In R (Biffa Waste Services Limited) v the Commissioners for HMRC  EWHC 1444 (Admin), the claimant company ("Biffa") challenged HMRC's revocation of its previous ruling on Biffa's tax treatment and its retrospective imposition of tax on the basis of a new tax regime. The High Court decided that a clear and unambiguous statement by a public authority such as HMRC on the interpretation of a new regulation may be construed as general policy guidance capable of establishing a legitimate expectation. The Court further ruled that such general guidance may be relied on not only in respect of the specific situation the ruling relates to, but also in respect of other materially identical situations.
- In order for a legitimate expectation to arise when seeking a ruling from a public body, an applicant must give full details of the specific transaction on which s/he seeks the ruling.
- The consequential representation given by the public body must be clear, unambiguous and devoid of relevant qualifications.
- In determining whether a ruling is general policy guidance or is specific to a particular matter, the Court will consider the intention of the public body at the time of its ruling having regard to the relevant legal and factual circumstances.
- If a ruling is given in respect of a specific matter but relies on general principles, it should be capable of being relied on in materially identical situations.
Biffa supplies waste disposal services across 12 landfill sites in the UK.
On 1 September 2009, a new landfill tax regime came into force whereby changes were made to the definition of 'taxable disposal' within the context of landfill tax.
Prior to this, Biffa had planned a restoration operation at one of its sites (North Herts), which involved construction of a "regulation layer". The regulation layer is placed below the "cap" used to seal the waste containment system.
Biffa requested clarification from HMRC as to whether the regulation layer would be treated as a 'taxable disposal' under the new regime. HMRC issued a ruling on 28 September 2009 that Biffa's proposed construction of the regulation layer would be outside the scope of the new regime and it was therefore non-taxable (the "2009 Ruling"). Following the 2009 Ruling, Biffa did not account for landfill tax in respect of the regulation layer at the North Herts site, nor did it account for landfill tax in respect of any regulation layers at any of its other landfill sites. Biffa did so on the basis that the regulation layer at each of those sites was materially the same as that at the North Herts site.
In May 2012, HMRC revoked the 2009 Ruling and stated that the regulation layer was in fact subject to landfill tax (the "2012 Ruling"). HMRC issued assessments against Biffa for landfill tax accumulated since the enactment of the new regime on 1 September 2009. HMRC did not consider that the 2009 Ruling applied to the regulation layer at any other site operated by Biffa.
Biffa filed an appeal against the substantive tax law grounds of the 2012 Ruling in the First-tier Tax Tribunal. This case before the High Court concerned a judicial review of the 2012 Ruling on public law grounds, which Biffa could not argue in the Tribunal. Biffa contended that it was entitled to rely on the 2009 Ruling in relation to each of its landfill sites and that HMRC could not withdraw the 2009 Ruling with retrospective effect.
The Court noted that the doctrine of legitimate expectation is founded on the principle that public authorities must not act conspicuously unfairly towards those with whom they deal. The Court emphasised that a person seeking a ruling must give full details of the specific transaction on which he seeks the ruling, and that the ruling or statement relied on should be clear, unambiguous and devoid of relevant qualification.
The Court then considered the following 2 issues:
- What is the meaning and scope of the 2009 Ruling?
- Did Biffa disclose to HMRC all relevant facts and matters before the 2009 Ruling was made, so that it would be conspicuously unfair for HMRC to revoke the 2009 Ruling with retrospective effect in respect of all sites other than North Herts?
In respect of the first issue, upon careful examination of internal HMRC correspondence and correspondence between HMRC and Biffa, the Court found that there was nothing to suggest that the 2009 Ruling was specific to a particular site, and it bore the clear hallmarks of a general policy statement of the correct tax treatment of the regulation layer in general, albeit that it was made in the context of the North Herts site.
The Court noted that HMRC knew that Biffa operated many other sites and that there was nothing unique or materially different about the North Herts site as opposed to Biffa's other sites. Biffa's requests had asked for general guidance as a matter of principle. In the circumstances it must have been implicit that the 2009 Ruling extended across Biffa's landfill sites. Indeed it would be irrational for this not to be the case in view of the lack of material differences between the sites.
Sir Kenneth Parker commented on the lack of proper disclosure by HMRC of significant internal correspondence, even following specific requests from Biffa, and the failure of HMRC's witness evidence to deal with key points. Exceptionally he notified the parties that he was minded to order HMRC to provide further disclosure after the conclusion of the judicial review hearing, following which HMRC filed a further witness statement and disclosed additional documents. However HMRC still maintained that two key individuals had retired and therefore their emails were not accessible. The judge found it "extraordinary that communications between public officials in respect of important decision making" could not be recoverable simply because those officials had left. He described HMRC's case that the 2009 Ruling should be given a narrow scope as "deeply unattractive" in the face of documents in HMRC's possession which indicated that no such narrow scope was intended by HMRC at the time: the documents disclosed by HMRC after the hearing demonstrated that the central thrust of HMRC's case regarding the scope of the 2009 Ruling had been "seriously misleading". In fact he went as far as to say that he would have been prepared to hold that it was conspicuously unfair, offensive to justice and unlawful for HMRC to put forward as the true meaning of a particular representation something wholly inconsistent with what the public authority intended at the time.
In respect of the second issue, the Court held that there was no material non-disclosure by Biffa such that Biffa could not legitimately rely upon the 2009 Ruling. The Court took into consideration that many tax rulings could have potential for application in other contexts and it would be unduly burdensome for the taxpayer to have to identify how else they may rely on such a ruling. HMRC is better placed to assess how such a ruling could be applied by taxpayers within the industry and an overly demanding test for disclosure could lessen the incentive to seek advance rulings in a way that would not be conducive to the public interest.
This case highlights that where there is a de facto industry standard commonly shared across different transactions, sites or projects (in this case the engineering specification of the regulation layer), a decision made by a public body is more likely to be treated as general guidance invoking legitimate expectations rather than being limited to a one-off representation where the different treatment would itself be irrational.
However, caution must be taken where a relevant transaction involves highly technical elements exclusively specific to a site or a project. In such circumstances, seeking a general policy ruling or relying on previous policy rulings will not automatically give rise to legitimate expectations unless all specific information is fully disclosed to the decision-making body and the ruling is unambiguous and clear. Presuming such guidance is sought at a planning stage of a project, it is advisable to make sure that any material amendments or development of the project affecting policy implication are communicated to the decision-making body in a timely manner.
This case also serves as a reminder of the importance of parties being open with the Court in terms of disclosing documents and giving evidence which gives a full, fair and accurate picture of the facts and background to the Court.