Breaking New Ground? Developing a Scottish tax to replace the UK Aggregates Levy Consultation Analysis Report

Report on the responses to the Scottish Government consultation regarding the structure and operation of a Scottish Aggregates Tax

3. Part A - Analysis of responses to consultation paper and relevant Advisory Group discussion


Part A of the consultation document, covering Chapters 1 to 5, considered the following issues related to strategic context and tax structure:

  • Chapter 1: The Context for a Devolved Aggregates Tax (Questions A1-A3)
  • Chapter 2: The Scope of The Tax – Defining “Aggregate” And “Commercial Exploitation” (Questions A4-A10)
  • Chapter 3: Exemptions and Reliefs (Questions A11-A18)
  • Chapter 4: Tax Rates (Questions A19-20)
  • Chapter 5: A Sustainability fund (Questions A21-A23)

3.1 The Context for a Devolved Tax

Chapter 1 of the consultation document provided context on the aggregates sector in Scotland, along with commentary on the production and use of aggregates and on the definitions being used for primary, secondary and recycled aggregates. It also confirmed that Revenue Scotland would be the tax authority responsible for the collection and management of the devolved tax.

A1 – Are there any aspects of the aggregates sector in Scotland to which the Scottish Government should give particular consideration in developing proposals for a tax?

Number of responses: 12

Four respondents, including primary aggregates industry and other industry respondents raised points broadly related to the importance of understanding the circumstances in which aggregates are used in Scotland. These included: a concern that the consultation had not properly recognised that aggregates are not just used in “bulk fill”, but also in high specification, high value applications, with industry specialism in both extraction and production; that primary aggregates are used for a range of economic purposes, including for manufacturing and for energy, transport and other infrastructure; and that geographic considerations limit the degree to which a tax can shape the market.

It was also noted that that Scotland is largely self-sufficient in terms of aggregates, with only small levels of sand and gravel imports, and a significant net exporter of crushed rock. Increasing demand for aggregates provided a further economic opportunity for Scotland, including in more remote parts of the country.

Another grouping of four waste and resource management respondents focused on the progress being made to develop the recycled and secondary aggregates markets in Scotland. They highlighted the establishment of numerous plants and sites and significant investment to support recycling of construction and demolition waste to create different levels of aggregates with a variety of uses, as well as concerns around barriers to the increased use of recycled aggregates for construction purposes. However, one primary aggregates industry respondent highlighted points around the more limited availability of recycled aggregate in rural areas.

Responses from three individuals highlighted, separately and in high-level terms, a need to consider the land that would be harmed or changed in the sourcing of raw materials, as well as concerns around the fairness of UKAL in terms of how it distinguished between different types of rock, and the use of aggregates in roads construction and maintenance.

Some respondents offered points that were relevant to other questions rather than this. These responses are not included in the total for A1 and the relevant points are picked up where appropriate.

A2 – Do you consider that a devolved tax has the potential to support Scotland’s overall circular economy ambitions? Please provide commentary for your views.

Number of responses: 17

In high-level terms, 12 respondents, either directly or through their comments, considered that the tax could support the circular economy. As summarised below, these respondents offered context and caveats for their comments.

Only one respondent explicitly stated that they did not consider that the tax could support the circular economy, based on concerns about the potential implications of any divergence from UKAL arrangements for silica sand quarries and glass manufacturers.

Two primary aggregates industry respondents raised various points of concern or scepticism, with one indicating that any impact could only be partial at most. Alongside an acceptance that recycled aggregates had a part to play overall, these respondents noted that: many applications require the properties of high-quality primary aggregates; recycling levels of “hard” construction and demolition materials are already high and scope to increase this is considered limited; recycled or secondary materials are unevenly distributed throughout Scotland; and there are limited sources of secondary aggregates in Scotland. One of the individual respondents also took a nuanced position, noting that the potential impact would depend on implementation and whether, for example, the tax arrangements resulted in more material being brought in from outside Scotland.

The respondents indicating full or partial agreement highlighted one or more of the themes below in their remarks.

  • Five respondents, representing a mix of environmental organisations and those with an interest in waste and resource management, were clear in their view that the tax would require complementary measures to have an effect and ensure, for example, that high quality, affordable and desirable recycled or alternative aggregates would be accessible to the construction industry. These views also broadly assumed that recycled aggregate would be exempt.
  • Three respondents considered that the tax rate would need to be higher than that for UKAL to have an impact.
  • One of the tax, accountancy or law organisations expressed agreement in principle, but called for further analysis of the intended policy aims. Another considered that a devolved tax could support Scotland’s broader circular economy ambitions with clear objectives and clear, concise legislation that is kept up to date. The respondent also highlighted broader points around the need to consider an annual legislative vehicle for changes to the fully devolved taxes.
  • Two other respondents noted points around the need to take environmental damage and environmental performance into account when considering the rationale for a tax, and to consider the limited availability of recycled aggregates in some areas.

Responses from three individuals, who did not offer a firm opinion or provide further commentary, stated that a tax: may simply make investment in developing infrastructure more expensive if circular economy options were not available; may harm the circular economy if done poorly; and would have a significant impact on the public sector.

A3 – What other considerations should Scottish Government take into account in terms of the rationale for a tax on the commercial exploitation of aggregates?

Number of responses: 18

Respondents offered comments across a diverse range of themes, including that:

  • The Scottish Government should “recognise and praise” the industry’s environmental performance in managing active quarries and their restoration; recognise the relative impacts of primary and secondary aggregates; and address the risks that a devolved tax would create unnecessary administrative burdens and market distortion.
  • There is an opportunity to improve enforcement and address issues related to temporary extraction sites known as “borrow pits”, through reporting and registration arrangements.
  • The UKAL sustainability fund could be re-introduced to deliver local environmental and social benefits.
  • The Scottish Government should consider the broader transportation system and its impact, recognising the impact of proximity on the cost of aggregates, carbon emissions, and local job markets.
  • The Scottish Government should encourage the continued development and operation of plants that produce recycled aggregate, particularly in locations where recycled aggregate is needed and ensure that these materials remain exempt.
  • The Bill should establish definitions and different treatment for multiple grades of recycled aggregates.
  • Consideration could be given, over and above an exemption for recycled aggregates, to introducing some sort of tax credit for use of recycled and secondary aggregates.
  • Over and above the specifics of an aggregates tax, the Scottish Government should consider a broader carbon tax linked to all primary or virgin resources, including timber, plastic resin derived from petroleum refining process, and mined/processed metals.
  • Any tax would simply represent an additional cost on development where suitable recycled alternatives are not available.
  • Arrangements for the tax should take into account that local authority run quarries are not operated for commercial gain.
  • Any divergence across the UK could create distortions where quarries operate close to the border between Scotland and England.
  • The Scottish Government should take into account environmental damage and environmental performance in the rationale for the tax.

Four respondents with a connection to waste and resource management specifically reflected on the intended role for Revenue Scotland in their responses, calling for lessons to be learned from implementation of Scottish Landfill Tax, for clear communication and collaborative working with industry well in advance of any changes being introduced and for more detail to be provided as to how Revenue Scotland will manage and resource the administration of the new tax.

Advisory Group discussion

Members discussed the overall context for the devolved tax during the first meeting of the group. This included consideration of the important role of aggregates in the Scottish economy; the nature of the industry in Scotland, including patterns of supply and demand and the flow of imports and exports; how the tax might best be harnessed to support wider circular economy ambitions in the context of other legislative, policy and sector-driven initiatives; and the challenges of using recycled and secondary aggregates and other novel materials, as an alternative to primary aggregate.

Scottish Government response

The Scottish Government intends that SAT will align with wider ambitions to deliver a fair, green and growing economy; in particular, the ambitions for a circular economy, which aims to minimise our demand on primary resources and maximise the re-use, recycling and recovery of resources.

The Scottish Government notes the points raised by respondents around the importance of any tax measure being accompanied by a wider package of measures to support the circular economy.

The 2023/24 Programme for Government outlines the Scottish Government’s commitment to set out priority actions to accelerate progress against our waste and recycling targets through a final Circular Economy and Waste Route Map. The Route Map will build on the progress that has been made and set out the priority actions to drive delivery of our system-wide, comprehensive vision for Scotland’s circular economy.

The responses to the 2022 consultation on initial Waste Route Map proposals have been published and the Scottish Government is considering this feedback carefully. A second Waste Route Map consultation will be published later this year along with updated impact assessments, before a final Route Map is confirmed.

The Scottish Government also intends that the devolved tax will demonstrate the operational benefits of tax devolution, reflected in a modern and effective Scotland-specific approach to tax collection and management.

3.2 The Scope of The Tax – Defining “Aggregate” And “Commercial Exploitation”

Chapter 2 of the consultation paper sought views on issues related to the scope of the devolved tax.

Reflecting the Scotland Act 2016 provisions and arrangements for UKAL, this included consideration the appropriate definitions of “aggregate” and “commercial exploitation” for the devolved tax. Views were sought on the tax treatment of material which is moved to Scotland, moved between Scotland and the rest of the UK, or imported/exported internationally.

Definition of “Aggregate”

A4 – In keeping with our Framework for Tax and ambitions for a circular economy, what options should the Scottish Government consider in terms of defining “aggregate” for the purposes of a tax and on what basis?

Do your views on this have a bearing on the Scottish Government’s consideration of reliefs and exemptions? If so, please provide further details.

Number of responses: 13

Four responses from primary aggregates and other industry respondents called for complete consistency with the UKAL definition, reflecting extensive engagement over time with the UK Government on this and previous litigation. One of these respondents focused on the potential negative impacts of any change on glass manufacturers sourcing raw materials from Scotland and/or Scottish glass manufacturers.

The six other organisations and three individuals responding offered a diverse range of views. One environmental organisation called for a wide definition, with as few exemptions as possible, and for consideration to be given to taxing recycled aggregate where it creates scope for contamination or pollution.

One waste and resource management respondent considered the definition should be as broad as possible without any financial loopholes, though without specifying what these might be. Another suggested that a definition would be required to separate virgin from recycled aggregates or repurposed materials such as ground glass and rubber crumb from tyres.

A primary aggregates industry respondent called for a distinct approach in areas where alternatives to primary aggregates were not available, noting a particular relevance for this in rural areas.

One of the tax, accountancy or legal organisation respondents reflected that it might be sensible to use the existing UKAL definition given that it has been tested in previous litigation, but that a review could be undertaken once the tax is fully functional. Another did not express a specific preference, noting that adopting the current UKAL definition would be attractive to producers, given their familiarity with what is and is not currently taxable. If the Scottish Government wished to take a distinctive approach there would however be an opportunity to specify more precisely which minerals come within the scope of the tax and to make the legislation more focused, clear and efficient.

One individual respondent called for aggregates to be defined as those products that are used for construction purposes and suggested that various materials and products should not be covered. The two other individual respondents highlighted that there may be challenges in identifying the material used in cement and mortar, and that aggregates should be defined in terms of mining method and usage rather than geological type.

Definition of “Commercial Exploitation”

A5 – Do the UK levy definitions of “commercial exploitation” as set out above cover all relevant circumstances in which this could be deemed to occur in Scotland?

Please provide commentary for your views, including to outline any alternative or additional examples of “commercial exploitation” which you think should be covered in a future tax.

Number of respondents: 13

Five respondents indicated they were unsure, but without any comment.

Three primary aggregates industry respondents supported adopting the UKAL definition on the grounds of consistency. One of these highlighted the opportunity to ensure that aggregates for exploitation are worked and supplied only from properly registered, permitted and regulated sites which are properly permitted and regulated. In addition, two of the tax, accountancy or legal respondents did not see or identify any need to change the existing UKAL definitions, with one also highlighting the need to give careful thought to cross border considerations.

Three other respondents provided commentary, but not a firm view on the question. One primary aggregates industry respondent considered that the tax should only apply to material specifically extracted for the purposes of inclusion in subsequent work and should not cover material extracted primarily for other benefits such as on-site construction or flood defences. Though not offering specific suggestions, an environmental organisation called in general for the definition to reflect the environmental impacts of extraction and for fewer exceptions to be included, whilst an individual respondent highlighted potential complexities associated with specific scenarios and materials, including by-products.

A6 – For any examples of commercial exploitation, should there be any exceptions in a devolved tax? If so, on what basis would these be appropriate?

Number of responses: 14

11 respondents offered views in response to this question, whilst a further three indicated without comment that they were unsure if a devolved tax should have exceptions.

Two respondents set out specific proposals. One local authority respondent suggested that an exception should be included where a quarry owned by a local authority used the products for its infrastructure maintenance, whilst a primary aggregates industry respondent suggested there should be an exception for any exploitation which is primarily for the development or benefit of the extraction site.

Separately, an environmental organisation set out their view that there should be minimal exceptions, with the environment as the foremost consideration, but did not offer any specific proposals.

Three primary aggregates industry respondents called for current UK arrangements to be maintained, whilst one of the tax, accountancy or legal organisations stated that they were not aware of any reasons for these to be changed. A further three respondents from the waste and resource management sector called specifically for the current UKAL exemption on recycled aggregate to be maintained.

One individual respondent did not consider that there should be any exceptions, noting that aggregate used for construction purposes should be within the scope of the tax to avoid confusion and fraud.

A7 – Subject to your views on the circumstances in which commercial exploitation occurs, are there any specific exemptions which should be legislated for, and on what basis?

Number of responses: 12

Nine respondents offered specific reflections on this question, with a further three indicating that they were unsure without comment.

Three respondents answered yes. A local authority respondent restated their proposal that quarries owned by councils using the product for its own infrastructure maintenance should be exempt. Without offering specific proposals, one individual called for local aggregate to be encouraged in rural areas and another made a general comment around the importance of being creative.

Three respondents related to the primary aggregates industry considered that there was no need to change existing UKAL arrangements, whilst one of the tax, accountancy or legal organisations noted that the answer to this would depend on the Scottish Government’s policy intent. One environmental organisation noted as a broader point the potential relevance, at that time, of the Westminster Retained EU Law Bill, for legislation related to environmental protection in Scotland.

Another individual respondent called for tax to apply to the use for aggregates purposes of any residue aggregate left over after material is extracted for non-aggregate purposes.

A8 – How should the Scottish Government treat movements of aggregates between Scotland and the rest of the UK in situations where commercial exploitation would not currently be considered to have occurred?

Number of responses: 11

Respondents largely reflected on the potential for complexities and risks to arise in relation to the movement of aggregate between Scotland and the rest of the UK, and vice versa. Where a specific view on treatment was set out, this was that tax should be charged on the eventual place in the UK in which the aggregate was used.

One environmental organisation considered that definitions and understanding of commercial exploitation should not change when aggregates are moved between Scotland and the rest of the UK, whilst one of the tax, accountancy or legal respondents noted that the appropriate treatment would depend on the Scottish Government’s overall policy decisions for the tax.

Representatives of the primary aggregates sector called for close alignment with UKAL and expressed concern about the potential complexities and risks for business having to deal with two tax authorities. They called on Revenue Scotland and HMRC and the UK and Scottish Governments to work together to seek to minimise complexities where there is cross border movement.

One waste and resource management respondent called on consideration to be given to the conclusions of the Scottish Government commissioned Aggregates Minerals Survey 2019, surveying Scottish aggregate production, noting the potential percentages of crushed rock exported from Scotland and the potential implications of this for achieving the tax’s proposed circular economy objectives.

Treatment of imports

A9 – Do you agree that the Scottish Government should treat imports in the same way as currently applies for the UK levy, taking account of the Scotland Act 2016 provisions?

Number of responses: 15

13 respondents from a variety of respondent groups indicated that they agreed with this. Five provided additional commentary to support their position.

Two respondents indicated they were not sure, without further comment. No respondents disagreed with the proposal.

Points in favour of taxing imports included that it would ensure that Scottish businesses are competing on a level playing field or would be consistent with the policy aim. Other respondents also discussed the need to separately consider issues around the movement of aggregate from the rest of the UK to Scotland and the importance of considering existing UKAL arrangements to prevent double taxation. One respondent highlighted the need to consider prior experience of the application of UKAL in Northern Ireland in terms of the potential impacts of differential rates.

A10 – What measures might help to ensure that imports of aggregates are identified and taxed appropriately? Please provide supporting commentary.

Number of respondents: 8

Respondents to this question offered a range of distinct suggestions, as summarised below.

  • The tax should be aligned with the rest of the UK.
  • Landing ports for aggregates should be registered for the tax, as is the case for UKAL.
  • Final users should have to prove that a competent registered supplier had been used in the supply of their aggregates.
  • Some form of policing should be introduced for imports, possibly involving a collaboration between Revenue Scotland, local authorities and SEPA, together with relevant administration and data collection.
  • Documentation should be kept simple.
  • There should be a reward for those who report “illegal” imports of aggregate.
  • A special condition should be added in construction contract documents, requiring contractors to demonstrate that the aggregates proposed will conform to specifications (potentially with a minimum recycled content) and to provide a declaration on origin. Though not directly connected to this question, this respondent also suggested that Scottish public sector procurement could be used to drive the increased use of recycled aggregate in specifications.

Advisory Group discussion

Several relevant issues were considered and discussed by the advisory group at its second meeting. The general view, from those expressing a position, was in favour of adopting UKAL definitions of aggregate, taxable aggregate, commercial exploitation and exempt aggregate. The main reasons given in support were: (1) the definitions had developed over a long period of time with extensive engagement between the UK Government and stakeholders, (2) they are widely understood by the industry, and (3) they had been considered and validated through litigation, including by the European courts.

The advisory group carefully considered how the definitions, and in particular that of commercial exploitation, would apply to the cross-border movement of aggregate within the UK. Consideration was given to both movements from Scotland to the rest of the UK and movements in the other direction. For both there was a clear view that aggregates should only be subject to one of SAT or UKAL.

In terms of movements of aggregate from Scotland, there was a comprehensive discussion. Initially, some expressed the view that it could be better for the tax to be levied in the country of extraction/production. However, after examining the potential administrative complexities, as well as the relevant Scotland Act provisions and the risk of double taxation, a consensus emerged in favour of levying the tax in the country where it is used. In practice this would mean providing a SAT tax credit for any aggregate moved to the rest of the UK, with UKAL then accounted for as appropriate. This would be consistent with Scotland Act 2016 provisions for UKAL, which will allow for a tax credit to be claimed for aggregate moved to Scotland from the rest of the UK, after introduction of the devolved tax.

Further consideration was then given to the appropriate treatment of aggregate moved to Scotland. The starting point was to consider taxing this in the same way as an international import, which was consistent with the overall approach discussed above. However, further consideration was necessary after significant concerns were raised that this could result in Scottish customers (e.g. a garden centre) purchasing aggregate from a producer in the rest of the UK having to account for the tax for the first time, creating entirely new administrative burdens and possible disruption to the cross-border aggregates market. There was broad consensus that, whilst not ideal, bringing a small number of additional aggregate suppliers based in the rest of the UK into the devolved tax regime was preferential to an approach where an entirely new group of customers would be required to register for and pay SAT. It was noted the preferred approach would minimise tax compliance risks as well as reducing the risk that customers would change purchasing behaviour to avoid tax complexities.

The advisory group also highlighted the overall importance of minimising any additional administrative burden on aggregates producers and disruption to the industry.

Scottish Government response

The Scottish Government has decided to adopt in the Bill the definition of “aggregate” provided for in UKAL. This is on the basis that it is compatible with the intended objectives for the tax, is well understood by aggregate producers, and is supported by existing UKAL taxpayers.

UKAL definitions of “commercial exploitation” have been retained for the same reasons. As such, the Bill stipulates that aggregate is considered to have been commercially exploited when it is either removed from its originating site, becomes subject to an agreement to supply it to any person, is used for construction purposes or is mixed with any material or substance other than water.

The Scottish Government has also decided that the treatment of imports should be consistent with current UK arrangements. Revenue Scotland will take account of the points raised in relation to administration as part of their ongoing preparatory work and engagement.

However, following careful consideration of the appropriate treatment of cross-border movements, the Scottish Government has concluded that movements of aggregate from the rest of the UK to Scotland should not be treated as an import. The Scottish Government considers that the least burdensome and most administratively straightforward approach to cross-border transactions would instead be for the aggregate producer to account for the tax as they would in a purely Scottish located transaction. This means that commercial exploitation of aggregate moved to Scotland from the rest of the UK will be taken to occur in Scotland.

For movements of aggregate from Scotland to the rest of the UK, the Scottish Government intends that a SAT tax credit can be claimed. This is discussed further in the next section.

3.3 Exemptions and Reliefs

Chapter 3 of the consultation paper provided context on the current exemptions and reliefs for the UKAL and sought views on the case for these, or others, to be provided for in the devolved tax.


A11 – Do you agree that recycled aggregate should be exempted from a devolved tax? Please set out commentary on your views.

Number of responses: 19

18 of the 19 respondents agreed that recycled aggregate should be exempt from the tax, though sometimes with caveats.

Opposition to the exemption came from an environmental organisation, on the basis of potential environmental damage. While the respondent considered that there may be justification for applying a different rate of tax for recycled aggregates, it did not agree that it should be exempt.

Various points were cited in support of including an exemption, including that it would be in keeping with the stated circular economy aims of the tax, would assist in carbon reduction, and that not having an exemption could undermine progress to date in adopting circular construction practices.

A range of points were made by respondents in support of the exemption. One industry representative placed a particular focus on glass, noting that other policies should incentivise waste glass cullet going to remelt rather than aggregates to promote a more circular economy for glass products.

Points raised by waste and resource management respondents included that it would be helpful to have a clear definition of “recycled aggregate” in the Bill that was both supportive of related regulations and could be readily attained; that, going beyond this, definitions for different grades of recycled aggregates could be included, or that a tax relief or carbon credit should be applied to the use of secondary or recycled aggregate to encourage their use (over and above these being exempt). This respondent did not however provide commentary on how this might be relevant to SAT, given the expectation that tax would usually be paid by the quarry operator, or whether another relevant tax had been identified.

An individual suggested that recycled aggregate producers should be required to have a license to avoid the risk of primary aggregate being sold as recycled.

Although agreeing with the exemption, representatives of the primary aggregates industry noted that the production and processing of recycled aggregates can have a negative environmental impact, particularly in built-up areas.

A12 – Which exemptions do you consider would be required, and in keeping with the proposed scope of the Scottish replacement tax, and on what basis?

Number of respondents: 11

Eight respondents offered specific views on this question, with another two referring to earlier answers

Three primary aggregates industry respondents favoured exemptions consistent with those for UKAL, with a view that these worked well, were understood and that changes could have unintended consequences across several industries.

On the other hand, an environmental organisation set out its overall view that there should be minimal or no tax exemptions, whilst an individual also did not consider that there should be any exceptions, noting that aggregate used for construction purposes should be within the scope of the tax to avoid confusion and fraud.

Other respondents focused on more specific issues.

  • An industry body called for glass manufacturers to continue to be exempt from tax as they were in UKAL, reflecting the range of policies and incentives already in place to reduce the use of virgin materials.
  • A primary aggregates industry respondent called for an exemption related to any aggregates being extracted for other reasons, where any subsequent usage is intended solely to reduce costs.
  • One waste and resource management respondent suggested increasing the available supply of feedstock for recycled aggregate by exempting historic industrial spoil heaps from the tax, as well as ensuring that other local and national government policies support the reuse and recycling of this material.
  • An individual called for an exemption for filler that goes into asphalt production, which they did not consider to be an aggregate. This respondent also called for china clay aggregates and slate aggregates to be brought into the scope of the tax, which is not currently the case for UKAL.
  • A local authority respondent referenced a call for an exemption for local authority quarries where the products are used for infrastructure maintenance, whilst another raised a more general point around situations where primary aggregate was being used for public benefit – e.g., to develop active travel routes.

A13 – Are any exceptions to these exemptions required, and on what basis

Number of responses: 11

No specific suggestions were made in any response. Four respondents, primarily related to the primary aggregates industry, expressly stated that exceptions were not required, whilst one environmental group restated its high-level view that the devolved tax should have minimal or no exemptions.

Six respondents were unsure, without comment.

A14 – Aside from reducing the number of exemptions currently available in the UK levy, are there opportunities for the Scottish Government to simplify arrangements for exemptions in a devolved tax? Please set out commentary for your answer.

Number of responses: 6

Due to an error, a box was not available in Citizen Space to allow for responses to be provided. This analysis is therefore based on the views of those respondents who set out their views in separately provided hard copy responses.

Two environmental organisations picked up broadly comparable points, with one restating calls for minimal or no tax exemptions and another calling for taxation of all primary materials, regardless of their intended use.

One of the tax, accountancy or law organisations considered that, should the Scottish Government wish to take a distinct approach, there may be opportunities to establish a more precise, clear and Scottish-specific definition of what is chargeable in legislation, with the means to amend that legislation as time and geology permits. This would assist in reducing the need to consider exemptions.

On the other hand, two primary aggregates industry respondents did not see any scope for simplification, with one highlighting the UK Government’s relatively recent consultation on simplifications and changes to the UKAL. These had been intended to assist in tackling issues around the impact of borrow pits on the wider market for construction aggregates and to simplify the rules around infrastructure works. One of the tax, accountancy and legal organisations also supported consistency with the UKAL reliefs to prevent burdens on business and reflect the principles of certainty, convenience and efficiency.


A15 – What reliefs do you consider would be required under a Scottish tax, and on what basis? Would the reliefs in place for the UK levy be appropriate? If so, why?

Number of responses: 9

Nine respondents commented on this question. Six respondents, representing the majority view and including primary aggregates industry and other industry organisations and an individual, were in favour of retaining all UKAL reliefs in the devolved tax. Points raised in support of this included that the reliefs had been established for good reason, that they had resulted from significant work over time and that consistency of approach would help to avoid creating distortions and provide stability and continuity for taxpayers.

In terms of potential new reliefs, one of the tax, accountancy or legal organisations noted the need to consider reliefs to prevent double taxation, while a primary aggregates industry respondent considered that a relief for the use of primary aggregate should be available where there are no available recycled aggregate options. This would be to prevent an unavoidable increase in costs. An individual respondent also suggested that a relief should be available where aggregate is procured for use in major public infrastructure projects to release funds for use elsewhere.

No respondents explicitly stated that UKAL reliefs would not be appropriate, although one environmental group again set out its high-level view that the devolved tax should have minimal or no exemptions.

A16 – In what circumstances should the Scottish Government consider a relief rather than an exemption from the tax?

Number of responses: 10

One of the tax, accountancy or legal organisations noted that an exemption would be appropriate where non-liability is known at the start based on the type of material, whereas a relief would be appropriate where the use would only be known with certainty at a later point.

Other respondents did not directly answer the question, instead largely restating points raised in other questions. One respondent indicated they were unsure, without comment.

Two primary aggregates industry respondents restated their calls for consistency with UKAL, an environmental organisation reiterated its call for environmental considerations to be foremost in tax design, and t wo waste and resource management respondents again highlighted the proposal that, over and above an exemption, a relief or tax credit should be available for the use of recycled aggregates to help encourage uptake.

One of the individual respondents observed that if aggregate is used for construction purposes and is not recycled it should be taxed and that this would avoid having to consider use in industrial and agricultural processes. The individual also called for there to be fixed percentage for water relief.

Taxation of Exports

A17 – How should the Scottish Government approach the taxation of exports from Scotland in a future tax?

Number of respondents: 9

Three primary aggregates industry respondents and one individual explicitly called for tax not to be paid on international exports, maintaining current UKAL arrangements and avoiding placing Scottish producers at a competitive disadvantage. One of the individual respondents also reflected on the importance of competition, but without specifying a particular view on this issue.

Two respondents, one of the primary aggregates industry respondents and an environmental organisation, considered that tax should be paid as this would help to influence behaviour and given the environmental impact. Separately a waste and resource management respondent took a balanced position, noting the potential environmental risks but recognising that this is a complex area that needs to be thoroughly considered.

Four respondents, including some already captured in the analysis above, reflected on the tax treatment of materials within the UK, with regard to issues around double taxation and the need to consider tax credits or reliefs where material was moved from or to Scotland. On this issue, two primary aggregates industry respondents called on the Scottish and UK Governments, Revenue Scotland and HMRC to agree rules that mean no site must deal with two taxes and two authorities for their production within the UK.

A18 – Are there alternatives to an exemption which could be considered, but which may require accompanying amendments to current UK levy provisions?

Number of respondents: 6

One waste and resource management respondent suggested without detail the application of a relief rather than an exemption for exports, based on evidence of use. The respondent noted that comparable changes would also be needed for UKAL.

One of the individual respondents did not consider that UKAL was achieving its objectives and called on the Scottish Government to consult with industry on the arrangements for the devolved tax, so as to avoid the same issues arising. No specific issues were highlighted for this question, but the respondent highlighted concerns about perceived unfairness in the relative tax treatment of different materials in other responses.

Two waste and resource management respondents again raised the point that there might be scope to offer a tax credit or relief for recycled aggregates, over and above any exemption. The value of any credit might depend on the environmental performance of the material.

One of the primary aggregates industry respondents stated that companies which exported from Scotland required clarity on this issue, whilst an environmental organisation restated the general view captured in other questions.

Advisory Group Discussion

Members discussed the case for various exemptions and reliefs at their second meeting. Consideration was given to a range of issues, including: the evidence base on existing UKAL arrangements; the definition of recycled aggregate; the current exemption relating to glass; the case for exempting local authorities that produce aggregates from their own quarries for road maintenance and whether an exemption for ball and china clay is required in the Scottish context. The group also discussed the emergence of novel technologies and new plants for producing recycled aggregates and the importance of considering links between SAT and Scottish Landfill Tax.

There was a consensus view from those expressing an opinion that the exemptions and reliefs provided for in UKAL should be retained, while also noting the importance of keeping these under review to reflect innovation in new technologies, processes and materials.

More detailed commentary on these points is set out in the published minutes.

Scottish Government response

With one exception, the Scottish Government has decided to mirror UKAL exemptions in the Bill, including the revised construction related exemptions introduced on 1 October 2023. As ball and china clay is not produced in Scotland, the Scottish Government has decided that there is no need to exempt the spoil from its extraction. Ball and china clay will continue to be exempt, on the basis that they are unlikely to be used as aggregates if imported into Scotland. No new exemptions are proposed.

The Scottish Government has also decided to include in the Bill the tax credits provided for in UKAL. For the purposes of SAT, tax credits (rather than exemptions) have been chosen where the end use of the aggregate might be uncertain at the point of exploitation, as the use of an exemption in that situation would give rise to a greater tax compliance risk.

As part of this, the Scottish Government intends to provide a tax credit for material which has been exported from Scotland to outside of the UK. A tax credit will also be available where material is moved from Scotland to the rest of the UK. This mirrors the tax treatment set out for UKAL in the Scotland Act 2016 provisions, relating to movements of aggregate from the rest of the UK to Scotland.

Broadly, the chosen exemptions and reliefs serve to remove from the scope of the tax: secondary or recycled aggregates, or rock, sand and gravel that would not generally be used as granular or particulate material in construction as concrete, mortar, roadstone, asphalt or drainage courses, or as construction aggregates. Further detail on the policy rationale for the chosen exemptions and tax credits is set out in the Policy Memorandum for the Bill.

In particular, the Scottish Government intends to exempt recycled aggregate in order to incentivise its use. However, as quarry operators would usually be expected to be liable for SAT, the Scottish Government does not consider that it is feasible to also consider offering a tax credit the use of recycled aggregate. In the ‘Delivering Scotland’s circular economy – route map to 2025 and beyond’ consultation the Scottish Government has however set out a number of measures to support and encourage sustainable construction.

The Scottish Government notes the suggestion that a tax relief should be available where aggregate is procured for use in public infrastructure projects. However, the Scottish Government considers that the public sector has an important role in supporting the circular economy and should be subject to the same conditions and incentives regarding aggregate use as the private sector.

The Scottish Government also notes the suggestion that a tax relief should be available where there are no recycled aggregate options. The Scottish Government considers that this would add a significant degree of complexity to the tax, reduce certainty regarding the tax landscape for producers and reduce the impact of the tax in encouraging alternatives to primary aggregate. However, the Scottish Government will keep under review the impact of SAT.

3.4 Tax Rates

Chapter 4 of the consultation paper sought views on the factors that the Scottish Government should take into consideration when setting a rate for tax, and on the options and processes that might apply to this. Views were also sought on whether the Bill should provide Ministers with the flexibility to introduce more than one rate of tax, to allow for differential charging in future to take account of different circumstances and impacts.

The consultation document made clear that, although the Bill would provide enabling powers related to the setting of a tax rate or rates, no specific rate of tax would be set out on the face of the Bill.

A19 – Which factors should be taken into consideration when setting any rate for the tax, including through the annual Scottish Budget process?

Number of responses: 18

Respondents set out a range of perspectives and propositions in answering this question.

Two primary aggregates industry respondents and one individual directly or indirectly called for parity with UKAL rates. Another primary aggregates industry respondent called for the relevant factors, direction and expected tax rate to be specifically discussed as part of the consultation.

Other respondents considered more generally that UKAL arrangements should be taken into account. One of the tax, accountancy or legal organisations noted that any deviation from the UK rate may cause market distortion and that consideration should thus be given to the impact of this on the Scottish aggregates industry. Another reflected more generally that consideration would need to be given to revenue yield, behavioural effects and environmental considerations, balanced with the resources to be invested in administering the tax.

Six respondents, including environmental, waste and resource management and other industry respondents reflected more generally on the need for the tax rate to be high enough to influence behaviour or reflect environmental damage. Some were explicit in their view that the UKAL rate was too low to deliver the tax’s environmental objectives and two called on the UK and Scottish Governments to work together to set a higher rate of tax across the UK. This took account of the potential for market distortion discussed above. One of the environmental organisations called for tax revenues to be hypothecated and spent on projects to deliver environmental enhancements and/or circular economy ambitions.

Four respondents, including two waste and resource management, one primary aggregates industry and one local authority respondent called for geographic factors to be considered, in particular the impact of tax in remote and rural areas which may have no, or low, access to recycled aggregate. Increases in tax could result in increased prices for primary aggregates if options to source alternatives are limited.

Separately, one of the primary aggregates industry respondents asked that quarry operators’ responsible approach be “applauded and recognised” in the new structure. Another challenged the consultation paper’s description of the environmental effects of quarrying, pointing to the relevant regulatory environment and the industry track record of restoration.

A20 – Would it be appropriate for the Scottish Government to include powers in a Bill to legislate for more than one rate of tax? If so, on what basis?

Number of responses: 13

In addition to the 13 direct responses, the views of another three respondents, set out in response to another question, are considered here. Views were split into three broad groupings.

Five respondents, two from the primary aggregates industry, one of the waste and resource management organisations, and two individuals did not support the inclusion of powers to set more than one rate, noting concerns about potential market distortion and complexity or offering a general comment about the need to maintain parity with UKAL structure. Some of these respondents noted however that it was not possible to comment in detail on this without a specific proposal.

Whilst not rejecting the idea outright, one primary aggregates industry respondent noted that this was a substantial suggestion that required careful consideration, considering geology, transport and societal needs. The respondent did, however, express scepticism about viability and concerns around increased administrative and compliance costs.

On the other hand, six respondents, from waste and resource management and environmental organisations and local authority interests, expressed support, though each for different reasons. Proposals raised included that there could be a lower rate for non-profit making uses and that different rates could apply on the basis of local circumstances, geography or application, along with a more general suggestion that different rates of tax could potentially reflect environmental damage or performance. In response to an earlier question, one of the environmental respondents had also suggested that there was a case to consider a separate and lower rate for recycled aggregates and noted its view that a flat rate of tax would not incentivise environmental performance.

Three respondents took a more nuanced approach. One primary aggregates industry respondent was unsure, noting that this approach was possible but would need to be product and context specific. One of the tax, accountancy or legal organisations noted that multiple rates could be provided for but would add to complexity, particularly in terms of cross-border arrangements and may inadvertently lead to compliance issues. A single flat rate was as such ideal, though a percentage approach rather than a flat tax rate might be considered over time. Another organisation from this grouping noted that including more than one rate could potentially allow for incentives to be put in place to suit the prevailing market, industry conditions and policy objectives, but that having a flat rate would be ideal in terms of minimising administrative complexity.

Another respondent indicated yes but focused their remarks on the case for increasing the tax rate in general.

Advisory Group Discussion

There was limited discussion of rate setting during meetings of the advisory group, primarily during the third meeting. Discussion focused primarily on the potential implications if differential rates of tax were applied in SAT and UKAL, with representatives of the primary aggregates industry restating their concerns about this.

Scottish Government response

The Scottish Government welcomes the range of comments and views offered on the issue of tax rate setting.

As set out in the consultation document, no specific rate of tax will be set out in the Bill.

The Bill however provides for a regulation-making power to allow Scottish Minsters, with the approval of the Scottish Parliament, to set the tax rate or rates through secondary legislation. It also sets out that the tax will be chargeable by weight, with a rate or rates per tonne applied to all taxable material and provides the Scottish Ministers with power to make regulations regarding the calculation of the weight of aggregate.

For tax introduction, the Scottish Government intends to provide for a single tax band, matching the approach taken for UKAL. The provisions in the Bill would however allow the Scottish Ministers to introduce multiple tax bands in future. Overall, this approach is intended to provide certainty and stability for taxpayers, whilst also providing Ministers with the flexibility to consider the case for a multi-band system over time.

3.5 Sustainability Fund

Chapter 5 of the consultation paper provided an overview of the historic sustainability funds linked to UKAL and sought views on the creation of a new fund linked to the devolved tax.

A21 – Do you support the introduction of a sustainability fund? Please explain your answer.

A22 – What do you think the objectives of such a fund could be?

Number of responses: 16

Responses to questions A21 and A22 are considered together on the basis that views on the case for a sustainability fund also included reflections on the objectives of such a fund.

15 respondents offered views on these questions, with an additional respondent indicating there were no sure on whether a fund should be introduced.

The majority (ten) of respondents supported introducing a sustainability fund, but without consensus on the objectives. As some respondents highlighted multiple potential objectives, the analysis is not broken down by organisation type. However, in summary, suggested objectives included to:

  • Support people in local communities, directly linked to the environmental and community effect of extraction. Supported projects could involve improving local amenity areas, sustainability or biodiversity.
  • Address skills shortages within the sector, enhance consumer preference and awareness of recycled materials and support research and development programmes to foster innovation.
  • Fund projects for community benefit which make better use of the infrastructure put in place for quarries, once they have been restored.
  • Promote the quality and use of recycled aggregate to the construction sector;
  • Reward good practice amongst operators in terms of environmental performance.
  • Conserve or restore the natural environment, helping people in Scotland to access and enjoy nature and enabling people to learn about nature.

Two respondents who were supportive suggested that all tax revenues should be hypothecated to a sustainability fund.

The four respondents not in favour of a sustainability fund specified various reasons, including a perceived poor track record of the previous UKAL fund, concerns that development and administration of a new fund would add complexity and cost, and a general opposition to hypothecation.

One organisation, whilst not explicitly opposed, highlighted that the amount of funding would likely be much lower than in e.g., the Scottish Landfill Communities Fund, and that the potential for the fund to have a tangible impact would be further limited by administrative costs.

A23 – If it were to be introduced, what model could be used to deliver such a fund?

Number of responses: 9

No consensus view emerged amongst those reflecting on the most appropriate model.

Two primary aggregates industry respondents noted that whilst a centrally run and operated fund would bring consistency, more local funds, either site-specific, or in a single planning authority area, might be closer to local communities and allow local residents to have their say. This latter point was picked up by a local authority respondent, along with one of the other industry respondents, which suggested allowing local authorities to administer funding as best suits their local needs and context.

One each of the tax, accountancy or legal, primary aggregates industry and environmental organisations highlighted the Scottish Landfill Communities Fund as a potential model or reference point, though with a need to make changes.

One of the primary aggregates industry respondents suggested that a grant-based fund might be most appropriate, and an individual suggested linking to some aggregate producers’ existing community engagement projects.

Advisory Group Discussion

The case for a sustainability fund was considered at the fourth meeting of the advisory group. There was some support for a fund, as reflected in the consultation analysis above, and various suggestions as to what it might support. Industry representatives favoured a fund that allowed aggregate producers to contribute to local communities near quarries. However, a number of practical considerations and issues were raised, including in terms of administration and impact. More detailed commentary on these points of discussion is set out in the published minutes.

Scottish Government response

The Scottish Government recognises that respondents to the consultation offered broad support for some form of sustainability fund to be introduced.

However, following careful consideration of the responses received and discussion at the advisory group, the Scottish Government has not included specific provisions related to a sustainability fund in the Bill.

This is on the basis that there is not at present a clearly defined and agreed focus for any such fund, taking into account the broad range of potential objectives highlighted and the significant issues to be considered in terms of the likely impact. In addition, concerns over the viability of a fund, in light of the expected revenues and likely administration costs, were also an important consideration.

The Scottish Government will keep this under consideration when SAT is operational. The creation of a fund would be a Scottish Government spending commitment and would therefore have to be considered as part of the wider Scottish Government budget setting process.



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