails for the movement of aggregate, by preventing the tax-free movement of aggregate to a variety of sites by a variety of operators.
24. The change detailed at paragraph 9 above provides clarification of existing policy, and the change at paragraph 10 above is designed to help reduce compliance costs for forestry and agricultural businesses.
25. Paragraph 11 above sets out a consequential amendment following the insertion of the same provision in respect of the meaning of commercial exploitation at section 19 (3A).
26. The change at paragraph 12 above extends the registration of premises provisions. The new provision brings sites which are used for mixing within the registration provisions to enable Customs to register them where appropriate and will enable a clear audit trail to be maintained.
27. The amendment at paragraph 13 above brings the aggregates levy insolvency provisions in line with those for VAT.
28. The amendment set out at paragraphs 14 and 15 above arises from the Government's commitment to reduce burdens on business, by allowing categories of trader who are exempt from registration not to have to notify Customs of their activities unless this is specifically provided for in regulations. Consequential amendment to the regulations will be made in due course.
29. The amendment at paragraph 16 above reflects the amendments to the corresponding insolvency provisions for the levy, brings the provisions in line with VAT, and ensures that in certain circumstances, Customs can off-set debits against credits.