Presiding over the case, Lord Ericht overturned a previous ruling and said Barr did not intend to “discard” the material used in the construction of the outer cell walls as it was used for an “engineering function”.
In a judgement published on 25 May, Lord Ericht said the First-tier Tribunal had previously “erred” by failing to take into account that saving landfill tax by using recycled materials “fulfils the objective of the tax”.
“Instead, the Tribunal proceeded on the basis that there was something inherently wrong with reducing tax by using recycled materials,” he said.
Barr’s appeal against penalties for using recycled material in roads at the sites also succeeded, though a further appeal concerning filter cake failed.
A spokesperson from Barr told letsrecycle.com that Barr was “pleased” with the outcome but as a matter of policy would not comment further on matters that are subject to legal proceedings.
A spokesperson for Revenue Scotland, the Scottish Government department responsible for the collection of devolved taxes, said: “This is a significant decision in a complex matter and Revenue Scotland is considering it carefully.”
Outer cell walls
Landfill sites are divided into individual cells by barriers known as outer cell walls. Once a cell is filled with waste, it is capped and the land restored by placing material on top.
The Tribunal proceeded on the basis that there was something inherently wrong with reducing tax by using recycled materials
– Lord Ericht
Following the publication of the Scottish Government’s Zero Waste Plan in 2010, Barr invested in a material recycling facility (MRF). It used some of the material processed by the MRF in the construction of outer cell walls and restoration at its Auchencarroch and Garlaff landfill sites. Barr did not believe it needed to pay tax on the material.
In 2018, Revenue Scotland decided the processed material was chargeable to Scottish Landfill Tax and presented Barr with a hefty £99.6 million bill in unpaid taxes and fines.
Last October, the First-tier Tribunal for Scotland refused Barr’s appeal against the bill. The company then appealed to the Upper Tribunal.
Late last month, the Upper Tribunal published its judgement, finding there was no “objective intention” to discard the recycled material and “it was not disposed of as waste”.
Overturning the First-tier Tribunals’ decision, Lord Ericht said: “The appellant invested in the MRFs to retain local authority contracts by saving their local authority clients’ money by reducing their landfill tax charges by recycling waste. There is nothing wrong in principle with such a model.”
Liability
Concluding his judgment, Lord Ericht added: “There is nothing wrong in principle with a landfill operator seeking to reduce its liability to landfill tax by recycling waste, and nothing wrong in principle with a landfill operator using the products of recycling.
“That is not to say that a landfill operator may reduce his landfill tax liability by a mere pretext of recycling: for example, a cell which consisted as to 90% of a wall of recycled waste and only 10% as to the waste surrounded by the wall is unlikely to be genuine recycling.
“The test of an objective intention to discard is well suited to preventing any such abuse.”
Biffa
The move by the Scottish court comes as Biffa today (7 June) said it was facing a possible bill of up to £153 million from HMRC in England over the potential misclassification of waste across the industry.
The waste management company said, however, that there was no certainty that HMRC would bring a claim and it was likely that it will be “some time before the enquiry reaches a conclusion”.
The period in question covers March 2016 to March 2020, Biffa said, and follows a long-standing case between a string of waste management companies and HMRC over ‘landfill fluff’ . HMRC won the latest appeal (see letsrecycle.com story).
Related link
Barr Environmental Ltd against Revenue Scotland
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