R (on the application of Biffa Waste Services Ltd) v Revenue and Customs Commissioners

JurisdictionEngland & Wales
JudgeSir Kenneth Parker
Judgment Date23 June 2016
Neutral Citation[2016] EWHC 1444 (Admin)
Docket NumberCase No: CO/248/2015
CourtQueen's Bench Division (Administrative Court)
Date23 June 2016

[2016] EWHC 1444 (Admin)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Sir Kenneth Parker

(Sitting as a Judge of the High Court)

Case No: CO/248/2015

Between:
The Queen (on the application of Biffa Waste Services Limited)
Claimant
and
The Commissioners for Her Majesty's Revenue and Customs
Defendants

Kieron Beal QC (instructed by Nabarro LLP) for the Claimant

Melanie Hall QC, Brendan McGurk, (instructed by The Solicitor for The Commissioners for Her Majesty's Revenue and Customs) for the Defendants

Hearing dates: 13, 14, 15 April 2016

Approved Judgment

Sir Kenneth Parker

Introduction

1

The Claimant in this claim is Biffa Waste Services Limited ("Biffa"). The Defendants are the Commissioners for Her Majesty's Revenue and Customs ("HMRC").

2

Biffa carries on business in the supply of waste disposal services. Biffa operates some 12 active landfill sites in the UK. Those sites contain cells in which waste is disposed of. The disposal of waste is subject to landfill tax ("LFT") charged by the Finance Act 1996 (" FA 1996"). The landfill site cells are constructed with a view to ensuring the safe containment of waste, and the sites also contain roads and other infrastructure to facilitate the landfill operation.

3

Biffa challenges a decision of HMRC dated 20 October 2014 ("the contested Decision"), by which HMRC informed Biffa that it was re-instating a decision taken on 31 May 2012. The contested Decision directed Biffa to treat as subject to LFT the use of material in the construction of a "regulation layer" (also referred to as a "regulating layer"). This layer is stated to be the layer above the final layer of soft waste placed below the "cap" used to seal the containment system which houses the waste material disposed of within the cell. The regulation layer is 300mm deep, and comprises soil or fine soils ("fines") or other appropriate material. Biffa calls the final layer of soft waste beneath the regulation layer the "EVP layer".

4

Biffa contends that the contested Decision was contrary to a previous ruling from HMRC which Biffa had received dated 28 September 2009 ("the Ruling"). Biffa maintains that the Ruling represented that the regulation layer was not subject to LFT. From September 2009 to May 2012 Biffa relied on the Ruling to its detriment, in that it did not account for LFT in relation to the material used to construct the regulation layers at each of its landfill sites.

5

Biffa contends that HMRC may not apply the contested Decision retrospectively and assess Biffa for LFT in respect of material used in the regulation layer prior to 31 May 2012 when HMRC revoked the Ruling. HMRC accepts that if the Ruling meant what Biffa contends that it meant, and if Biffa disclosed to HMRC all material facts before the Ruling was made, HMRC was not entitled to withdraw the Ruling with retrospective effect and the claim must succeed.

6

Biffa does not seek permission to apply for judicial review in respect of the substantive nature of the contested Decision. Although Biffa does not agree that the contested Decision is correct in law, that is a matter that Biffa is challenging before the First-tier Tribunal (Tax Chamber) ("FTT"). The judicial review proceeds therefore on the assumption that HMRC's revised analysis of the LFT treatment of the regulation layer is correct. That is, the material used in the regulation layer is subject to LFT.

The Relevant Legislation

7

The relevant legislation is set out in Annex 1 to this judgment.

The "regulation layer": Further Description

8

The construction and operation of landfill sites are regulated by the Environment Agency (" EA"). In order to operate landfill sites and individual cells, Biffa is required to be licensed as a landfill operator by the EA. It requires a permit and planning permission for each proposed site. Each permit requires Biffa to enter into a Construction Quality Assurance agreement ("CQA") with the EA setting out the way in which the cell engineering will be carried out at that site.

9

One component of the cell engineering is the containment system, also referred to as the liner. This liner is put in place to ensure that pollutants are prevented from escaping from the cell. The containment system itself may be vulnerable to large, heavy or sharp items discarded in the landfill cell. As waste decomposes, it can move underground and this can put pressure on the containment system. Landfill operators typically place a layer of approximately two metres of "fluff" at the base and side of landfill cells. This is commonly referred to as "basal and side fluff" within the industry. The term "fluff" thus relates to soft material, which is typically black bag domestic waste.

10

When the cells are full of disposed waste, a landfill operator is required to seal the top of it. This is referred to as "capping". This capping then enables restoration work to be carried out above the cap, so that the land can be re-used for other purposes.

11

For each of its sites, the CQA required Biffa to place (and compact) a 300 mm thick "regulation layer" above the final waste in a landfill cell below the cap. This layer had to consist of material with a particle size no bigger than 20 mm, which would provide a uniform surface upon which the liner would be placed and the restoration work could be carried out. The CQA also set out requirements for the material that could be used as part of the regulation layer and how it should be placed and compacted. The "regulation layer" had to be constructed using suitable material. The requirements of the regulation layer were applied in the same way across all landfill cells that Biffa constructed.

12

For example, the CQA dating from May 2009 for the North Herts Landfill Site dealt with the regulation layer in section 5. The 300mm thick regulation layer was to be placed and compacted over the final waste surface. It had to comprise the materials noted in Clause 5.2 of the Specification. The CQA Engineer (employed by a third party) had to monitor the materials that were to be used in the regulation layer, to make sure non-compliant material did not enter the works. The CQA Engineer also had periodically to excavate through the compacted regulation layer to check that the thickness was 300mm or greater.

13

The EA in draft guidance described the regulation layer in the following terms:

"Regulating Layer

B37. Where a regulating layer is incorporated in the design of a capping scheme, it should be installed over the final lift of waste and would generally consist of fine grained material, although a variety of materials may be appropriate including suitable material from the incoming waste stream. The waste regulating layer is not included in the Landfill Regulations capping guidelines as it performs none of the functions required of the capping system. However, the inclusion of a waste regulating layer has a number of benefits which include:

• Protection of the overlying geo-synthetic engineered cap from puncture by protruding objects within the waste mass;

• Reduction of the magnitude of strains on the engineered cap;

• Provision of a firm, even surface against which to place the engineered cap therefore making control and monitoring of material placement easier." [emphasis added].

14

Biffa used a 300mm thick regulation layer as the material placed immediately below the cap.

Material changes to the legislation at the time of the Ruling

15

In July 2008, in Waste Recycling Group v HMRC [2008] EWCA Civ 849, CA (" WRG"), the Court of Appeal held (applying the earlier reasoning of the Court of Appeal in Parkwood v. HMRC [2002] EWCA Civ 1707; [2003] 1 WLR 697) that material which was put to "use" on a landfill site was not subject to landfill tax as it had not been disposed of with the intention of discarding it within the meaning of sections 40 and 64 of the FA 1996.

16

On 22 December 2008, HMRC published Revenue & Customs Brief 58/08 ("Brief 58/08"). Brief 58/08 stated, amongst other things, that:

"2…. The Court found that where material received on a landfill site is put to use on the site (for example, for the daily coverage of sites required under environmental regulation, and construction of on-site haulage roads), it is not taxable, as there is not, at the relevant time, a disposal with the intention of discarding the material.

3. We accepted the Court's decision and did not seek leave to appeal to the House of Lords."

Brief 58/08 then stated that:

"4. Notwithstanding any possible changes to landfill tax legislation that the Government might decide to introduce, the judgment means that materials put to use on a landfill site are not taxable. Illustrative non-taxable uses of material include:

Cell engineering

• Mineral material (including clay) used as part of an artificially established (geological) barrier on the bottom, sides or top (cap) of a landfill. Materials used to protect from damage any geosynthetic product used for landfill containment on the base, sides or top of the landfill.

• Drainage material at the base and up the sides of the site used to collect leachate and allow its transport to a low point for collection/extraction.

• Material used beneath the landfill cap and up the sides of the site to allow landfill gas to accumulate for extraction. Material used as a preferential drainage layer above the cap to encourage surface water run off.

• Mineral material (including clay) used to protect the cap and provide a restoration layer for planting."

17

The relevant legislation was changed prospectively from 1 September 2009. A new section 65A FA 1996 enabled certain procedures or activities to be treated as a disposal of waste (even if pursuant to WRG they might be regarded as "use" of waste). HMRC enacted...

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    • United Kingdom
    • Competition and Markets Authority (EW)
    • 13 Diciembre 2017
    ...78. The Appellants relied on Samarkand Film Partnership No 3 v HMRC [2017] STC 926, paragraphs 115, 117-119 and Biffa) v HMRC [2016] EWHC 1444(Admin), paragraphs 78-83 and 144 in support of their 332 NoA, paragraph 5.7. 324 325 76 accepted. 333 It follows that the Generators cannot adjust t......
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    • United Kingdom
    • Competition and Markets Authority (EW)
    • 13 Diciembre 2017
    ...78. The Appellants relied on Samarkand Film Partnership No 3 v HMRC [2017] STC 926, paragraphs 115, 117-119 and Biffa) v HMRC [2016] EWHC 1444(Admin), paragraphs 78-83 and 144 in support of their proposition. 332 NoA, paragraph 5.7. 77 accepted.333 It follows that the Generators cannot adju......

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