Devon Waste Management Ltd and others v Commissioners of HM Revenue and Customs; Biffa Waste Services Ltd v Commissioners of HM Revenue and Customs – Environment – Landfill tax – Waste disposal – Appellants appealing against decision of First-tier Tribunal concerning taxable disposals at landfill sites – Selected layers of waste laid to protect cell liner – Layer of shredded waste (EVP) incorporated as protection layer beneath regulating layer of landfill cell – Whether waste or EVP disposed of “with the intention of discarding it” within section 64 of Finance Act 1996 – Appeals allowed
The appellant companies operated in the field of waste management and disposal. Where they disposed of materials as waste by way of landfill at landfill sites, they were liable to pay landfill tax. In two separate appeals, the issue raised was whether “black bag” waste material that was disposed of at landfill sites in a particular way was subject to landfill tax.
In the first appeal, the First-tier Tribunal (FTT) had determined issues concerning the use of certain black bag waste (fluff) in the construction of landfill cells. The fluff had been specifically selected as part of a base layer designed to protect the liner of the landfill cell. The FTT held that, although the black bag waste was “used” to protect the lining system, all of the material was destined for landfill, in the main body of landfilled waste if it was not to be “fluff”. The phrase “by way of landfill” in section 40 of the Finance Act 1996 was a qualification that allowed the exclusion of deposits that were clearly not by way of landfill. The deposit of black bag waste intended to remain in the landfill permanently was not an exception: see [2018] UKFTT 181 (TC).
In the second appeal, the FTT reached similar conclusions in a case concerning the deposit of shredded waste (EVP) at the top of landfill cells. The FTT held that the various deposits were all made with the intention of discarding it as waste and were all made by way of landfill: see [2018] UKFTT 199 (TC).
The dispute between the parties on each appeal was whether the black bag waste so used was a taxable disposal because it was a disposal “with the intention of discarding the material” within section 64 of the 1996 Act; or whether it was not taxable because, although disposed of, it was not discarded, since some use was made of it in connection with the design and operation of the cell.
Held: The appeals were allowed.
(1) Section 40 of the 1996 Act required four separate conditions to be satisfied before a disposal was a taxable disposal. The structure of the section therefore contemplated that there might be disposals that were not taxable disposals, even if they were disposals made at a relevant time by way of landfill at a landfill site, because a further condition to the charge to tax arising was that the disposal was a disposal of material “as waste”. The central question was whether the site operator making the disposal did so “with the intention of discarding” the material in question: section 64(1). Contrary to the initial impression created by section 40(2)(a), the focus was on the intention of the person making the disposal, whatever the material was.
(2) The Court of Appeal in HMRC v Waste Recycling Group Ltd [2008] EWCA Civ 849; [2009] STC 200 (WRG) decided, as a matter of principle, that if a site operator disposed of material at a landfill site, but intended to and did make use of its properties for his own purposes, including compliance with regulations, licenses, permits or any other requirements for the site, that use meant that the operator did not make the disposal with the intention of discarding the material. That was so regardless of whether the material was recycled or sorted before being deposited on the landfill site, and even though the disposal was acknowledged to be “by way of landfill” as defined by section 65(1) of the 1996 Act. The effect of the decision was that use of the properties of materials for the operator’s own purposes would not be a disposal with the intention of discarding them, and so not a disposal of the materials “as waste”: WRG applied; Customs and Excise Commissioners v Darfish Ltd [2000] Env LR 3 and In Customs and Excise Commissioners v Parkwood Landfill Ltd [2002] EWCA Civ 1707; [2002] PLSCS 265 considered.
(3) On the facts as found by the FTT, it wrongly concluded that the appellants had the intention of discarding the materials which formed the fluff layers and EVP respectively. The FTT wrongly held that WRG established no more than that re-use of materials was an indicator of use to be taken into account.
Material was not disposed of by the site operator “as waste” because it had previously been discarded as waste by someone else. Whether it was disposed of as waste at the critical time depended on the intention of the person who deposited the material on or under the land at a landfill site. It was not the character of the material that was determinative but the intention with which it was so deposited. It was therefore wrong in principle to conclude that there was an intention to discard because the black bags were waste destined for landfill in any event.
(4) Applying the ratio of WRG to the facts of the present case, the clear conclusion was that the taxpayer companies, when disposing of fluff at their landfill sites, intended to and did make use of the properties of the fluff for their own purposes, namely providing a layer of protection, thereby complying with the regulatory requirements for use of the landfill cell. The fact that the black bags were not recycled and only sorted to a limited extent at the time of emplacement made no difference in principle. As in WRG, the use that was made of the fluff was clear and compelled the conclusion that the taxpayer companies did not intend to discard it.
Roderick Cordara QC and Zizhen Yang (instructed by Ernst & Young LLP) appeared for the first and second appellants in the first appeal and the appellant in the second appeal; Sam Grodzinski QC (instructed by Simmons and Simmons LLP) appeared for the third and fourth appellants in the first appeal; Melanie Hall QC, Brendan McGurk and David Gregory (instructed by the General Counsel and Solicitor to HM Revenue and Customs) appeared for the respondents in both appeals.
Eileen O’Grady, barrister
