Patersons of Greenoakhill Ltd v The Commissioners for HM Revenue & Customs
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Lady Justice Black,Lady Justice King |
| Judgment Date | 07 December 2016 |
| Neutral Citation | [2016] EWCA Civ 1250 |
| Docket Number | Case No: A3/2014/2725 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 December 2016 |
[2016] EWCA Civ 1250
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
(Tax and Chancery Chamber)
Mrs Justice Rose
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
Lady Justice Black
and
Lady Justice King
Case No: A3/2014/2725
Roderick Cordara QC and Zizhen Yang (instructed by KPMG LLP) for the Appellant
Melanie Hall QC and Simon Charles (instructed by HMRC) for the Respondents
Hearing dates: 14 – 15 June 2016
Approved Judgment
This appeal is about the liability to landfill tax ("LT") of a landfill site operator ("LSO") where biodegradable material (material which decomposes through the action of microbes) is deposited at the landfill site, and produces methane which the LSO can extract and turn to account in making electricity. Normally, LSOs have to pay LT on any material which is disposed of "as waste" on their landfill site (Finance Act 1996 ("FA 96"), section 40(2)(a)). An LSO, however, which uses materials, rather than placing them into the landfill site as waste, is in general not liable to LT. This is because a person is treated as disposing of material as waste if, and only if, he disposes of it "with the intention of discarding the material" (FA 96, section 64). In HMRC v Waste Recycling Group Ltd (" WRG") [2009] STC 200, this Court interpreted this provision so that waste does not include inert material received at a landfill site but used as a protective cover ("daily cover") over the waste at the end of the working day, or for constructing roads on the site. This Court has not previously considered the situation where the material is not inert but biodegradable, and is not itself extracted from the site, but produces methane which can be removed.
In this case, the LSO, the appellant ("Patersons"), acquired both biodegradable and inert materials for landfilling at its site near Glasgow. It was obliged to remove the methane as a term of its licence and use it to create electricity. It now seeks a repayment of LT paid in respect of the biodegradable material for the three years (2006 to 2009) when biodegradable materials were deposited into the landfill site and produced methane. Patersons installed machinery which enabled it to convert that methane into electricity and sell it to the National Grid.
The First-tier Tribunal ("FTT") (Judge Demack and Roger Freeston FRICS) by order dated 21 July 2009, and the Upper Tribunal ("UT") by order dated 22 May 2014, ruled against Patersons. The full facts may be found in their decisions. The FTT made some critical findings about the process whereby methane is produced. In particular, the FTT found that methane is produced by microbes when they cause the biodegradable material to decompose (FTT Decision, §3). The process of decomposition is triggered by deposit into landfill (FTT Decision, §98). There is no more to which I need refer for the purposes of this judgment.
In my judgment, for the reasons given below, they were right to do so. The question whether Patersons disposed of the material as waste for the purposes of section 40(2)(a) must be decided at the date of deposit by reference to the material in the form it then was. At that time, there was no methane. That came later. Therefore, I would dismiss this appeal.
This judgment first outlines the relevant legislation and case law about LT and then summarises the decisions of the FTT and UT so far as material. After that I will summarise the submissions. Finally, I shall state my reasons for my conclusion.
RELEVANT LEGISLATION ABOUT LT
Landfill tax is governed by Part III of the Finance Act 1996. It is a domestic tax in that it is not a tax required under EU law ( Customs & Excise Commissioners v Parkwood Landfill Ltd [2003] 1 WLR 697, §9). All references below to sections are to sections of that Act unless it otherwise appears. Tax is charged on a taxable disposal, and since 1 April 2015, the disposal must occur in England and Wales or Northern Ireland.
Section 40(2) sets out four conditions that have to be established for a disposal to be a taxable disposal. This appeal concerns only the first condition. Section 40(2) provides:
(2) A disposal is a taxable disposal if—
(a) it is a disposal of material as waste,
(b) it is made by way of landfill,
(c) it is made at a landfill site, and
(d) it is made on or after 1st October 1996.
Unless the context otherwise requires, "material" means material of all kinds, including objects, substances and products of all kinds (section 70(1)).
Section 41 provides that the person liable to pay the landfill tax charged on a taxable disposal is the landfill site operator. The amount of tax is set out in section 42.
Section 64 explains what is meant by "a disposal of material as waste" and so far as material it provides that:
(1) A disposal of material is a disposal of it as waste if the person making the disposal does so with the intention of discarding the material.
(2) The fact that the person making the disposal or any other person could benefit from or make use of the material is irrelevant….
Section 41 provides that it is not the original producer of the waste which pays LT but the LSO. The amount is generally determined by the weight of the material deposited, but it may be determined in other ways. There are no specific mechanics for working out "rebates" for recycling.
In sum, LT is set out in simply-worded text. As is usual, no practical examples are given. The Tribunals and this Court have had to work out how these provisions apply in cases where there are several persons involved in a disposal. These cases are fundamental to an understanding of LT and to the arguments in this appeal. They are the building blocks on which Patersons has built its case in the Tribunals and in this Court. So, before I set out the Tribunals' decisions in this case, I will summarise that case law.
RELEVANT LANDFILL TAX CASE LAW
The most basic question at issue in this appeal is whether Patersons has disposed of the biodegradable element of the materials it acquired from customers as waste if at the time of deposit on the landfill site it intended to extract methane from those materials when they have decomposed.
The trail begins with HMRC v Darfish [2002] B.T.C. 8003, where an LSO, Darfish, bought soil for use as site engineering. Darfish used a group company to obtain topsoil and deposit it on its landfill site. The previous owners of the topsoil intended to dispose of it as waste but the LSO did not. Moses J held that disposal was different from deposit and that section 64 envisaged that a person might dispose of waste without discarding it. The intention of the owners was to dispose of the soil, and, in the judgment of the judge, the soil had been deposited in the landfill site for them. It was their intention which was relevant, not that of the LSO.
The next relevant case is Parkwood. Here the LSO's subsidiary bought waste for deposit on the LSO's landfill site, from which it extracted inert materials for use as site engineering on the LSO's landfill site, and also bought in other material for the same purpose. I will call all this material "RM" (recyclable material), and the separation out of RM from other waste "the RM separation factor".
In Parkwood, HMRC contended that the relevant disposal was that made by the customer from which the LSO's subsidiary acquired the waste, that the conditions in section 40(2) could be satisfied sequentially and that the disposal would include RM.
This Court rejected HMRC's case. This Court held that all four conditions in section 40(2) had to be satisfied at the same time. Otherwise the liability might depend on the intention of previous owners of the waste which was not known to the LSO. By the time of the deposit in the landfill site in this case, the RM was not being disposed of as waste, and was therefore outside the charge to LT. It would be inconsistent with the purpose of the legislation if LT was payable on the RM since the legislation had as part of its purpose the aim of promoting recycling waste material. This case, therefore, establishes that LT is a tax on landfill waste. Where materials are recycled, there was no liability to LT. Aldous LJ held:
27 The commissioners also submitted that there was nothing in the statute which suggested that material which had been discarded as waste ceased to be waste because it had been successfully recycled. That submission is contrary to common sense. Take material which is thrown away. That is waste. Melt it down and mould it into a spare part for a machine and it is not waste. There need be no change in chemical substance to convert waste into a useful product. It is the act of recycling which is important. This is recognised by Parliament in its drive to promote recycling rather than disposal and is recognised by the cumulative effect of section 40(2).
28 The commissioners accept that their argument leads to the result that companies such as Parkwood will be liable for tax if they use recycled material for site engineering or building purposes, whereas they would not be liable for tax if they used fresh materials. That cannot have been the intention of Parliament when they introduced the landfill tax. The purpose of the legislation was to tax waste material deposited at landfill sites and not to tax deposits at landfill sites of useful material produced from waste material.
…
30….. the tax bites upon the...
To continue reading
Request your trial
-
Devon Waste Management And Others v The Commissioners For Her Majesty's Revenue & Customs, TC 06441
...the Environment Agency on matters relating to fluff), we found neither Mr Legge’s witness statement nor the outcome of the cross 13 [2016] EWCA Civ 1250, [2017] 1WLR 1219, [2017] STC 225 18 examination to be of any material assistance to us in the matters which fall to be decided by this Tr......
-
Biffa Waste Services Limited v The Commissioners For Her Majesty's Revenue & Customs, TC 06442
...processing of waste under EC Council Directive 75/442 of 15 July 1975 on waste (OJ L194 11 [2002] EWCA Civ 1707, [2002] STC 1536 12 [2016] EWCA Civ 1250. [2017] STC 225 27 25.07.75 p 39). The Environmental Protection Act 1990 is the key piece of domestic legislation enacted to meet this obl......
-
Steven Goodman v Dawn Cummings and DMS Governance Ltd
...should be adopted. 81 Learned Counsel cited Patersons of Greenoahhill v The Commissioners for Her Majesty's Revenue and Customs [2016] EWCA Civ 1250, where the English Court of Appeal had to determine what the relevant date was for determining whether a landfill site operator disposed of m......
-
Goodman v Cummings and Dms Governance Ltd (Tangerine Investment Management Ltd (in Official Liquidation) as Third Party)
...Alarms Ltd., [1968] 1 W.L.R. 1916; [1969] 1 All E.R. 93, referred to. (19)Patersons of Greenoakhill Ltd. v. Revenue & Customs Commrs., [2016] EWCA Civ 1250; [2017] 1 W.L.R. 1210; [2017] S.T.C. 225, dicta of Arden, L.J. considered. (20)Peiris v. Daniels, [2015] SC (Bda) 13 Civ, referred to. ......