Her Majesty's Customs And Excise v Devon Waste Management Ltd & Ors

Under Part III of the Finance Act 1996, whether material is disposed of as waste turns on whether the disposer intended to discard it when the statutory conditions for a taxable disposal were satisfied. The question is not simply whether the material was used. Use may be relevant, but it is only one factor in a fact-sensitive assessment. Processing, separation, storage, title, economic circumstances and the practicality of applying the tax may also matter. Protective placement, inspection and compaction of black-bag waste, and shredding of engineered waste, did not negate the landfill operators’ intention to discard the material. The disposals were therefore taxable.

HMRC appealed against a decision of the Upper Tribunal (Tax and Chancery Chamber), reported at [2020] UKUT 1 (TCC), which had reversed two First-tier Tribunal decisions. The First-tier Tribunal had held that the disposal of black-bag waste or fluff was taxable in [2018] UKFTT 181 (TC), and that the disposal of engineered waste, or EVP, was taxable in [2018] UKFTT 199 (TC).

The material was placed in landfill cells as protective base, side or top layers. The central issue was whether its protective function meant that the respondents did not intend to discard it for the purposes of Part III of the Finance Act 1996.

1. Disposition. The appeals were allowed. The Upper Tribunal’s decision was set aside and the First-tier Tribunal’s decisions were restored. The disposals of fluff and EVP were taxable disposals.
2. Under section 40(2) of the Finance Act 1996, all four conditions for a taxable disposal must be satisfied at the same time. Section 64(1) asks whether the person making the disposal intended to discard the material. The relevant time will often be when the material reaches its final resting place in the landfill cell, and the relevant intention will usually be that of the landfill site operator.
3. The statutory question is not whether the operator used the material. The word discard bears its ordinary meaning, read in statutory context. Use can coexist with discarding and is not a determinative legal test. Section 64(2) makes potential usefulness irrelevant where the material is otherwise being discarded.
4. The intention to discard is a fact-sensitive question. Relevant factors may include processing or transformation, separation and storage, permanent placement, passage of title, economic circumstances, the location of the material and the practicality of applying the tax. No factor that indicates whether material is being discarded should be excluded unless the statutory wording makes that unavoidable. The Court applied this approach consistently with Parkwood Landfill Ltd v Commissioners of Customs and Excise [2002] EWCA Civ 1707 and explained that Waste Recycling Group v Revenue and Customs Commissioners [2008] EWCA Civ 849 did not establish that any use necessarily excludes an intention to discard.
5. The First-tier Tribunal had correctly found that the respondents were carefully disposing of waste in a manner that protected landfill infrastructure. The inspection, placement and compaction of fluff, and the shredding of EVP, did not negate the otherwise obvious intention to discard the material. The other statutory conditions were accepted as satisfied.
6. Legislative purpose forms part of ordinary statutory construction and need not be pleaded in a respondent’s notice. Broad environmental policy may assist with statutory scope, but is usually of limited assistance in identifying the precise boundary between taxable and non-taxable disposals.

• Court of Appeal (Civil Division) allowed HMRC’s appeals and restored the First-tier Tribunal’s decisions.
• Upper Tribunal (Tax and Chancery Chamber) [2020] UKUT 1 (TCC) reversed the First-tier Tribunal and held that the respondents’ use of fluff and EVP meant that they had not intended to discard the material.
• First-tier Tribunal held the fluff disposals taxable in [2018] UKFTT 181 (TC) and the EVP disposals taxable in [2018] UKFTT 199 (TC).