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Treasury seeks to reinstate ALCS in Northern Ireland

HMRC

European Commission decides aggregates levy credit scheme was in line with state aid rules

THE European Commission has this week published full details on its decision to rule in favour of the UK Government’s aggregates levy credit scheme (ALCS). The decision confirms that the scheme was in line with state aid rules, bringing to an end a protracted period of uncertainty for quarry operators in Northern Ireland.

The credit scheme gave an 80% tax credit for aggregates originating in Northern Ireland in return for quarries meeting environmental standards. The scheme ran from 1 April 2004 to 30 November 2010.

The Commission opened an investigation into the credit scheme after the British Aggregates Association (BAA) claimed that the scheme provided unlawful state aid. The Commission originally approved the scheme in 2004 and has again agreed with the UK government that the scheme does not provide unlawful aid.

The UK Government was required to suspend the ALCS from 1 December 2010 during the Commission investigation, but has stated that it is committed to reinstating the scheme.

This can only be done, however, if the scheme receives further approval from the Commission on whether it meets the latest state aid rules. The Government has said it will work with the industry in Northern Ireland to make the case for this, but needs to await the outcome of a further Commission investigation into the levy.

Priti Patel, Exchequer Secretary to the Treasury, said: ‘We welcome this decision, which ends a period of unnecessary uncertainty for quarry operators in Northern Ireland. We remain committed to reinstating the credit scheme as soon as possible.’

The Commission’s decision also sets out the requirement for the UK to implement a scheme which will reimburse 80% of the levy paid on aggregate imported into Northern Ireland from other member states between 1 April 2004 and 30 November 2010. The Government has said it will legislate for this in 2015 and more details will be set out by HMRC in due course.

The British Aggregates Association has welcomed the decision by the European Commission that HM Treasury must repay 80% of the aggregates levy charged to importers of aggregates to Northern Ireland during the period of the ALCS scheme, but has also warned that certain other aspects of the decision are open to challenge and says it is currently taking legal advice on the matter.

The BAA says it is particularly keen to ensure that the Northern Ireland quarry industry is allowed to get back to normal as quickly as possible, but that the only way that this can realistically now be accomplished is for the levy as is to be replaced altogether by a 10p across the board community fund, as suggested by both the BAA and QPANI.

BAA director Robert Durward said: ‘The ALCS scheme was a short-term measure to protect the Northern Ireland quarry industry until our legal challenge was finally resolved. We are hopefully now in the final stages of this process but the situation in Northern Ireland remains dire.

‘Following this decision, there is no realistic prospect of a second ALCS scheme being approved in the foreseeable future. It would have to be approved by the European Commission and would again be open to challenge.’

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