Published online September 16, 2015 doi:10.1144/qjegh2014-084 | Vol. 48 | 2015 | pp. 244 –247

Quarterly Journal of Engineering Geology and Hydrogeology

© 2015 The Author(s). Published by The Geological Society of London. All rights reserved. For permissions: http://www.geolsoc.org.uk/permissions. Publishing disclaimer: www.geolsoc.org.uk/pub_ethics

‘When I use a word,’ Humpty Dumpty said in rather a scornful tone, ‘it means just what I choose it to mean—neither more nor less.’ ‘The questions is’, said Alice, ‘whether you can make words mean different things’ (Alice Through the Looking Glass, Lewis Carroll (1871), Chapter 6). These remarks are apposite to the present situation regard-ing the Aggregates Levy because a number of geological rock terms, including some with no formal definition or with imprecise meanings, have been used to describe quarried products. This is not in itself a problem but these terms have also been used in a quasi-legal sense by Her Majesty’s Revenue and Customs (HMRC) as an indication of the usefulness of such products as a construction commodity and thus their potential for exemption from payment of the Aggregates Levy.

In 2002 the British Aggregates Association (BAA) submitted views to the European Commission, challenging the introduction of the Aggregates Levy on the grounds that the legislation contained unapproved and unallowable state aid (HMRC 2012). However, at that time the Commission raised no objections to the levy and the BAA subsequently brought an action in the European Courts chal-lenging the Commission’s decision. On 7 March 2012 the European General Court ruled that the Commission’s original consideration of whether the legislation underpinning the levy did or did not contain provision for state aid was flawed, and annulled the Commission’s decision. Following this action, the Commission decided to open a formal investigation relating to whether or not state aid is incorpo-rated within some of the exemptions and reliefs within the Aggregates Levy, but it also made clear that some exemptions and relief do not contain state aid (HMRC 2014). The Commission has requested evi-dence from the UK Government relating to this and has asked for further clarification of aspects of the levy.

‘On 1st April 2014 certain exemptions, exclusions and reliefs from the aggregates levy were suspended or limited in (their) scope’ (HMRC 2014). However, ‘The Government undertook to reinstate them should the outcome of the Commission’s investiga-tion allow’ (HMRC 2014). The Commission ruled on 27 March 2015 that, although most of the exemptions were considered to be lawful, in certain circumstances the exemption of shale from the levy amounted to illegal state aid and ordered the UK Government to recover the levy from its recipients (HMRC 2015).

It is argued by the government that the exemptions reflect an overarching environmental objective and, because they are justified by the nature of the tax system, they do not satisfy the condi-tion of selectivity. The stated purpose of the exemption scheme is to

encourage the use of otherwise ‘waste’ materials as aggregate, grant-ing tax relief on materials deemed to be of lower value and therefore not marketable with the ‘normal’ tax burden. The disposal of a sig-nificant proportion of this waste was regarded as (and undoubtedly is) of substantial environmental benefit, with the added advantage of reducing the demand for high-quality materials where they were not required by the benchmarks for their intended application. Prima facie the statements regarding what is or is not liable for tax appear clear, but difficulties arise because many of the terms used not only have imprecise general use definitions but also have differing techni-cal definitions of varying precision and emphasis. The purpose of this discussion is to highlight the range of meanings of some of the terms used, and thereby the difficulties encountered in applying them, and to suggest that there may be a solution to this problem.

Specification

An extract from the relevant specification of exemptions provided under section 3.2.1 (a) of Notice AGL1: Aggregates Levy, April 2009, amended in 2013 (AGL 2009; HMRC 2013) serves as a start-ing point.

What materials were considered exempt from the levy?(a) Any material, more than half of which consists of the follow-

ing substances is exempt from the levy:

• clay, soil, vegetable or other organic matter;• coal, lignite, slate and shale;• processing waste resulting from the separation of coal, lig-

nite, slate or shale from other aggregate after extraction (but not any other aggregate that was extracted at the same time);

• all spoil or waste from, or other by-products from any industrial combustion process or the smelting or refining of metal, for example, industrial slag, pulverized fuel ash and used foundry sand;

• drill cuttings from oil exploration in UK waters, and from land drilling in the UK if licensed under the Petroleum Act 1998 or the Petroleum (Production) Act (Northern Ireland) 1964, and Notice AGL1: Aggregates Levy April 2009 page 11 of 73;

• material arising from utility works, for example, laying gas or water pipes and phone lines, if carried out under the New Roads and Street Works Act 1991, the Roads (Northern Ireland) Order 1993 or the Street Works (Northern Ireland) Order 1995.

Alice, aggregates and tax: muddy waters

Colin J. R. Braithwaite1 & Rachel A. Heath2

1 School of Geographical and Earth Sciences, College of Science and Engineering, University of Glasgow, Glasgow G12 8QQ, UK

2 Heath and Hardie Geosciences, Ltd, 4, Lammerton Terrace, Dundee DD4 7BW, UK* Correspondence: colin.braithwaite@glasgow.ac.uk

Abstract: On 7 March 2012 the European Court decided to annul the 2002 decision by the European Commission that it would not raise any objections to the current imposition of the Aggregates Levy by the UK government and in particular to exemptions. On 31 July 2013 the Commission decided to open formal investigation procedures to give further consideration to certain aspects of the exemptions. This shift in policy will require that the fundamental problems in the definitions that are applied to identify supposed exempt materials are addressed and resolved. Here we discuss these issues and point out areas of ambiguity, indicating the reasons why these cause problems, and suggest solutions.

Received 23 October 2014; accepted 26 June 2015

XXX10.1144/qjegh2014-084C. J. R. Braithwaite & R. A. HeathAlice, aggregates and tax: muddy waters2015

Technical note

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3.2.2 (b) Anything that consists completely of the following sub-stances is exempt from the levy:

• china clay waste and ball clay waste;• spoil from the processing after extraction of industrial min-

erals, for example, fluorspar, sodium chloride, talc.

No further clarification was provided and thus, because many of the terms used to define these materials are ambiguous, their appli-cation is uncertain. This uncertainty gives cause for concern, such as that addressed by Smith & Doyle (2008), who discussed the issue of evaluating potential exemptions for ‘shale’, although they left some stones unturned. A report on claystone, mudstone, shale and slate was prepared for HMRC by the British Geological Survey (Merriman et al. 2003) to aid HM Customs & Excise offic-ers during site visits. Although this gives an overview of salient points, it does not address the issue of gradations between rock types, which require microscopic precision to accurately catego-rize these materials. The terms used in Aggregates Levy Notice AGL1: April 2009, page 11, are addressed below to illustrate their specific characteristics.

Clays and argillaceous materials

‘Clay’ is defined in a number of very different ways. In popular usage it refers to a fine-grained plastic material such as is used in the manufacture of pottery and other ceramics. In general use the term is commonly also applied as synonymous with particular engi-neering ‘soils’. In geological terminology ‘clay-size’ material, orig-inally defined by Udden (1898) and subsequently modified by both Wentworth (1922) and Krumbein (1934), has been regarded as hav-ing a grain size of less than c. 4 μm (restated from its original Imperial scale). ISO 14688 and engineering geology texts such as that by Krynine & Judd (1957) defined clay particles as smaller than 2 μm, but colloid chemists refer to only materials of less than 1 μm as ‘clay’. However, the term ‘clay’ is simultaneously used to describe a large group of alumino-phyllosilicate minerals, ‘clay minerals’, with a particular structure. Clays defined on the basis of grain size may consist of such minerals but may also include vari-able proportions of others such as quartz or feldspar of similar grain size. Clay minerals include kaolinite (the mineral forming both china clay and ball clay; mineralogically identical but of different origins), chlorite, montmorillonite, illite, smectite and others. Some of these are important in engineering works, montmorillonite in particular, because of its propensity to absorb water and swell. Materials consisting of both clays and silts (grain sizes in the range from <4 to 62.5 μm) are generally referred to as ‘muds’ or as being ‘argillaceous’. Geotechnical engineers commonly differentiate between silts and clays on the basis of their plasticity, as measured by their Atterberg Limits, rather than by any precise grain size. Thus, where the specification refers to ‘clay’ as exempt it is difficult to determine what material is meant. The assumption that it is ‘easy’ may well be founded on ignorance of the alternatives.

Indurated (hardened) argillaceous sediments, consisting largely of ‘clays’, are described as mudstones (some also use the term clay-stones) but have widely varying strength characteristics. Examples from relatively young rocks may be soft, plastic or easily broken with the fingers, but typically show a progressive increase in strength with age and/or depth of burial. They may also become harder as a result of cementation by silica or carbonate minerals, and some limestones were originally deposited as calcium carbonate muds or mixtures of these with clays. Slightly indurated mixtures of this kind are referred to as ‘marls’. A rock technically becomes a limestone when more than 50% by volume consists of carbonates. However, the Chalk in Britain effectively consists almost entirely of carbonate ‘mud’ (carbonate par-ticles of clay size) although the degree of induration varies. The Lower

Chalk, with a greater proportion of clay minerals present, is generally weaker. Highly indurated mudrocks may be hard and porcellanous, splintering when struck with a hammer and with strengths in excess of 20 MPa. Mudrocks are lithologically identical to shales in most respects but are not fissile and thus, because the Aggregates Levy specifies ‘shales’, have theoretically been excluded from exemptions. Nevertheless, anecdotal reports suggest that they have been accepted as ‘shales’ in some areas but not in others and thus they have provided a major source of confusion and indeed contention in the industry.

It is important to note that because argillaceous rocks (mudrocks) originate under a variety of hydrodynamic conditions it is mislead-ing to regard any of them as ‘pure’. As indicated, they commonly contain silt (size) as well as clay particles and varying compositions are captured in terms such as ‘silty-clay’ or ‘clayey-silt’ (reflecting contrasting proportions). They may also incorporate sand-size material (sandy-clay) or organic matter (see below) although remaining fundamentally ‘muddy’. Clays used in the manufacture of bricks commonly have sand added but remain plastic ‘clays’.

Shales

‘Shales’ are widely regarded as the most common sedimentary rocks of the world, estimated at c. 69% of those preserved on the continents. However, this figure overstates their importance because, in the absence of an agreed formal definition, the term has been used in a general sense for all kinds of clay- rich sedimentary rocks. This is not a new issue, and Krynine & Judd (1957) noted that many rocks classified as ‘shales’ are in reality claystones or mudstones. So, is there any real distinction?

Mudrocks were typically deposited in quiet-water environments, because any currents present would have winnowed the fine-grained sediment away. Nevertheless, subtle environmental changes are com-monly reflected in millimetre-scale lamination that may or may not be visible to the naked eye. Following compaction and some indura-tion, these laminae may become fissile. Fissility is a planar parting along more or less well-defined bedding-parallel surfaces, analogous in some respects to slaty cleavage but generally characterizing much softer rocks. It is this fissility that is commonly regarded as character-izing ‘shales’ irrespective of the fact that, as indicated, the term shale is used indiscriminately. Smith & Doyle (2008) indicated that the description of shale used by HMRC is that proposed by Stowe (1981), collating the views of Folk (1968), Pettijohn (1975), Blatt et al. (1980) and others in which ‘shale is defined as a fissile rock comprising more than 50% siliciclastic grains (i.e. grains of sediment comprising more than 50% silica) and of which more than 50% of all grains are less than 63 μm in size (i.e. silt and clay particles)’. Why this definition is preferred to those of other widely used texts is not clear. However, there are ambiguities in the statement because the critical grains are not all silica per se (i.e. varieties of quartz) but are of silicate minerals (Stowe did not define siliciclastic materials as ‘silica’), and the percentages are probably intended to refer to weight or volume rather than the grain numbers that are implied. Indurated (hardened) shales may locally be used as aggregate but are typically worked in conjunction with other materials.

This definition excludes carbonate grains of any size but also organic matter that is common in mudrocks, otherwise referred to as black shales. Almost all contain 2–3% organic materials but higher proportions give rise to oil shales and indeed oil and gas source rocks. Where organic matter is present in much higher proportions there is a gradational series from peat through brown and bituminous coals to anthracite, in which the coal has effectively been metamorphosed to some degree. Preservation of organic matter in these rocks is taken as an indication of reducing conditions during deposition and burial, and associated shales commonly contain pyrite. Although the bound-aries here are not fixed, these predominantly organic materials are universally excluded from use in aggregates.

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C. J. R. Braithwaite & R. A. Heath 246

Slates and metamorphism

‘Induration’, literally ‘hardening’, of rocks is broadly a function of age, insofar as this reflects the depth of burial and thus the tem-peratures to which the materials have been exposed. In tectonically active regions (mountain belts) such as the Alps, very young rocks may be significantly indurated and strong, but in sediments depos-ited on stable cratonic areas (old continental crust, inactive for many millions of years) induration may be slight, notwithstanding a great age. However, mudrocks may also be indurated by meta-morphism. This occurs in two general situations. First, rocks in mountain belts may be deeply buried and deformed at relatively high temperatures and pressures. The process that occurs is described as regional metamorphism and has the effect of causing some minerals to recrystallize. In mudrocks this commonly imparts a slaty ‘cleavage’, planar separations at right angles to the imposed stress. Slates are thus indurated argillaceous rocks that exhibit a cleavage, typically a closely spaced parting. Unlike the fissility of shales, where partings are bedding-parallel, cleavage commonly has a cross-cutting relationship to depositional bedding (layering) where strata are folded. Such rocks are typically hard and tough, but their former widespread use as roofing materials is testament to their propensity to cleave easily in one direction, and small frag-ments, such as might otherwise have been regarded as suitable (in strength terms) for use in concrete or surfacing roads, are inevita-bly flaky. At greater depths higher temperatures lead to further growth of new minerals, particularly micas visible to the naked eye, forming schists and phyllites. These retain or indeed enhance the parting characteristics (now termed schistosity) of precursor slates, developing new minerals such as kyanite, sillimanite and garnet, but are commonly weaker, because of the cleavage charac-teristics of the component micas, and may also weather more eas-ily. Further changes at greater depth lead to the formation of gneiss.

Metamorphism may also result from additional heating in prox-imity to igneous intrusions. This contact metamorphism again leads to recrystallization of component minerals in a zone (an aureole) surrounding the intrusion. This may range from a few cen-timetres with small intrusions to many metres or even kilometres with larger bodies. Mudrocks in such situations may be signifi-cantly changed. At low temperatures adjacent to smaller intrusions the rocks may appear relatively unchanged but nevertheless become hard and durable, forming hornfelses. Adjacent to large intrusions they may develop a whole suite of new coarse-grained

minerals including zeolites, prehnite–pumpellyite, albite, epidote, hornblende, pyroxenes and sanidine.

Soils and organic matter

‘Soils’ are another source of confusion. In general usage ‘soil’ refers to a cultivated layer forming the land surface. This varies in thick-ness from centimetres to metres but includes not only a mineral component but also a significant biological element that incorpo-rates the products and textures imposed by living plants and animals, together with their by-products (‘vegetable matter’). Soils (thus defined) vary in their characteristics, depending on their parent materials and local climate. They typically show a vertical zoning, often with contrasting characteristics, reflecting their history and the progressive alteration of the parent materials. This is not usually of significance but in arid and some semi-arid climates dissolution and reprecipitation of component minerals may lead to a build-up of cal-cium carbonate, silica or gypsum (variously referred to as calcrete, silcrete and gypcrete), and locally, in South Africa for example, some of these materials have been used as aggregate. However, most engineering texts define soil as the loose material overlying bedrock. This definition therefore incorporates not only deep weathering products, of dubious economic value, but also transported materials. These include screes and solifluxion deposits, together with surface deposits of sands and gravels of fluvial or glaciofluvial origin, many of which are themselves sources of aggregates.

Discussion

The broad definitions of shale and slate in practical use do not embrace the full range of characteristics of the rocks, or the rock types with which they may be intimately associated and therefore inevitably included in quarrying processes. Although the materials that have been exempt from the Aggregates Levy are generally of lower value than other materials produced from quarries, exemption has been granted only to aggregates consisting ‘wholly or mainly’ of the exempt materials (i.e. greater than 50%). It is important to appreciate that stockpiles with this composition would include a proportion of, for example, the sandstones and/or limestones with which they were interbedded. Thus, a quarry stockpile without an exemption might nevertheless include a proportion (by definition less than 50%) of exempt materials previously interbedded with the more desirable components. Aggregates are generally defined within the industry as

Fig. 1. Quarry face illustrating typical interbedding of sandstones and ‘shales’. The wide variation in the relative proportions of these components within the face should be noted.

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particles of rock that, when brought together in a bound or unbound condition, form part or the whole of an engineering or building struc-ture (Smith & Collis 2001). The materials clay, shale and slate can therefore be classified as aggregate when used for these purposes, although clay per se may have very limited value.

There is an additional issue. Almost all of the materials where ambiguities arise are of sedimentary origin. Conditions varied dur-ing deposition and shale and mudrocks are typically interbedded with more robust rock types (Fig. 1), including limestones and sandstones of value as aggregates. Within some quarries propor-tions may vary within a single working face on a day-to-day basis, and similar variations also occur regionally. Many other ‘exempt’ materials have similar associations. The boundaries between these rock types (i.e. between strong and weak rocks) are commonly transitional. There is a general trend, with a greater proportion of clay minerals within a rock, to reduction in the strength of the material. However, not all clay-bearing rocks are weak and neither are all rocks lacking clay minerals necessarily strong; some poorly cemented sandstones that are weak in bulk may nevertheless pro-vide high-quality fine aggregate after processing. All of these rock types have been included in the production of aggregates, even though they are unlikely to be the main product from a quarry.

Smith & Doyle (2008) referred to the purpose of granting of exemption from the Aggregates Levy as ‘introduced with the aim of reducing the environmental impacts of quarrying by encouraging the use of alternative materials as aggregates’. This interpretation paves the way for the economic disposal of a proportion of the waste result-ing from the preparation of higher quality aggregates. Smith & Doyle (2008) addressed the issue of how far the stated exemptions could be applied to differing rock sequences but from an industry perspective large areas of ambiguity remain, in relation not only to sedimentary sequences but also to weathered igneous and other associations. One course of action might be to request more detailed specifications that incorporate clarifications of these terms, but these might be difficult to determine and equally difficult to apply, and would be expected to require expert opinion and more expensive testing. However, we may assume, given the stated aims, that the object of the procedure is not punitive, but to allow the passage of materials that are generally suit-able for low-specification use but will be used only if they can be sold cheaply, whereas the tax is levied on high-quality materials. The question is where the boundary between these lies. The current offi-cial answer to this is where 50% or more of the aggregate at point of exit from the quarry, typically point of sale, consists of the undesira-ble component (tax exempt materials such as shale), as defined in the levy specifications. However, there are uncertainties, arising not only from the longstanding problems of nomenclature discussed above, but also about where to draw the line between materials that are or are not to be included.

Conclusions

A more practical approach to the extensive problems that have arisen during the implementation of the Aggregates Levy is to suggest that a physically determined boundary would provide a practical alterna-tive. One might be drawn where >50% of the bulk aggregate consists of material that is structurally weak. Strength could be tested on blocks, extracted from blast piles at quarry faces, using a Schmidt hammer or a point load apparatus. These tests are relatively cheap and easy to apply but proportions would need to be determined by present separation methods and BSI procedures. Uniaxial strength of (say) 20 MPa would exclude undesirable materials (those not suitable for quality aggregates) irrespective of composition, together with many mudrocks that currently cause problems. However, the diffi-culty of establishing the proportion of the exempt component would remain. Determination of an appropriate (scaled-up) aggregate crush-ing value or aggregate impact value would provide an objective test that would not require either the separation or the identification of

components and would remain effective when applied to mixtures in stockpiles. Such tests may be expected to be effective across a range of grain sizes and should apply even where weak materials separated into strong components. Detailed X-ray analyses or petrographic examinations would not be necessary although they would remain essential for other applications. Initially, a programme of aggregate crushing value tests on known proportions of components would be required to provide a baseline and define an exemption boundary. Some indurated deposits that currently occupy a grey area might well become liable to tax as a result, but this would be outweighed by the clarity of a physically defined boundary. If the Aggregates Levy is to remain in force with exemptions (which serve a useful purpose) per-haps the time has come for a completely different approach. An example has been suggested by Simon Collins, who reviewed this paper. By allocating a tax that is a proportion of the selling price (like VAT) the unsatisfactory use of poorly defined lithological terms as an indicator of economic value is removed. Low-value aggregate is determined as such by market forces and would naturally incur a pro-portionately lower tax. Conversely, higher value aggregate would be taxed at a commensurate rate and the net revenue to HMRC would continue. This approach would also take into account materials unsuitable for concrete or road surfacing, because of a high flakiness value, frost susceptibility or potentially reactive components, which could not be sold at premium rates.

Scientific editing by Edward Bromhead

Acknowledgements and FundingWe are indebted to a number of colleagues for robust discussion of this topic and to Simon Collins and an anonymous reviewer for perceptive comments leading to improvements in our presentation.

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