HMRC has published a further Brief about its change in policy relating to claims for overpaid landfill tax. These changes follow earlier HMRC briefs following the judgement of the Court of Appeal in 2008 in the case of HMRC v Waste Recycling Group Ltd. In that case, the Court of Appeal held that material put to use on a landfill site (for example material used for the daily coverage of sites required under environmental regulation and the construction of temporary haulage roads) was not subject to landfill tax. HMRC therefore announced that it would accept retrospective claims by landfill site operators for overpaid landfill tax, subject to a four year limitation period, in relation to materials put to use at a landfill site. However, the Government responded to the judgment with legislation which taxes most materials reused on site with effect from 1 September 2009.
The most recent announcement made in January this year seeks to clarify that HMRC will not accept claims for so called “fluff” layers whether on the sides, base or reverse/top of a landfill site. However, HMRC will not seek to clawback any payments which it has already made in relation to side and base “fluff”. This may lead to similar landfill site operators being treated differently, which may be challenged in the courts.
HMRC stated that its most recent announcement was motivated by the fact that increasing numbers of claims from some landfill site operators have cited the 2008 judgment to challenge the boundaries of landfill tax legislation. HMRC has also stated that there is a hearing pending before the First-tier Tax Tribunal which will consider the landfill tax liability of the so called reverse or top fluff layer. HMRC maintains that such material has always been subject to landfill tax as it is intended to be discarded and that it is simply carefully placed and well managed waste. The Tax Tribunal will determine its liability to landfill tax.
What does this mean?
There are a number of claims that have been made by landfill site operators for overpaid landfill tax. There may be an opportunity for users of landfill sites to seek to recover overcharged landfill tax from landfill site operators in relevant circumstances prior to 1 September 2009. Users of landfill sites may have a claim in restitution against the landfill site operators for overpaid landfill tax. The interaction of the limitation periods for restitution and statutory claims by taxpayers is an evolving area of law, in the context of both direct tax and VAT. This may have a bearing on the nature of any relief that may be available. Any such relief will depend upon individual factual circumstances.