HMRC has, with revised legal advice, restated that such waste, often known as fluff, is subject to landfill tax. This revision comes in the face of increasing numbers of challenges by waste companies who want refunds for past landfill tax payments and who, in the eyes of HMRC, are challenging the boundaries of landfill tax legislation.
Todays review clarificiation by HMRC is expected to be a significant blow to some of the large operators, such as Veolia Environmental Services, and other large firms as well as smaller site operators.
Concern
It is likely to be greeted with huge concern by the companies with action against HMRC already underway in a First Tier Tax Tribunal, part of a formal procedure to challenge HMRC decisions. The review announcement is expected to bolster HMRCs case to refuse to pay refunds although there is thought to be a determination within some companies to pursue the matter to the highest level possible.
The issue goes back to before 2010 when Waste Recycling Group (WRG) now FCC went to court to claim that landfill tax should not be payable on waste materials (fluff) which it used for roads and site lining, (see letsrecycle.com story).
The company won its case in the Court of Appeal in July 2008. In 2010 Exchequer Secretary Sarah McCarthy-Fry told Parliament that “The effect of the Court of Appeal’s judgment in the Waste Recycling Group case was to reduce the revenue yield from landfill tax and render certain waste materials non-taxable, even though they have a detrimental environmental impact.”
WRG was reimbursed 2.1 million for landfill tax it had paid on material between October 1996 and September 2002 and the Treasury estimated that in all, some 300 million might have to be refunded.
New legal advice
Now, HMRC says it has received new legal advice which has meant a review of outstanding claims. It now considers that the previous interpretation of the 2008 judgement was wrong and that the WRG case did not create a precedent and the ruling applied only to the WRG case. Furthermore, HMRC today emphasised that it also considers that all types of fluff material are, and always have been taxable, and are nothing more than waste discarded permanently to landfill.
Consequently, letsrecycle.com understands that HMRC will vigorously defend claims for refunds on the fluff when companies consider it not taxable.
‘… material referred to by some as the reverse or top fluff layer constituted careful placement of soft waste which is (and always has been) liable to landfill tax’ – HMRC
More details about todays announcement and policy decision can be found in guidance brief just published by HMRC: Landfill Tax Brief 02 14
It notes that in 2008 in the wake of the court case, HMRC actually invited claims from companies for landfill tax refunds. But, in 2012 futher guidance was published clarifying the situation. This guidance took a tougher stance and said: It was confirmed that material referred to by some as the reverse or top fluff layer constituted careful placement of soft waste which is (and always has been) liable to landfill tax. This is because the waste material is disposed of with the intention of discarding it and the disposal does not constitute a use of that material.
‘No further payments’
The Landfill Tax Brief notes that HMRC will make no further payments of side and base fluff claims. Claims for repayment of tax in respect of reverse or top fluff will also be resisted.
HMRC emphasises that in its view the principle of use only applies to the specific circumstances in the WRG case and that it has found no evidence to suggest that fluff layers fulfil any engineering purpose or are a regulatory requirement.
FOR OTHER ARTICLES OF INTEREST REGARDING THE ISSUE:
Proposed landfill tax changes (April 2009)
Treasury set to return £300m in Landfill Tax (February 2010)
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