A consultation paper issued by HM Revenue & Customs on 9 August 2016 invites comments on whether to exempt from the Aggregates Levy all aggregate extracted by utility companies laying pipes or cables.

Aggregate Levy was introduced in 2002. It is a tax, payable at £2 per tonne, on the commercial exploitation of rock, sand, gravel and other aggregates.

Exemptions have been made where aggregate is an unavoidable by-product of some necessary construction works, including the laying or repair of utility pipes under streets or the laying of pipes and cables on building sites.

This results in situations where the majority of aggregate extracted (during, for example, a pipe-laying scheme) will be exempt, but some aggregate (not under a street and not from a building site) will be subject to the Levy. In turn this raises the difficulty of accounting for tax on part only of the aggregate extracted during a pipe-laying job. This administrative cost can outweigh the Levy itself.

The water sector has asked that all aggregate extracted during a pipe-laying scheme be exempt. HMRC recognises that other utility sectors are equally affected by the current rules.

Two options are under consideration:

  1. an extension to the scope of the existing exemptions; this would apply the exemption to aggregate extracted from private land outside the building site when laying pipes or cables;
  2. a new exemption, to cover all aggregate removed when laying utility pipes.

The consultation seeks views on a number of questions relating to these options, in particular concerning anticipated impacts of either option if introduced.

The consultation period closes on 18 October 2016. The paper states that government considers that there is a good case for proceeding. If the proposal goes ahead, draft legislation will be published in late 2016.