Commercial exploitation

Scottish Aggregates Tax is charged on aggregate when it is subject to ‘Commercial Exploitation’ in Scotland, unless it is Exempt Aggregate. Exempt Aggregate is defined in Exemptions – Exempt Aggregate.

Commercial exploitation happens in Scotland if the aggregate is exploited in Scotland. This includes, where the aggregate has been moved from outside Scotland for exploitation in Scotland. This may include imports from overseas and movements from the rest of the UK before exploitation in Scotland. Special rules apply to material arriving in Scotland from elsewhere in the UK before exploitation in Scotland. Information about this can be found in the section Cross Border Transactions.

Aggregate is considered ‘commercially exploited’ if, as part of a business activity, it is:  

1. removed from a site
2. used for construction purposes
3. mixed with anything other than water, except in permitted circumstances
4. supplied to another person

The earliest of the commercial exploitation points will trigger the tax.

Each of the possible occasions of commercial exploitation is expanded below.

Removal from site

When considering whether aggregate has been removed from a ‘site’, a site refers to: 

1. the originating site
2. another site under the same registration as the originating site
3. a site where it was taken for an ‘excepted process’, but that process has not been applied

The originating site is where aggregate was won, or most recently won, except if the aggregate is from:

1. the seabed within the Scottish marine area, in which case it is where the aggregate is first landed in the UK
2. an excepted process (such as offcuts from producing dimension stone), in which case it is where the process is carried out

Aggregate that is won can be from:

1. quarrying, mining, digging or dredging
2. collecting or separating it in any other way from any land or area of the seabed
3. collecting aggregate that has been extracted before and left at, or returned to, the originating site or a connected site 

A ‘Connected Site’ is one different to the originating site but still under the registered operator’s control. 

Aggregate is not subjected to commercial exploitation where: 

1. aggregate is moved between sites that are registered under the name of the same person
2. aggregate has been removed to a registered site to have an excepted process applied to it
3. aggregate is removed to any site to have china clay or ball clay extracted from it
4. it has been removed in order to help extract more aggregates or minerals from the site and has then been returned to the land it was won from, provided it is not mixed with any substance or material other than water 

5. In the case of an agricultural or forestry business, if aggregate is extracted from any site that a person occupies, and it then becomes part of the land of that site, or any other site the person occupies, the aggregate will not be considered commercially exploited, provided that the aggregate is not mixed with any other material.

Agreement to supply

Commercial Exploitation occurs at the time an agreement to supply has been made. This is either at the point:  

1. the agreement is entered into
2. if the aggregate is not separately identifiable when the agreement is made, the time at which the aggregate becomes part of the agreement 

An ‘Agreement to Supply’ does not include situations where it relates to the transfer or creation of land rights. For example, where a site is sold along with the aggregate stockpiled there. This aggregate will not be treated as part of an agreement to supply under commercial exploitation. 

The Scottish Aggregate Tax rate in place at the time the agreement is entered into is the appropriate rate to be used to calculate the tax payable.

Used for construction purposes

Aggregate is commercially exploited for construction purposes when it is:

1. used as material or support in the construction or improvement of any structure
2. mixed with anything to produce mortar, concrete, tarmacadam, coated roadstone or any similar construction material

Structures include buildings, bridges, roads, paths, embankments and the ground a railway is laid on. This includes, but is not limited to, aggregate used for: 

1. lining ponds and lagoons
2. landfill engineering
3. railway ballast
4. bunds, flood defences, temporary haulage roads and dams
5. walling, hedging, gabion and rockery stone
6. scouring protection for off-shore wind turbines and foundations for on-shore wind turbines
7. landscaping and restoration, unless it is just disposed of to fill a void - there may be Scottish Landfill Tax considerations where material is disposed of 

Mixed with material or substance

Aggregate is often mixed with other material or substances to produce materials, such as concrete or asphalt. When the aggregate is mixed, it becomes subject to ‘Commercial Exploitation’ and therefore taxable to Scottish Aggregates Tax.  

Aggregate can be mixed with water without it being considered ‘mixed’ for commercial exploitation. Detail on relief for water used in mixing can be found in Tax Calculation – Water Discounts.

‘Commercial Exploitation’ does not occur when the aggregate is mixed with material or substance in certain ‘Permitted Circumstances’, specifically if: 

1. the material or substance with which it is mixed is wholly taxable aggregate that has not been previously subject to Commercial Exploitation in Scotland 

and

2. the mixing takes place wholly on the originating site, another site under the same registration as the originating site, or a site where it was taken for an ‘excepted process’, but that process was not applied.

These are detailed in Exemptions - Excepted Processes.

Broadly this means that where aggregate is mixed with other taxable aggregate and neither aggregate has borne Scottish Aggregates Tax, it can be mixed without being considered commercially exploited at that time. This is provided that mixing takes place at one of the sites specified above.  

For example, a quarry operator might mix gravel and sand together on-site to make a product. In this situation commercial exploitation would not occur at the mixing stage, but would still happen later when the mix is commercially exploited in its own right.