This was the message from the waste industry trade body following news that The Durham Company’s judicial review into the exemption had been dismissed by a High Court Judge yesterday (21 September) (see letsrecycle.com story).
The response came as the Local Government Association (LGA), which was present at the July hearing, dubbed Justice Warren’s decision a “huge victory for councils” and argued its representation had been “pivotal” to the ruling.
Jacob Hayler, chief executive of ESA, said: “ESA was hoping that this case would clarify the position on whether some local authorities are acting on a commercial basis, and therefore subject to VAT, when providing trade waste collections. We are therefore disappointed that the presiding judge felt unable to take this particular decision.
“ESA agrees with the claimant that it isn’t credible to believe that all local authority commercial waste collections “are carried out only following a request and for a reasonable cost reflecting cost recovery and no surplus”, which seems to be the condition which would make those services genuinely VAT free. ESA will support any further action considered by the claimant in any way we can.”
Anti-competitive
The Durham Company – which trades as Max Recycle – brought the judicial review against HMRC following its decision in 2011 to introduce VAT exemptions from councils, suggesting the ruling was anti-competitive and gave councils a commercial advantage over waste businesses offering the same type of service.
Speaking to letsrecycle.com, Scott Hawthorne of Max Recycle explained that the argument still stood and the company would be challenging the decision in the second part of its application which is to be heard separately in the Administration Court.
Mr Hawthorne said: “The judge found himself unable to make a decision and erred for the status quo. But this is not done by a long shot.”
In the second part of Max Recycle’s application, the company will argue that the VAT exemptions give way to market distortion and “effectively constitute state-aid”. He suggested there was little difference between the break offered to councils and the recent EU decision that the Irish Government breached state aid laws in support of Apple.
Mr Hawthorne went on to welcome the support it had already received from the ESA. He added the company had been in correspondence with ESA in recent weeks requesting a “more hand’s on approach” from the Association in the next stage of the review.
Industry
The decision to dismiss the review has prompted further questions of the role local authorities play in commercial collections from some corners of the industry. Referencing the reasons behind Slough borough council’s decision to bring its waste services in-house from next year (see letsrecycle.com story), Simon Ellin, chief executive of the Recycling Association, said: “If am understanding this correctly, the judge is saying that local authorities gain their trade collections by request, rather than by marketing.
“Yet Slough borough council are advocating bringing their services in house by “offering” services outside the council – i.e they are marketing their services, much of which will be VAT exempt. This renders the judgement utter nonsense does it not?”
But within the public sector, the ruling has been welcomed. The LGA, which was involved as an ‘interested party’ in the case, said that the judgement was ‘fantastic news for councils.
The organisation’s environment spokesman, councillor Martin Tett, said: “This is fantastic news and a huge victory for councils and it will mean savings of many millions to them at a time when many local authorities have experienced substantial budget reductions. The LGA has been at the forefront of campaigning for this exemption.”
“This is fantastic news and a huge victory for councils and it will mean savings of many millions.”
Councillor Martin Tett, environment spokesman
LGA
He added: “Councils want to do everything they can to support local businesses and potentially absorbing the extra 20% [in VAT savings] would have had a major impact on budgets, meaning them spending less on things like caring for old people and fixing potholes.”
LARAC
Andrew Bird, chair of the Local Authority Recycling Advisory Committee (LARAC), also praised the Judge’s decision. He had previously described the judicial review as “not in the Christmas spirit” when it was launched in late 2014.
Mr Bird told letsrecycle.com: “We are very pleased to see that result. Effectively it wasn’t local authorities’ decision to not charge VAT it was HMRC, so that was outside of our control. As local authorities we have a responsibility under the Environmental Protection Act and quite often we have to collect from premises that others won’t because logistically it is not cost effective.
“Bringing revenue in allows you to spread the cost of your operation, and that makes it more efficient for the taxpayer at the end of the day.”
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