A controversial tax hike, which would have forced hundreds of skip hire companies out of business, has been reversed – despite the government denying a u-turn.

Guidance was issued by Her Majesty’s Revenue and Customs (HMRC) on May 18 which led to some tips increasing their charges for dumping inert material previously charged at £2.50 per tonne at £64 per tonne - a 2500 per cent increase.

The increase would have meant skips hired out at previously lower rates would have cost hundreds more for businesses like Reliable Skips in Mitcham to empty, who told the Wimbledon Guardian last week they faced bankruptcy.

However HMRC has insisted there has been no U-turn and that they were simply "clarifying" existing landfill tax rules and that the sudden increases charged by many tips was the result of a misunderstanding.

Siobhain McDonagh, MP for Mitcham and Morden, held a public ‘campaign and protest’ meeting in Parliament yesterday (May 31), in which photocopies of the Wimbledon Guardian’s story about the issue were handed out.

She said: "People in the skip industry are hard-working and operate on very tight margins, but the Government have spent all week attacking these decent people saying this 25-fold skip tax increase was because they were "not paying the right rate of tax" and were "disadvantaging" everyone else.

"We’re all delighted that after I got the industry in to see the government they’ve performed their fastest U-turn yet, but the 50,000 people who thought they were going to lose their jobs should never have been put through this torment in the first place.

"The U-turn is welcome, but the shambles that went with it has been a disgrace.

"I bet they wish they could take this Government to the dump."

HMRC have said they will be issuing further clarification explaining how landfill tax rates should be applied.

Yesterday (May 31) a spokesman for HRMC said: “HMRC responded to concerns expressed by landfill operators that some companies were not paying the right rate of tax and in the process disadvantaging those who paid the correct rate. “We have addressed this by issuing guidance to remind them of the current rules and ensure a level playing field for all businesses working in landfill.”