Waste Recycling Group Ltd v Commissioners for HMRC (Revenue and Customs)

For landfill tax to arise, the same disposal must satisfy all the conditions in section 40(2) of the Finance Act 1996 when it occurs at the landfill site. The relevant intention is that of the person making, or treated as making, that disposal. Recycling includes any process that produces useful material from waste, including sorting or separating. Re-use at the landfill site alone does not necessarily prevent a disposal from being made as waste. The court must consider all the circumstances, including the financial terms of the transaction. Section 64(2) excludes mere potential usefulness, but does not exclude evidence of the parties’ conduct bearing on an intention to discard.

Waste Recycling Group Ltd appealed against a decision of the Value Added Tax and Duties Tribunal dismissing its claim for repayment of landfill tax paid on inert material used for site engineering and daily cover. The Tribunal had treated the material in categories including free, uneconomic, break-even and discounted tips, civic amenity and transfer-station deposits, procured and sorted material, and site engineering and daily cover as taxable disposals.

The appeal concerned only whether the material was disposed of as waste under section 40(2)(a) of the Finance Act 1996. The central issues were the identity and intention of the relevant disposer, the effect of title passing to the landfill operator, the meaning of recycling, and the relevance of the financial terms of supply or disposal.

1. The appeal was allowed to the extent stated. A taxable disposal under section 40(2) of the Finance Act 1996 must satisfy all four statutory conditions at the same time. The relevant disposal is the disposal made by way of landfill at the landfill site.

2. The relevant intention is that of the person making the disposal, or the person treated as making it under section 64(3) and (4). Passing of title to the landfill operator is not conclusive. The identity of the disposer must be determined by examining the whole process culminating in the deposit, including whether the disposal was made at another person’s request or under a contract with that person.

3. The Tribunal had given insufficient effect to Customs and Excise Commissioners v Parkwood Landfill Ltd [2002] EWCA Civ 1707. Recycling is not confined to crushing, mixing or similar processing. It includes sorting or separating, where that process produces useful material from waste. The relevant question is whether such a process occurred before the material was deposited. Recycling may be undertaken by the landfill operator, the original producer or another person, and the material need not be sold.

4. Re-use at the landfill site is not by itself equivalent to recycling. Material may still be disposed of as waste despite being used for engineering or daily cover. The court must consider all the surrounding circumstances and identify the governing intention.

5. The Tribunal erred in treating the economic circumstances of the transaction as impermissible under section 64(2). That provision excludes the mere potential usefulness of discarded material. It does not exclude financial terms, including payment, transport costs, discounts or other commercial arrangements, as evidence of whether the disposer intended to discard the material.

6. HM Commissioners of Customs and Excise v Darfish Ltd was not overruled or disapproved by Parkwood. Its approach was consistent with Parkwood: the relevant disposer and intention may be identified by examining the whole transaction. Categories (b) to (e) and (h) therefore required reconsideration or agreement in light of this judgment. The parties were to consider whether the remaining categories required remission to the Tribunal.

• High Court (Chancery Division): allowed the appeal to the extent stated against the decision of the Value Added Tax and Duties Tribunal dated 8 March 2007.
• Value Added Tax and Duties Tribunal: dismissed the appeal against HMRC’s refusal to repay the disputed landfill tax.