MoreThanWaste.com - Important decision in landfill tax liability case - cover and engineering materials (01/09/2008)

Janet Jones, Partner, Tax Group, Eversheds LLP, writes about the Waste Recycling Group Ltd v Revenue and Customs Commissioners case.

Waste Recycling Group Ltd v Revenue and Customs Commissioners
[2008] All ER (D) 300 (Jul)
Court of Appeal, Civil Division
Sir Andrew Morrit C, Arden and Smith LJJ
Judgment date: 22 July 2008

Introduction

The case debates the question of whether there was a liability to landfill tax and, in doing so, discusses the proper interpretation and application of the provisions of Part III of the Finance Act 1996 ('the Act') and, in particular, sections 40(2)(a) and 64 of the Act.

Summary

This is an important decision in respect of who makes a disposal, the intention of the person making the disposal and the meaning of 'discard'.

It was held that discard should be given its ordinary meaning and the relevant intention need not necessarily be that of the original producer of the materials.

The legislation

Landfill tax was introduced by Part III of the Finance Act 1996. The charge is imposed by section 40(1), which states that a "tax shall be charged on a taxable disposal". Pursuant to section 40(2):

"A disposal is a taxable disposal if-
(a) it is a disposal of material as waste,
(b) it is made by way of landfill,
(c) it is made at a landfill site, and
(d) it is made on or after 1st October 1996."

Further, pursuant to section 40(3):

"A disposal is made at a landfill site if the land on or under which it is made constitutes or falls within land which is a landfill site at the time of the disposal."

Liability to pay the tax is imposed on the landfill site operator by section 41. Section 42 prescribes the amount of the tax per tonne of waste disposed of: £24 per tonne of active waste and £2 per tonne for inactive or inert waste. (These figures were accurate at the time of the appeal to the High Court, but are now £32.00 and £2.50 respectively.)

Section 64 amplifies the condition of a chargeable disposal set out in section 40(2)(a) ("disposal of material as waste"). It provides:

"(1) A disposal of material is a disposal of it as waste if the person making the disposal does so with the intention of discarding the material.
(2) The fact that the person making the disposal or any other person could benefit from or make use of the material is irrelevant.
(3) Where a person makes a disposal on behalf of another person, for the purposes of subsections (1) and (2) above the person on whose behalf the disposal is made shall be treated as making the disposal.
(4) The reference in subsection (3) above to a disposal on behalf of another person includes references to a disposal-
(a) at the request of another person;
(b) in pursuance of a contract with another person."

It is this section that this case concerns.

The facts

The respondent, Waste Recycling Group Limited (WRG), was the representative member of a group of companies (pursuant to section 59) whose business was waste management. WRG owned and operated approximately 60 landfill sites across the UK, most accepting both inert (also called 'qualifying' under section 42 of the Act) and active waste. WRG was liable to pay (and paid) landfill tax charged in respect of taxable disposals at its landfill sites. All of the sites were licensed under Part II of the Environmental Protection Act 1990 and had to operate in accordance with the strict conditions of the licences.

One such condition was that operators of sites must keep sufficient stocks of inert material or suitable substitutes for use as daily cover to lay over the waste material that has been deposited during the course of a day's operation. Further, inert material is also used for site engineering purposes, particularly the construction of roads within the sites.

WRG also operated approximately 25 transfer stations and 60 civic amenity sites, none of which was a landfill site. They are, instead, facilities at which waste is accepted before it is sorted and either sent for recycling (WRG has some recycling facilities of its own, which are not relevant to this appeal) or to one of WRG's landfill sites. The transfer stations accept waste from local authorities and business and the amenity sites accept waste from members of the public.

As part of its terms of trade, whenever waste is accepted at a landfill site, transfer station or amenity site, title in the waste materials passes to WRG who may then deal with the waste as they so wish (subject to its site operating licence and any agreement with the local authority).

WRG sought from the appellant, HM Revenue & Customs (HMRC), a refund of landfill tax paid in respect of inert materials it had used in the period 1 October 1996 to 30 September 2002 either to provide daily cover or in the construction of the roads on its sites. It contended that such use of inert material could not give rise to a taxable disposal for the purposes of landfill tax and sought a refund of the overpaid tax (in the sum of £2.1m) because the relevant material had not been disposed of "as waste" (sections 40(2)(a) and 64).

The question to be decided by the court was whether the use of inert materials by WRG for daily cover and road construction was "a disposal of material as waste" pursuant to sections 40(2)(a) of the Act.

Conclusion

In coming to its conclusion, the court considered the decisions of Moses J in Commissioners of Customs & Excise v Darfish Ltd [2000] All ER (D) 361 and of the Court of Appeal in Commissioners of Customs & Excise v Parkwood Landfill Ltd [2002] STC 1536 (the latter of which bound the court in respect of the aspects of interpretation with which it previously dealt).

In answering this question, the court followed the approach taken previously by Barling J of the High Court in that whether WRG's use of materials constituted "a disposal of material as waste" depended on whose was the governing intention and what that intention was.

The court acknowledged that Parkwood established that all four conditions laid down by section 40(2) must be satisfied at the same time and agreed that that moment must be the time when the last of them is satisfied, which is likely to be the moment when the material is disposed of as landfill in accordance with the provisions of section 65. This is the relevant time for assessing whose was the governing intention and what that intention was.

On the facts, the court held that the materials were deposited on the landfill site by WRG at a time when the property in them had passed to WRG. Thus, assuming there to have been a disposal at all (this issue was not discussed by the court), the court found that the disposal relevant for the purposes of section 40(2)(a) was made by WRG on its own behalf.

The second question is, therefore, whether WRG intended to discard the materials. The court held that the word 'discard' must be seen by its ordinary meaning of 'cast aside', 'reject' or 'abandon' and did not comprehend the retention and use of the material for the purposes of the owner of it.

Thus, in the instant case, the materials used by WRG for daily cover and the building of roads were not the subject matter of a taxable disposal as defined in section 40(2) and the appeal was dismissed.

Relevance of conclusion

The case confirms several points worthy of highlighting.

The court appears to have gone further than Parkwood in holding that the relevant time at which the satisfaction of the conditions imposed by section 40(2) had to be considered was the time at which the last of them is satisfied. That is likely to be the moment when the material is disposed of as landfill in accordance with the provisions of section 65.

The person making the disposal does not necessarily have to be the original producer of the materials. There may well be cases in which the deposit by way of landfill is effected by the producer of the waste tipping it onto the landfill site with the consent of the site operator. In addition, there may be other cases in which the site operator deposits the material on to the landfill site as agent for, or at the request of, the producer of the material. What is clear is that all the circumstances surrounding the disposal must be taken into account. The fact that title to the materials had passed to WRG by the time the materials were deposited clearly was, whilst not conclusive, instrumental to the court's decision.

The fact that the person making the disposal does not necessarily have to be the original producer of the materials also means that the relevant intention does not have to be that of the original producer. In other words, the court held that there is no principle that material once labelled and intended as 'waste' is always 'waste' just because the original producer of it had thrown it away. Recycling may indicate a change in the relevant intention but is not an essential prerequisite. Re-use by the owner of the material for the time being may do likewise. Once again, all the facts of the case must be considered.

[The views expressed in this paper are the views of the author and do not necessarily reflect the views of MoreThanWaste.com. Legal advice should be sought about your own specific circumstances - Editor]


	Important decision in landfill tax liability case - cover and engineering materials (01/09/2008) *Janet Jones, Partner, Tax Group, Eversheds LLP, writes about the Waste Recycling Group Ltd v Revenue and Customs Commissioners* case.** Waste Recycling Group Ltd v Revenue and Customs Commissioners [2008] All ER (D) 300 (Jul) Court of Appeal, Civil Division Sir Andrew Morrit C, Arden and Smith LJJ Judgment date: 22 July 2008 Introduction The case debates the question of whether there was a liability to landfill tax and, in doing so, discusses the proper interpretation and application of the provisions of Part III of the Finance Act 1996 ('the Act') and, in particular, sections 40(2)(a) and 64 of the Act. Summary This is an important decision in respect of who makes a disposal, the intention of the person making the disposal and the meaning of 'discard'. It was held that discard should be given its ordinary meaning and the relevant intention need not necessarily be that of the original producer of the materials. The legislation Landfill tax was introduced by Part III of the Finance Act 1996. The charge is imposed by section 40(1), which states that a "tax shall be charged on a taxable disposal". Pursuant to section 40(2): "A disposal is a taxable disposal if- (a) it is a disposal of material as waste, (b) it is made by way of landfill, (c) it is made at a landfill site, and (d) it is made on or after 1st October 1996." Further, pursuant to section 40(3): "A disposal is made at a landfill site if the land on or under which it is made constitutes or falls within land which is a landfill site at the time of the disposal." Liability to pay the tax is imposed on the landfill site operator by section 41. Section 42 prescribes the amount of the tax per tonne of waste disposed of: £24 per tonne of active waste and £2 per tonne for inactive or inert waste. (These figures were accurate at the time of the appeal to the High Court, but are now £32.00 and £2.50 respectively.) Section 64 amplifies the condition of a chargeable disposal set out in section 40(2)(a) ("disposal of material as waste"). It provides: "(1) A disposal of material is a disposal of it as waste if the person making the disposal does so with the intention of discarding the material. (2) The fact that the person making the disposal or any other person could benefit from or make use of the material is irrelevant. (3) Where a person makes a disposal on behalf of another person, for the purposes of subsections (1) and (2) above the person on whose behalf the disposal is made shall be treated as making the disposal. (4) The reference in subsection (3) above to a disposal on behalf of another person includes references to a disposal- (a) at the request of another person; (b) in pursuance of a contract with another person." It is this section that this case concerns. The facts The respondent, Waste Recycling Group Limited (WRG), was the representative member of a group of companies (pursuant to section 59) whose business was waste management. WRG owned and operated approximately 60 landfill sites across the UK, most accepting both inert (also called 'qualifying' under section 42 of the Act) and active waste. WRG was liable to pay (and paid) landfill tax charged in respect of taxable disposals at its landfill sites. All of the sites were licensed under Part II of the Environmental Protection Act 1990 and had to operate in accordance with the strict conditions of the licences. One such condition was that operators of sites must keep sufficient stocks of inert material or suitable substitutes for use as daily cover to lay over the waste material that has been deposited during the course of a day's operation. Further, inert material is also used for site engineering purposes, particularly the construction of roads within the sites. WRG also operated approximately 25 transfer stations and 60 civic amenity sites, none of which was a landfill site. They are, instead, facilities at which waste is accepted before it is sorted and either sent for recycling (WRG has some recycling facilities of its own, which are not relevant to this appeal) or to one of WRG's landfill sites. The transfer stations accept waste from local authorities and business and the amenity sites accept waste from members of the public. As part of its terms of trade, whenever waste is accepted at a landfill site, transfer station or amenity site, title in the waste materials passes to WRG who may then deal with the waste as they so wish (subject to its site operating licence and any agreement with the local authority). WRG sought from the appellant, HM Revenue & Customs (HMRC), a refund of landfill tax paid in respect of inert materials it had used in the period 1 October 1996 to 30 September 2002 either to provide daily cover or in the construction of the roads on its sites. It contended that such use of inert material could not give rise to a taxable disposal for the purposes of landfill tax and sought a refund of the overpaid tax (in the sum of £2.1m) because the relevant material had not been disposed of "as waste" (sections 40(2)(a) and 64). The question to be decided by the court was whether the use of inert materials by WRG for daily cover and road construction was "a disposal of material as waste" pursuant to sections 40(2)(a) of the Act. Conclusion In coming to its conclusion, the court considered the decisions of Moses J in Commissioners of Customs & Excise v Darfish Ltd [2000] All ER (D) 361 and of the Court of Appeal in Commissioners of Customs & Excise v Parkwood Landfill Ltd [2002] STC 1536 (the latter of which bound the court in respect of the aspects of interpretation with which it previously dealt). In answering this question, the court followed the approach taken previously by Barling J of the High Court in that whether WRG's use of materials constituted "a disposal of material as waste" depended on whose was the governing intention and what that intention was. The court acknowledged that Parkwood established that all four conditions laid down by section 40(2) must be satisfied at the same time and agreed that that moment must be the time when the last of them is satisfied, which is likely to be the moment when the material is disposed of as landfill in accordance with the provisions of section 65. This is the relevant time for assessing whose was the governing intention and what that intention was. On the facts, the court held that the materials were deposited on the landfill site by WRG at a time when the property in them had passed to WRG. Thus, assuming there to have been a disposal at all (this issue was not discussed by the court), the court found that the disposal relevant for the purposes of section 40(2)(a) was made by WRG on its own behalf. The second question is, therefore, whether WRG intended to discard the materials. The court held that the word 'discard' must be seen by its ordinary meaning of 'cast aside', 'reject' or 'abandon' and did not comprehend the retention and use of the material for the purposes of the owner of it. Thus, in the instant case, the materials used by WRG for daily cover and the building of roads were not the subject matter of a taxable disposal as defined in section 40(2) and the appeal was dismissed. Relevance of conclusion The case confirms several points worthy of highlighting. The court appears to have gone further than Parkwood in holding that the relevant time at which the satisfaction of the conditions imposed by section 40(2) had to be considered was the time at which the last of them is satisfied. That is likely to be the moment when the material is disposed of as landfill in accordance with the provisions of section 65. The person making the disposal does not necessarily have to be the original producer of the materials. There may well be cases in which the deposit by way of landfill is effected by the producer of the waste tipping it onto the landfill site with the consent of the site operator. In addition, there may be other cases in which the site operator deposits the material on to the landfill site as agent for, or at the request of, the producer of the material. What is clear is that all the circumstances surrounding the disposal must be taken into account. The fact that title to the materials had passed to WRG by the time the materials were deposited clearly was, whilst not conclusive, instrumental to the court's decision. The fact that the person making the disposal does not necessarily have to be the original producer of the materials also means that the relevant intention does not have to be that of the original producer. In other words, the court held that there is no principle that material once labelled and intended as 'waste' is always 'waste' just because the original producer of it had thrown it away. Recycling may indicate a change in the relevant intention but is not an essential prerequisite. Re-use by the owner of the material for the time being may do likewise. Once again, all the facts of the case must be considered. [The views expressed in this paper are the views of the author and do not necessarily reflect the views of MoreThanWaste.com. Legal advice should be sought about your own specific circumstances - Editor]