SLfT7001 - The Scottish Landfill Communities Fund

SLfT7001 - Introduction

This guidance has been produced by Revenue Scotland to help landfill operators understand their roles and responsibilities under the Scottish Landfill Communities Fund (SLCF).

The SLCF scheme encourages landfill site operators to provide contributions to organisations (‘approved bodies’) approved by the regulator, which in turn fund community and environmental projects. The SLCF only applies to Scottish Landfill Tax (SLfT) and not to UK Landfill Tax. 

Under the scheme you can claim a tax credit for contributions you make to approved bodies. These organisations are those registered by SEPA, the regulatory body responsible for regulating the scheme on behalf of us.

You can claim a tax credit equal to 90% of any qualifying contribution that you make to an approved body for spending on a project meeting the objects of the scheme subject to a maximum percentage of your SLfT liability during your contribution year.

The maximum percentage credit may be liable to change each year as announced in the Scottish Budget and agreed by the Scottish Parliament. The current percentage credit is 5.6% of your SLfT liability.

A contribution payment must have been received by the approved body before it can be declared on the SLfT return and the appropriate credit claimed.

Unless indicated otherwise, references in this chapter to:

• ‘the regulator’ mean the Scottish Environment Protection Agency or ‘SEPA’;
• ‘the scheme’ mean the Scottish Landfill Communities Fund;
• 'we', ‘us’ or 'our' mean Revenue Scotland; and
• 'you' or 'your' mean a landfill site operator (or the person registered with us to carrying out taxable activities in relation to SLfT).

SLfT7002 - Background and mechanism of the SLCF

SLfT guidance on the background and mechanism of the SLCF, including roles and responsibilities of the regulator, approved bodies and projects.

Under the LT(S)A 2014 the Scottish Ministers have the power to set the credit rate and objectives of the scheme whilst we (Revenue Scotland) have responsibility and powers to control and administer the SLCF scheme. The provisions in the Act also require that a landfill operator is only entitled to credit if they meet certain conditions i.e. to pay a sum only to an approved body.

The Scottish Landfill Tax (Administration) Regulations 2015 set out the legislative provisions underpinning the SLCF. The objects of the scheme are contained in regulation 29(5) and include protection of the environment, enhancements to the environment (such as public amenities in the vicinity of a landfill site), the maintenance, restoration or repair of a building of historic interest and projects that help sustain and improve the biodiversity of the landscape. Further detail on the objects of the scheme can be found in SLfT7005.

The regulator

The regulator, SEPA, will focus its regulatory effort on the approved bodies and will determine whether these organisations comply with the requirements of the regulations. SEPA will check that approved bodies have appropriate systems and procedures in place to comply with the obligations of the scheme. On occasion, SEPA may also have cause to examine the work undertaken by projects insofar as it relates to an assessment of whether an approved body has met its requirements under the regulations.

You should submit details of any contributions you receive from third parties to SEPA. We will reconcile data from the SLCF with SLfT returns you have made to us. A contribution payment must have been received by the approved body before it can be declared on the SLfT return and the appropriate credit claimed.

SEPA will assess all applications to become an approved body and keep and publish an accurate register. Registration commenced on 1 April 2015. Projects will enrol with an approved body and not the regulator.

If an organisation is not successful in their application to become an approved body, or they are an approved body who has had their registration revoked, they can appeal this decision to an independent panel set up by the Scottish Ministers.

Approved bodies

You will make contributions direct to an approved body (all such contributions will be notified to us as part of the SLfT return) and the approved body must notify SEPA within 7 days of receiving funds from you. Approved bodies enrol projects, ensure that money is spent in accordance within its objects and report to the regulator.

All approved bodies will be registered by the regulator SEPA, who act on behalf of us. The maximum administration cost for approved bodies is set at 10%, including any other costs such as VAT. It is anticipated that all approved bodies will keep administration costs as low as possible to ensure more funds go to the good causes intended. Failure to keep administration costs below 10% could result in SEPA placing conditions on the approved body or ultimately us revoking its registration.

When considering funding a project, approved bodies are not permitted to discriminate on the grounds of geographic location (other than in respect of vicinity rules) or the objective of the project.

Projects

Projects would seek access to funding from the scheme by contacting an approved body. If approached about securing funding then we, SEPA or landfill operators will point such projects to the register of approved bodies available from SEPA’s website.

SLCF-related money must be spent on the objects of the fund. Where these objects refer to ‘in the vicinity’ of an authorised or permitted landfill site or transfer station:

• landfill site has the same meaning as in section 12(1) of the LT(S)A 2014. You do not have to contribute to the scheme for your landfill to be included as a ‘landfill’ for the purpose of the vicinity test, as long as you (the landfill operator for the site) were eligible at some point to contribute to the scheme;
• a ‘transfer station’ is a facility authorised by SEPA for the storage and/or treatment of waste and which sends more than 2500 tonnes of waste per annum offsite for the purpose of landfill with a destination either inside Scotland or to the rest of the UK; and
• the ‘vicinity of a landfill site or transfer station’ is regarded as being within a 10 mile radius.

As the environmental regulator for transfer stations and landfill sites, SEPA may be contacted to establish which sites may be applicable under the scheme. SEPA have published a map of these - Scottish Landfill Communities Fund

The distribution mechanism for the SLCF is summarised by the diagram below.

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SLfT7003 - Qualifying contributions

SLfT guidance on the conditions that must be met before a contribution is deemed as a qualifying contributions for the purposes of the SLCF.

A contribution is a qualifying contribution if the following conditions are met:

SLfT7004 - Approved bodies

SLfT guidance on the information that landfill operators need to know and understand about approved bodies in the context of the SLCF.

This section is designed to help you understand how the regulations could limit your interaction with approved bodies.

An approved body that wants to register with SEPA must not distribute profit or income other than for the furtherance of its objects, but it does not have to be a charity. It can be a body corporate, a trust, a partnership or other unincorporated body, but must not be controlled or managed by one or more of the following:

• local authorities;
• bodies corporate controlled by one or more authority;
• registered landfill site operators; or
• a person connected with any of the above (see the definition below).

As well as not controlling an approved body, the following must not be involved in its management. A person:

• who controlled or managed an approved body that had its registration revoked unless they asked to be removed from the register;
• convicted of an indictable offence;
• disqualified from being a charity trustee;
• connected with any of the above (see further below); or
• to whom a mental health order has effect.

The work of a body must not benefit a landfill operator who contributed to it and claimed SLfT credits or a third party contributor (except where they benefit as a class of persons not related to their role as a landfill operator). The body is also prevented from carrying out any work required to be done by the site operator under any enforcement notice, planning permission, approval or consent, or other statutory consent or approval.

‘Connected’ takes the same definition as provided in section 1122 of the Corporation Tax Act 2010 and is used to determine whether a person or persons are connected. While it is not possible to cover every aspect of this definition in this guidance, a connected person includes a brother, sister, spouses, partnerships and associated companies. An employee is not connected to an employer purely on the basis of employment (although the employee might be connected as a director or major shareholder who controls the employing company).

Checking whether an approved body is registered

If you wish to claim tax credits, you are responsible for ensuring that an approved body is registered by SEPA before you make a qualifying contribution to it. There are a number of checks you can carry out to ensure that a body is approved, including checking the list of registered approved bodies (including any revoked registrations) that SEPA publishes on its website. 

If you are in doubt about anything concerning the registration of an approved body contact SEPA.

The Scottish Landfill Tax (Administration) Regulations 2015

SLfT7005 - Approved objects for the SLCF

The objects of the SLCF scheme are contained in regulation 29(5) of The Scottish Landfill Tax (Administration) Regulations 2015 and can be summarised as follows:

Anywhere in Scotland

A) Reclamation, remediation, restoration or any other operation intended to facilitate economic, social or environmental use on land with restricted use due to a previous activity;

B) Community based waste prevention, recycling and reuse projects;

In the vicinity of a landfill site or transfer station

C) Provision, improvement, maintenance of a public park or other not for profit public amenity;

D) The conservation or promotion of biological diversity through the provision, conservation, restoration and/or enhancement of a natural habitat of Scotland or the maintenance or recovery of a species in its natural Scottish habitat;

E) Maintenance, repair or restoration of historic structures or sites of religious worship, historic, archaeological or architectural interest open to the public in Scotland, including their landscape context;

In order to fund administration costs

F) Provide financial, administration or similar services to a body enrolled with an approved body.

Please note that the regulations also require objects B, C, D and E to be ‘for the protection of the environment’. In the context of the SLCF the term ‘environment’ is not restricted to the natural environment and may be applied in a wider sense, including to the physical and built environments.

Further guidance on the registration process for approved bodies and what is expected of such bodies and the projects they enrol and fund is available from SEPA. Approved bodies can be contacted directly to establish what requirements they have in place to enable a project to enrol with them.

SLfT7006 - Calculating your SLfT liability in relation to the SLCF

The maximum amount of credit you can claim in relation to the SLCF is 5.6% of your total SLfT liability in the period 1 April to 31 March. Separate guidance is available covering How to make an SLfT return and pay Scottish Landfill tax.

A contribution payment must have been received by the approved body before it can be declared on the SLfT return and the appropriate credit claimed.

SLfT7007 - Contribution years

Your first contribution year starts from your effective registration date and ends on the following 31 March. Thereafter your contribution year will run from 1 April to 31 March.

SLfT7008 - How to claim for credit in relation to the SLCF

SLfT guidance on how to claim for credit in relation to the SLCF when you are registered or un-registered.

Amount that can be claimed

You cannot anticipate your SLfT payments. The amount of credit that you can claim on your first return in the contribution year is the maximum percentage credit of that period's tax liability. In the second period the amount of credit is the maximum percentage credit of the  total tax liability for the first and second periods, less  any credit that you claimed for the first period, and so on.

Claiming credit in relation to the SLCF in your SLfT return

To claim credit in relation to the SLCF, you must include the amount of credit you are claiming in the ‘Credit for bodies concerned with the environment claimed’ section of the relevant SLfT return.

Separate guidance is available covering How to make an SLfT return and How to pay SLfT

In order to give you time to calculate your SLfT liability for a particular accounting period (and so you can then make a qualifying contribution), you can also claim for contributions made after the end of the accounting period but before the SLfT return for that period is due to be received by us (see SLfT5002 for these dates).

Where the total credit you have claimed exceeds the total tax due for the accounting period, we will repay you an amount equal to the excess.

The Scottish Landfill Tax (Administration) Regulations 2015 regulation 15

Claiming credit in relation to the SLCF if you are no longer registered for SLfT

If you are not registered with us as a registrable person for SLfT purposes (because we have cancelled your registration), you should make your claim for credit in relation to the SLCF by emailing to us at the contact email address provided on our website, setting out the events that have made you entitled to credit.

If we are satisfied that you are entitled to credit (and have not previously had the benefit of that credit), we shall pay you an amount equal to the credit. We will not make such a payment to you if you have failed to make all the SLfT returns you were required to make.

Where the total credit claimed by yourself exceeds the total tax due for the accounting period, we will repay you an amount equal to the excess.

The Scottish Landfill Tax (Administration) Regulations 2015 regulation 16

SLfT7009 - Circumstances affecting entitlement to credit for the SLCF

Circumstances which can affect your entitlement to credit in relation to the SLCF include:

• donations from other organisations (third parties) – see SLfT7010
• an approved body’s repaying contributions – see SLfT7011
• an approved body transferring a contribution to another approved body – see SLfT7012
• an approved body not spending a contribution on a project fulfilling an approved object – see SLfT7013
• an approved body ceasing to be registered – see SLfT7014
• an approved body’s accounting practices failing to maintain a clear audit trail – see SLfT7015.

SLfT7010 - Donations from other organisations (third parties)

SLfT guidance on SLCF-related donations from third party organisations to landfill operators and the effect these have on the operator’s credit entitlement.

A condition of a payment qualifying for SLfT credit is that a registered landfill site operator must make it. Condition of the payment qualifying for SLfT is that it must be made by a registered landfill operator.

There is nothing, however, to prevent a third party from helping to fund or part fund your contribution, so long as that person or organisation is not itself the approved body you propose to donate to.

The approved body must make sure that any third party contributors do not directly benefit from the projects they are helping to fund. 

As the SLCF is a voluntary fund, other donations are encouraged to provide good causes with access to funding but only contributions from landfill operators qualify for SLfT credit.

SLfT7011 - Approved body repaying contributions

SLfT guidance on the action a landfill operator must take if an approved body, in certain circumstances, repays all or part of a qualifying contribution.

If an approved body you funded cannot either utilise your funds on another enrolled project or utilise the funds within two years of receiving them and as a result repays all or part of your qualifying contribution to a third party contributor and/or you, then you must repay 90% of the refunded qualifying contribution to us.

SLfT7012 - Approved body transferring contribution to another approved body

SLfT guidance on the rules which apply when an approved body transfers all or part of its SLCF-related qualifying contribution to another approved body.

If an approved body transfers your contribution to another approved body (for example, because the original approved body ceases to operate), then:

• the transferred payment must be subject to a condition that it is spent on a project fulfilling an approved object;
• you are still treated as the contributor (although you cannot claim a further SLfT credit on the transfer of funds); and
• the approved body must notify SEPA of the transfer.

Because how your contribution is spent determines your entitlement to SLfT credit, it is in your interest to make sure that approved bodies you donate to inform you if such transfers occur. You should inform SEPA if you become aware that an approved body has not done this.

SLfT7013 - Approved body not spending contribution on a project fulfilling approved fund object

SLfT guidance on the rules which apply when an approved body fails to spend a contribution on an approved object or fails to transfer it to a project.

We can recover all or part of a SLfT credit where we are not satisfied that the relevant contribution was spent by the approved body on an object of the scheme or the approved body did not transfer the money to a project within two years of receiving it.

SEPA will inform us of all irregularities and we will consider each case on its merits when deciding whether the repayment of credit (or 'claw back') is appropriate. (Note: If the approved body has already given your contribution to a project, the ability for us to seek a claw back of the contribution from you ceases).

Important: Although the scheme provides for a tax credit of 90% of your contribution, the whole amount of the contribution itself must be given by you.

The fact that SEPA has registered and is regulating an approved body should give you reassurance that the body will be spending funds on approved objects. However, you may wish to check their registration status before making each payment to an approved body. You may wish to spread your contributions among a number of approved bodies to reduce the risk.

SLfT7014 - Approved body ceasing to be registered

SLfT guidance on the effect on a landfill operator of an approved body ceasing to be registered for the SLCF.

There are a number of reasons why an approved body might have its registration in the scheme revoked. For example, the body might:

• voluntarily wish to leave the scheme (possibly because it is not attracting funding);
• cease operating (possibly because it was only set up to deliver a specific project or projects); or
• fail to comply with the scheme rules.

You lose your entitlement to credit on any of your contributions which remain undistributed at the time that the registration of an approved body you had donated to is revoked.

You should therefore ensure that, if an approved body’s enrolment is revoked, part of your agreement with an approved body includes the provision that unspent funds are either repaid to you or transferred to another approved body with your agreement.

SLfT7015 - Approved body’s accounting practices failing to maintain a clear audit trail

SLfT guidance on an approved body failing to maintain a clear audit trail showing a link between expenditure and contributing landfill operators.

SEPA will regulate approved bodies requirement to maintain a clear audit trail to show a link between expenditure and contributing landfill site operators. Where an approved body is unable to maintain such records, the body is expected to inform the contributing landfill site operator.

You may therefore wish to consider the accounting practices of a body that you fund (or propose to fund) to make sure that it satisfies your requirements to safeguard your contribution.

SLfT7016 - Summary of a landfill site operator's responsibilities under the SLCF

SLfT guidance summarising the various responsibilities that a landfill operator has in relation to the SLCF.

We have prepared a checklist of some of your responsibilities when using the SLCF. These reflect the more detailed guidance provided elsewhere in this chapter.

• make sure the approved body you wish to fund is registered within the scheme (see SLfT7004)
• make contributions subject to a condition that they are only spent on projects fulfilling approved objects (see SLfT7005)
• record the details of the contributions and the approved body (or bodies) receiving them
• record details of any third party contribution received and notify SEPA and the approved body of them (see SLfT7010)
• ensure that you, or a third party contributor, do not benefit from your contributions
• only claim credit up to the maximum liability percentage of your annual SLfT liability (see SLfT7001)
• make sure you have used the correct dates to calculate your contribution year
• check whether the approved body has transferred your contribution to another approved body. If they have, make sure that it informs you of the transfer. You are still treated as the contributor (see SLfT7012)
• check whether the approved body's enrolment has been revoked. If it has, recover any of your money that is unspent at that date (see SLfT7014)
• repay us 90% of any repayment of contributions you receive from an approved body (see SLfT7011).

SLfT7017 - Consequences of an approved body failing to comply with requirements

SLfT guidance on the consequences of an approved body failing to comply with its requirements under the SLCF, including its approval being revoked.

Approved bodies must comply with the requirements set out in regulation 30 of The Scottish Landfill Tax (Administration) Regulations 2015.

Where SEPA identifies potential breaches of these requirements it may investigate and, where appropriate, apply conditions. This could ultimately lead us to potentially revoke a registration based on evidence provided by SEPA.

SEPA may also amend conditions to the registration of a body to ensure that particular projects which have not met the objects can no longer be funded.

If an approved body disagrees with our decision to revoke its approval, it can appeal that decision to an independent panel established by Scottish Ministers.

See SLfT7009 for further guidance on circumstances that can affect your entitlement to credit. It is important to remember that if you make a contribution to an approved body which later has its approval revoked (see SLfT7014), we may recover all or part of the tax credit you claim.

SLfT7018 - Transitional arrangements for UK LCF and SLCF

SLfT guidance on the transitional arrangements between the UK Landfill Communities Fund scheme and the Scottish Landfill Communities Fund scheme.

The UK Landfill Communities Fund (LCF) and the SLCF are two different schemes. Money generated under UK Landfill Tax can only be spent on projects enrolled under the UK LCF and money generated by SLfT can only be spent on projects enrolled under the SLCF.

The UK LCF will cease to be funded from Scottish landfill operators from the 1 April 2015 but projects may continue to be funded in Scotland from the UK scheme provided all of the funds are utilised by the 31 March 2017. Landfill operators in Scotland will not be able to contribute to the UK LCF after 1 April 2015.

Scottish funds already allocated to UK scheme projects prior to 1 April 2015 may continue.

UK generated funds will have until 31 March 2017 to be utilised in UK LCF projects which are located in Scotland.

If you fund both the UK LCF and the SLCF (because you have operations both in Scotland and in the rest of the UK) then the funds should be clearly separated. We would expect you to ensure that any approved body to which you give SLCF-related money keeps that money in separate bank accounts from any UK LCF-related money which they may deal with.