Aggregates levy – Exemption – Dredging – Watercourse – Respondent commissioners rejecting appellant’s claim for refund of overpaid aggregates levy on aggregate extracted during construction of marina – First-tier tribunal upholding decision – Appellant appealing – Whether “dredging” meaning removal of material from area later forming body of water – Whether “watercourse” meaning definition published in HMRC notice – Whether navigable area of marina falling within section 17(3)(c)(i) of Finance Act 2001 – Appeal dismissed
The appellant was engaged as a sub-contractor to undertake the removal of aggregate from a site adjacent to the River Nene in Northamptonshire which previously consisted of open fields and a river inlet (the dogleg). The aggregate was extracted in the course of the construction of the Lilford Marina, for the mooring of pleasure boats with access to the river. The aggregate was extracted using 360 excavators with buckets. The entire reserve of aggregate (approximately 300,000 tonnes) was removed, to a depth of five metres, as a condition of the planning consent (to prevent sterilisation of the resource). After its removal the aggregate was used in the manufacture of concrete and the site was filled in with inert material to give the marina a depth of two metres for the safe navigation of boats and for other environmental and health and safety reasons. Once completed, pontoons were installed. Whilst most of the marina was navigable there were small parts where the gradient was profiled. Boat owners were expected to navigate away from those areas.
The appellant claimed a refund of overpaid aggregates levy on aggregate extracted during the course of construction of the marina. That claim was rejected on review by the respondent commissioners and the First-tier Tribunal (FTT) dismissed its appeal against that decision. The FTT decided that the exemption from levy contained in section 17(3)(c) of the Finance Act 2001, as amended, did not apply because creation of a new marina by excavation, principally of two fields near the river, was not dredging the bed of a river, canal or watercourse or of any channel in or approach to any port or harbour; and the marina was neither a watercourse nor a channel in a port or harbour, though it probably was a port or harbour.
The appellant appealed, contending that the tribunal erred in law: (i) in failing to decide that “dredging” could mean the removal of material from an area that would later form a body of water; (ii) in finding that the appropriate definition of “watercourse” was the respondents’ definition of watercourse in HMRC Notice AGL1; and (iii) in finding the navigable area of the marina did not fall within section 17(3)(c)(i).
Held: The appeal was dismissed.
Parliament had used specific words to create the exemptions from the levy, especially in exemption (c), which referred to removal from the bed of any river, canal, watercourse, channel or approach, not proposed features, and it referred to the carrying out of “dredging”, not to aggregate won by removal from the ground. The ordinary meaning of “dredging” could not be displaced and substituted by the words “dredging or excavating”, because of the existence of the word “creating” in paragraph (c)(ii). Dredging did not take place in this case but the excavation of fields and a drained dogleg feature of the river to the depth of five metres, followed by infill of inert waste and sub soil to the depth of two metres. Dredging was central to the exemption, and the aggregate had to be removed from the bed of the watercourse or channel in question in the course of dredging. The contrast with the other specified exemptions was marked. It was not impossible to conceive of a new watercourse being created by dredging an existing (more limited) feature, or a new channel being created in a port or harbour. The words in para (c)(ii) “that river, canal, watercourse, channel or approach” referred back to the feature in para (c)(i) from whose bed the aggregate was won, and therefore it was the bed of the new feature that had to be dredged. For dredging to occur, there had to be some existing water feature, not (as was mainly the case here) fields that required to be excavated. It made no difference that the excavation for the purposes of removing aggregate had to be carried out to a depth below the natural water table. What was carried out was not dredging in the ordinary meaning of that word, nor was the bed of any specified water feature being dredged. Moreover, the dogleg was not dredged for the purpose of creating, restoring, improving or maintaining it. The dogleg was, in fact, destroyed in the creation of the marina.
(2) The term “watercourse” in section 17(3)(c) bore its ordinary meaning, which was not so wide as to include an artificial marina built near to a river and connecting to the river only by a narrow channel. A watercourse was, for the purposes of the 2001 Act, at minimum a linear feature (natural or artificial) that carried naturally arising water from one part or end of it to or towards the other, such as a stream, culvert or ditch. The marina, by contrast, was in the nature of a lagoon, connected with but distinct from the adjoining river. Alternatively, it might be an inland port or harbour within the meaning of the Act. In either case, it had no natural flow of water; only the rise and fall in its level from time to time. Therefore, the marina was not a watercourse.
(3) It was the marina (i.e. the port or harbour) that was constructed, not a channel in a port or harbour. It was an inappropriate use of language to describe virtually the entirety of the port or harbour as a channel on the basis that all of it was navigable. The narrow channel between the river and the marina might be described as a channel, within the meaning of the 2001 Act, but the aggregate was not removed from there. That area was blocked by clay while the marina was excavated, and on completion the clay bung was removed so that river water could fill the marina.
Adam Rycroft (of KPMG LLP) appeared for the appellant; James Puzey (instructed by the General Counsel and Solicitor to HM Revenue and Customs) appeared for the respondents.
Click here to read transcript: PJ Thory Ltd v Commissioners of HM Revenue and Customs
