The appeal dismissal comes as Her Majesty’s Revenue & Customs disclosed that an ‘almost overwhelming’ number of landfill operators are also attempting to claim repayment for tax paid on fluff material.
A total of 90 landfill operators are claiming to be owed rebates for top, base and side fluff that was briefly discounted from the regime following an appeal by the Waste Recycling Group in 2008.
At the time, the Court of Appeal found that where material received at landfill is put to use on the site it cannot be classified as taxable as there was no other disposal option available to processors.
This includes fluff, soft waste for engineering which can be used to layer the base, sides and the cap of a landfill cell and help protect against leachate run-off.
In accordance with the judgement, HMRC initially invited claims for repayment of landfill tax and acknowledged a claim from Veolia that it had overpaid on base and side fluff.
Relief
However, the tax relief ended in 2012 when HMRC issued two notices claiming ‘reverse or top fluff layer’ material was taxable and that its disposal did not constitute a use of the material.
In early 2014, the government solidified its position further by claiming all types of fluff ‘are and always have been taxable’ and that the 2008 ruling ‘does not set a precedent’ on landfill tax (see letsrecycle.com story).
As a result, HMRC has become inundated with an ‘increasing number’ of claims from landfill operators who plan to take the government decision to a first-tier tax tribunal.
And, HMRC’s decision to reject Veolia’s previous claims has seen the company launch judicial review proceedings, asserting a breach of its ‘legitimate expectation’ that it would be paid. The waste company has been joined by other firms which also have part or wholly unpaid repayment claims – including Viridor, FCC Environment, SUEZ Environnement (then SITA UK), and Alpha Resource Management.
Delay
HMRC’s appeal to delay the judicial review had hinged on a witness statement delivered at a hearing last month (June 4) by assistant director Morris Graham, who argued the case should be referred to the first-tier tax tribunal along with the claims from landfill site operators.
Mr Graham added that the “almost overwhelming” number of claims that have now submitted by landfill operators was threatening to undermine the integrity of the tax regime.
But quashing the appeal in the ruling last week, Lady Justice Arden concluded HMRC had failed to make clear what precisely their case will be in response to Veolia’s claims or how wide its case will go into technical evidence regarding fluff.
She added that Veolia and the other waste companies bringing the judicial review were ‘not responsible’ for the number of different claims now faced by HMRC and said the admission only helped explain a ‘chaotic presentation by a public body’.
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But, Lady Justice Arden conceded that a ‘properly prepared’ application by HMRC to the Administrative Court might still be considered if it can prove there is a ‘significant’ risk of inconsistent factual findings by a tax tribunal.
‘Complex’
She said: “Needless to say, HMRC are now making some very serious allegations in the tax appeals brought by these respondents and other landfill site operators. I do not doubt that the position is complex. HMRC’s new case has the potential to lead to an increase in the areas of factual dispute.”
Speaking on the outcome, an industry source told letsrecycle.com that it was assumed HMRC would now appeal the decision. And, if the judicial review goes ahead, it is likely the tax appeals will take years to process.
Commenting on the outcome of the appeal, a spokesperson for HMRC said: “HMRC is currently considering how to respond to the judgment. We are determined that claims designed to ‘push the boundaries’ of environmental taxes to an unjustifiable extent will not succeed.”
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