Aggregate Levy for construction businesses

The Aggregates Levy is an environmental tax on the commercial exploitation of sand, gravel, and crushed rock in the United Kingdom. If your construction business extracts or commercially exploits virgin aggregate, you must register with HMRC and account for the levy.

Aggregates Levy rates and registration requirements

Current Aggregates Levy rate, scope, registration requirements, exemptions, and penalties for non-compliance. The Aggregates Levy is an environmental tax on the commercial exploitation of sand, gravel, and crushed rock in the United Kingdom. Pure data reference for quarry operators, construction contractors, and aggregate suppliers.

Current rate: 2.00 pounds per tonne
Effective date of current rate: 1 April 2024
What the levy applies to: Sand, gravel, and crushed rock that is commercially exploited in the United Kingdom, whether extracted from the land, dredged from the seabed within UK territorial waters, or imported
Registration requirement: Any person who carries out or intends to carry out the commercial exploitation of aggregate in the United Kingdom must register with HMRC before exploiting aggregate
Meaning of commercial exploitation: Subjecting aggregate to an exploitation act (removal from its originating site, being mixed with anything other than water, or being used for construction, building, or similar purposes) in the course or furtherance of a business

Exemption - recycled aggregates: Aggregate that has previously been used for construction purposes and is being reused is exempt from the levy
Exemption - spoil from non-aggregate extraction: Aggregate arising as a by-product of the extraction of other minerals (e.g. china clay waste, slate waste, stone from coal mining) is exempt where it has not been extracted for use as aggregate
Exemption - maintenance dredging: Aggregate won from dredging carried out for the purpose of creating, restoring, improving, or maintaining navigable waterways, inland waterways, or harbour facilities is exempt
Exemption - exported aggregate: Aggregate removed from the United Kingdom is not subject to the levy
Penalty for failure to register: Daily penalty of up to 250 pounds for each day of non-registration, plus recovery of all unpaid levy with interest
Interaction with CIS: The Aggregates Levy is a separate tax obligation from Construction Industry Scheme (CIS) deductions on materials; they operate independently
Enforcement body: HM Revenue and Customs (HMRC)
Geographic scope: United Kingdom (England, Scotland, Wales, and Northern Ireland)

Exemptions

Several categories of aggregate are exempt from the levy:

Recycled aggregates - aggregate that has previously been used for construction purposes and is being reused is exempt
Spoil from non-aggregate extraction - aggregate arising as a by-product of extracting other minerals (such as china clay waste, slate waste, or stone from coal mining) is exempt where it has not been extracted for use as aggregate
Maintenance dredging - aggregate from dredging to create, restore, improve, or maintain navigable waterways, inland waterways, or harbour facilities is exempt
Exported aggregate - aggregate removed from the United Kingdom is not subject to the levy; a tax credit applies

Construction businesses that exclusively use recycled or secondary aggregates do not need to register for the levy. However, if you mix recycled aggregate with virgin aggregate, the virgin component remains taxable.

CIS materials deduction rules

Materials costs are excluded from CIS deductions. This snippet defines what qualifies as materials, what does not qualify, and how to evidence materials on invoices.

Materials costs are excluded from CIS deductions. When calculating CIS deductions, you deduct the cost of materials from the gross invoice amount before applying the deduction rate. This means subcontractors are not taxed on materials they purchase directly for the job.

The deduction applies only to the labour element of the payment, not materials provided by the subcontractor.

CIS deduction basis: Labour element only (after deducting materials and VAT)
Materials deduction: Subtract materials cost from gross amount before applying CIS rate
Evidence required: Receipts or invoices showing subcontractor paid for materials directly
No evidence available: Contractor must estimate reasonable cost of materials
Formula: CIS deduction = (Invoice - VAT - Materials) x Deduction rate

What counts as materials

The following items can be deducted as materials costs before calculating CIS deductions:

Building materials - bricks, cement, timber, plasterboard, tiles, pipes, cables
Consumable stores - nails, screws, fixings, sealants, adhesives
Plant hire with operator - crane hire where operator is included in the hire
Fuel for equipment - diesel or petrol for generators, compressors, site plant (not vehicle fuel for travel)
Items incorporated in the work - anything that becomes part of the finished construction

What does NOT count as materials

The following items cannot be deducted as materials and remain subject to CIS deductions:

Plant hire without operator - hire of excavators, scaffolding, generators without operator
Equipment purchase or hire - tools, ladders, PPE, power tools owned by subcontractor
Travel costs - fuel or expenses for travelling to and from site
Accommodation - lodging costs for workers
Scaffolding hire - unless the subcontractor is erecting or dismantling it
Professional services - design fees, consultancy, surveying

How to show materials on invoices

Subcontractors should clearly separate materials from labour on their invoices:

Show materials cost as a separate line item
Include "Materials" or "Cost of materials" label
Keep receipts or supplier invoices as evidence
Be prepared to provide evidence if contractor requests it

Contractor's responsibility: If the subcontractor does not provide evidence of materials costs, the contractor must make a reasonable estimate of the materials element. HMRC expects contractors to make genuine efforts to establish materials costs.

Registration, returns, and payment

You must register with HMRC before commercially exploiting aggregate. Registration is required for quarry operators, aggregate suppliers, and any business that extracts aggregate for its own use in the course of business.

Once registered, you must submit quarterly Aggregates Levy returns to HMRC and pay the levy due. Returns are due by the last working day of the month following the end of each quarter. Late returns and late payments attract interest and penalties.

What to do next

If you commercially exploit aggregate, register for the Aggregates Levy with HMRC. If you only use recycled or exempt aggregate, keep records that demonstrate the exemption applies in case HMRC queries your position.

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Aggregate Levy for construction businesses

Exemptions

Registration, returns, and payment

What to do next

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Exemptions

Registration, returns, and payment

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