APPENDIX 1
Supplementary memorandum submitted by HM Customs and Excise
Question 143: further information on problems caused by unspent credits and reconciliation of credits and contributions.
Two separate issues are involved here. The first is the reconciliation of landfill site operators' tax credits with the contributions received by environmental bodies. When a site operator makes a contribution to an approved environmental body then the body informs ENTRUST of the date and the amount received along with the name of the site operator. ENTRUST give this information to Customs in order that the contribution can be reconciled with the tax credit claimed by the landfill site operator. The NAO reported (paragraph 4.25) that Customs had identified an imbalance of approximately £8 million but this problem was already being addressed. Customs are happy that this system is now working well and there are no major problems requiring further regulation at present. The total discrepancy between credits claimed and amounts notified to ENTRUST is currently £33,000.
The second issue is that of money contributed to an environmental body that remains unspent by the body for some period of time. Many projects take more than two years to complete. Some of these projects can be funded in stages. However, other projects require all the money to be provided up front. This can be because of fears that landfill site operators would withdraw funding in subsequent years with the body being left with a partially completed project. Or because of the need for matched funding where a body can obtain funds through either central or EU grants provided the money to be matched is already held. Again this can mean that a body will get the entire project funding up front but spend it over the life of the project which can be more than two years.
ENTRUST monitor those bodies which have held funds for more than two years and it is a factor that they consider when assessing risk. Figures for proportion of spend are moving in the right direction—the latest available (September 2001) show 57 per cent of contributions have been spent within two years of receipt. (NAO Report: 47 per cent). In line with the NAO's recommendation we are looking at whether a time limit for spending contributions would be appropriate, and if so what the period should be.
Question 151: position on benefits from patents developed as a result of Landfill Tax Credit Scheme funding.
Under the Landfill Tax Regulations, as amended in January 2000, neither contributing landfill site operators nor third party contributors may benefit from their contributions. This includes benefit arising from intellectual property rights.
ENTRUST's guidance to Environmental Bodies, "Helping you with the Regulations" makes explicit that research results are required to be published widely in order that benefits are widely shared. In the specific case of new intellectual property created by their projects, ENTRUST's guidance recommends that Environmental Bodies should consider patenting the property, or otherwise protecting its value. Any income derived from such a patent must also be spent on the objects of the Environmental Body. All these matters are examined by ENTRUST's audit staff during their review of projects.
Question 180: proportion of funding allocated to each category A to F.
| |
1997 |
1998 |
1999 |
2000 |
2001 (to Oct) |
|
Contributions reported by EBs |
£65m |
£80m |
£88m |
£113m |
£74m |
|
Spend reported by EBs |
n/a |
£28m |
£76m |
£52m |
£95m |
|
Cumulative % [spend by] objectA |
n/a |
7.1 |
5.5 |
7.0 |
6.5 |
|
B |
n/a |
0.5 |
0.6 |
0.6 |
0.4 |
|
C+CC |
n/a |
31.0 |
34 |
34.0 |
33.2 |
|
D |
n/a |
50.8 |
51 |
48.4 |
50.9 |
|
E |
n/a |
10.3 |
8.5 |
9.7 |
8.6 |
|
F |
n/a |
0.3 |
0.4 |
0.3 |
0.3 |
The ENTRUST database records total project spending of £251,476,317 at at 31 October 2001. Expenditure by object is:
|
Object A |
6.49% |
|
Object B |
0.44% |
|
Object C |
33.19% |
|
Object D |
50.94% |
|
Object E |
8.60% |
|
Object F |
0.34% |
Following the announcement of the indicative guidelines in May 2001, ENTRUST entered into consultations with landfill operators and enrolled bodies. As a result, in August 2001, a revised form was sent to all enrolled bodies, asking them to advise ENTRUST of the objects on which their future contributions were to be spent. Forms received since then indicate the following future expenditure by object:
|
Object A |
2% |
|
Object B |
0% |
|
Object C |
57% |
|
Object D |
29% |
|
Object E |
1% |
|
Object F |
0% |
|
None specified |
11% |
Approved categories of project (also known as "approved objects") are included in regulations and are:
A¸reclamation of land whose use is prevented by a previous activity;
B¸reduction or prevention of pollution of land which was caused by a previous activity;
C¸research and development, education or collection and dissemination of information about more sustainable waste management practices;
CC¸research and development, education or collection and dissemination of information to encourage the development of products from waste or markets for recycled waste;
D¸the provision, maintenance or improvement of a public park or other public amenity in the vicinity of a landfill site (the park or amenity must not be operated with a view to profit);
E¸the maintenance, repair or restoration of a building or other structure of religious or architectural interest in the vicinity of a landfill site (such places must be open to the public and must not be operated with a view to profit);
F¸the provision of financial, administration and other similar services to enrolled environmental bodies.
Question 198: clarification of changes to the memorandum of articles detailing what was changed, why and when.
When the Landfill Tax Credit Scheme was being designed in 1996, the working party charged with the task presumed that the regulatory body would be constituted as a charity, and the memorandum and articles of the company were drafted accordingly. It was subsequently recognised that the regulatory body would not have charitable objects, and that it would be necessary to pay directors, and thus it could not be a charity on two counts. Unfortunately the memorandum and articles were not changed at this time. In 1998 ENTRUST received legal advice drawing attention to this state of affairs. The memorandum and articles were amended in May 1998, ratifying fees paid to directors to that date. However that amendment did not allow for future fees subsequent to that date, and a further change to permit this was made in February 2000. At that time lawyers were asked to check the memorandum and articles for any other provisions that were incompatible with ENTRUST not being a charity. As a result of this, one further change was made in May 2000, in relation to Clause 9.
Clause 9 in the memorandum refers to the distribution of any surplus funds which may result upon the winding-up or dissolution of the company. Its intention is to ensure that any such funds should be transferred in the first instance to any successor body. Originally it required such funds to be transferred to "another charitable body". Since ENTRUST is not a charitable body, nor could be, nor is it likely that any successor body could or would be, the clause clearly needed to be amended, by deletion of the word "charitable". Any surplus funds still have to be given or transferred to an institution having objects similar to ENTRUST, (i.e. a successor body), or if none can be identified, to some charitable object.
Mr Richard Broadbent
Chairman
HM Customs and Excise
December 2001
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