Patersons of Greenoakhill Ltd v HM Revenue & Customs

For landfill tax under the Finance Act 1996, whether material is disposed of as waste is determined when it is deposited, when the statutory conditions must be satisfied, and by reference to the material then existing. In that context, material has a static meaning and does not include future by-products. An operator cannot avoid tax on deposited biodegradable material by intending to use methane later produced from its decomposition. Intended use or reuse may be a relevant indicator of an intention to discard in an appropriate case, but it did not determine this appeal. Potential benefits and quantification difficulties cannot displace the statutory language.

This was an appeal by a landfill site operator against the Upper Tribunal’s decision dismissing its appeal from the First-tier Tribunal. Both tribunals had ruled against the operator’s claim for repayment of landfill tax paid on biodegradable material deposited between 2006 and 2009. The material decomposed and produced methane, which the operator extracted and used to generate electricity. The central issue was whether the operator had disposed of the material as waste under sections 40(2)(a) and 64 of the Finance Act 1996, despite intending to use the methane produced later.

The appeal was dismissed. The respondent’s notice was allowed in part.

1. The Court followed Parkwood [2003] 1 WLR 697 in treating the four conditions for a taxable disposal under section 40(2) of the Finance Act 1996 as conditions that must be satisfied at the same time. The relevant point was the deposit of the material by way of landfill at the landfill site.
2. Arden LJ held that the word material in sections 40(2)(a) and 64(1), read with section 70(1), had its usual static meaning in this context. It referred to the material in the form in which it existed at the date of deposit. It did not include future by-products. The methane was produced only after the biodegradable biomass had been deposited, so an intention to use the methane could not prevent the biomass from being discarded as waste.
3. Section 64(2), which makes potential benefit or use irrelevant, provided some additional support for rejecting an argument based on future use. Arden LJ also treated the absence of statutory formulae for calculating tax on later by-products, and the reference to the weight of deposited material in section 68, as indications rather than determinative considerations.
4. The Court did not need to decide whether action taken under a licence amounted to use of the deposited material. Black LJ expressed the alternative view that, on balance, harvesting methane did not amount to using the biomass. King LJ agreed that the appeal was resolved by Arden LJ’s analysis, while observing that use may in some circumstances be a valuable pointer to an intention under section 64(1). The approach in WRG [2009] STC 200 therefore remained relevant background but was not determinative on these facts.

1. Court of Appeal (Civil Division) dismissed the appeal and allowed the respondent’s notice in part.
2. Upper Tribunal (Tax and Chancery Chamber) dismissed the appeal from the First-tier Tribunal: [2014] UKUT 0225 (TCC).
3. First-tier Tribunal ruled against the operator by order dated 21 July 2009.