The Treasury expects to repay around £300 million in landfill tax to companies and councils in the wake of the landmark WRG v HMRC court case, the government has revealed.
However, companies on the receiving end of the reimbursement have been reluctant to declare whether the money will find its way back to the original producers of the waste.
The extent of the returns was revealed by exchequer secretary Sarah McCarthy-Fry late last month (January 20) in response to a Parliamentary Question on how much the government was likely to repay for activities up to September 1 2009.
This follows the landmark ruling of Her Majesty’s Revenue and Customs (HMRC) v Waste Recycling Group (WRG) court case in June 2008, which saw WRG reimbursed £2.1 million for landfill tax it had paid on material between October 1996 and September 2002 which should not have been taxed (see letsrecycle.com story).
“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,” Ms McCarthy-Fry said.
“We estimate that around £300 million will be repaid on related claims for periods before 1 September 2009.”
HM Revenue and Customs (HMRC) told letsrecycle.com that it had not introduced any specific guidance overseeing the return of Landfill Tax and, to date, there had been 94 claims for repayment. This figure includes companies or councils that may have made more than one claim.
We estimate that around £300 million will be repaid on related claims for periods before 1 September 2009
Sarah McCarthy-Fry, exchequer secretary
Ms McCarthy-Fry explained that the changes made to Landfill Tax legislation in September 2009 by the Treasury in the wake of the WRG case were now saving the government hundreds of millions of pounds.
She said: “The Exchequer could also have lost as much as £60 million this financial year and a further £140 million for each subsequent year, if the government had not made the legislative changes to the landfill tax introduced on 1 September 2009.”
The changes to the legislation, in the Landfill Tax (Prescribed Landfill Site Activities) Order 2009, changed the majority of previously exempt activities into taxable activities. The Treasury claimed at the time that this move was done to “remove confusion” surrounding the existing legislation.
The amendments clamped down on the temporary constructions, such as haul roads, cell bunds and hard standings, which had been at the centre of the original court case.
This closed the opportunity for rebate caused by the WRG case, where the Court of Appeal ruled that inert waste taken onto the firm’s 60 landfill sites and used in temporary structures, such as daily landfill cover and site engineering purposes, was not liable for taxation as it had not been disposed of.
One issue remains as to whether the companies that received the reimbursement, after lodging claims with the Treasury, will redistribute the refund to councils and companies which presented the waste at their landfill sites. The practicality and actual costs incurred in doing this have been much discussed.
Speaking to letsrecycle.com, WRG stated that it would be using the returned money to help transform the company away from its landfill operations.
A spokesman said: “Money rightly returned to the industry by HM Revenue and Customs will be used for investment in continuing to transform the waste and resource management business away from landfill disposal to recycling, recovery and renewable energy production and, in particular, to help support development of new treatment infrastructure going forward.
The spokesman added that WRG was “in discussions with some customers and waste producers with a view to passing on monies”.
London-based waste management firm Cory Environmental, which operates the Mucking landfill site in Essex, confirmed to letsrecycle.com that it had been issued a rebate for Landfill Tax paid before September 1 2009 but said it could not divulge any further information.
A spokesman said: “Following the WRG case ruling, Cory Environmental has received Landfill Tax repayments for the tax which we had incorrectly paid to HMRC. We would not go into any financial details regarding this.”
Waste management firm Viridor, which operates 25 landfill sites across the UK, said that it was unable to comment on the return of Landfill Tax at this stage due to the fact its current claim for repayment was going through “due process”.
If waste disposal companies are getting refunds from the Treasury for the Landfill Tax originally paid for by councils then we would expect them to act in good faith and return the money so councils can give their council tax payers an even better deal
Spokesman, Local Government Association
“Until outcome of this claim is known, it would not be appropriate for us to comment further,” a spokesman said.
HMRC told letsrecycle.com that, while it did not have a specific guidance in place for the return of the Landfill Tax monies, it did ask claimants to state if they would be “unjustly enriched” by the repayment.
In an instance where the claimant states they would be “unjustly enriched” but still seek the refund, HMRC said it would enter into a reimbursement scheme, under which the claimant has to repay its customers or consumers.
In addition, if a claimant says they will not be “unjustly enriched” then HMRC stated that the burden was on the company – in this case the landfill operator – to prove that they had fully or in part passed the tax back to the customers.
HMRC stated that companies and customers may have contracts in place to sort the return of monies but HMRC would not get involved if the operator withheld repayment from a customer who believed was owed the money.
Responding to the reluctance on the part of companies to reveal the end location of the returned monies, the Local Government Association (LGA) called on waste firms to ensure it was returned to local authority sources.
A spokesman for the LGA told letsrecycle.com: “If waste disposal companies are getting refunds from the Treasury for the Landfill Tax originally paid for by councils then we would expect them to act in good faith and return the money so councils can give their council tax payers an even better deal.”