The Association for Organics Recycling (AfOR) is lobbying the government over the new business rates due to come into effect in April next year. Those who are already paying could see their rates rise by as much as 75%.
AfOR is concerned that the tax is being based on the size of a business premises. The trade body believed that other industries such as aggregates are not taxed in this way - their business rates are worked out in relation to the tonnages they process. AfOR wants to see this approach applied to the recycling industry.
In order to build a case, it is urging recycling companies to get in touch with details of their old tax and what they are being asked to pay now. It has pledged to lobby on behalf of the whole industry and not just composters.
AfOR has also had assurances that the Valuation Office Agency (VOA) – the organisation administering the tax –will re-examine how the tax is applied. But AfOR needs to show that tonnage throughput is used across the industry as a measure to calculate rent and so therefore should be used by VOA to calculate value – so it is particularly interested in cases that prove this point.
A letter from an officer in the Department for Communities and Local Government stated: “I understand from the VOA that has stated is happy to look at any evidence from the industry that actual market rents of the hereditaments are based on tonnage throughput as suggested.”
AfOR managing director Jeremy Jacobs said: “The larger sites are now being hit heavily. Those that were paying £10-15,000 are now being asked to pay £60-70,000 in some cases. Business rates are recalculated every five years but the recycling sector has fallen under its radar and so many businesses have not had to pay anything before.
“Suddenly it’s been seen. It’s a cash cow and they have decided to get in there.”
For the purposes of the tax, composting has been reclassified as a commercial activity rather than an agricultural one. This means that small farms recycling material back onto their own fields, that have never had to pay this tax before, are now being asked to pay. Jacobs said this will act as a disincentive with some abandoning it completely. He added: “It will be too much for them to bear. It will be another nail in the coffin for them.”
There are a number of other problems AfOR has identified with the tax. It is concerned that the rateable value – used as a basis to work out the tax - also considers buildings, plant and machinery on a premises. But Jacobs argued that composting is “going more enclosed” because more food waste is being treated and need more buildings to help mitigate odours. Therefore those companies by trying to prevent bad smells for their local population and use the most up-to-date technology will be penalised.
Jacobs argued that as well as disincentivising recycling, local authority budgets will suffer. He said: “Who is going to pay for these added charges? It will be put back – they will have to increase the gate fee – it will go back to local authorities who will be charged more. So nobody will win.”
A VOA spokesman said: 'The VOA can only use the rental evidence available, and at the moment we have been provided with little evidence to suggest that recycling companies are charged rents based on the amount of recycling material they process. If the recycling industry changes the measure used to calculate rent, then the VOA would consider that evidence in determining rateable values. We are working closely with the recycling industry to discuss their concerns.
'We urge all businesses to check the details of the new valuation of their business in the letters we have sent them and on our website www.voa.gov.uk. They should get in touch if there are any errors so that we can put it right now before local councils issue the new rate bills in early 2010.”