Landfill tax: Taylor Woodrow v Customs & Excise (November 1998) VAT and Duties Tribunal

United Kingdom

Taylor Woodrow v Customs & Excise (November 1998) VAT and Duties Tribunal

This case concerned a dispute between Taylor Woodrow & Customs & Excise over a Taylor Woodrow project in Bury which involved reclamation of derelict land, including an unlicensed tip, as part of a new retail development. In order to avoid imposing costs on land reclamation projects, the Government has granted an exemption from the £7 per tonne landfill tax for material excavated from contaminated sites. In order to qualify for this exemption, the developer must get a certificate from Customs & Excise stating the tonnage of exempt material and the landfill site to which it is going. It had been expected that Customs & Excise would interpret the legislation to exempt all contaminated material removed for the purpose of "facilitating development". Customs & Excise have, however, refused to grant the exemption for that contaminated soil removed from building footings as this would have to be removed anyway, and such operation would be "construction", to which the exemption does not apply. Customs & Excise sought to alleviate the uncertainty in its Information Note of May 1997 stating that if Customs & Excise are satisfied that reclamation is taking place, then the material removed will be exempt from landfill tax even if it would have been removed at a later stage as part of the construction operations. The difficulties in obtaining the exemption have, however, continued. The Taylor Woodrow project involved the removal of 10,800 tonnes of waste material and the consignment of this waste to landfill. Customs & Excise refused to grant Taylor Woodrow an exemption in respect of 2,800 tonnes of this waste. The reason given by a Customs Officer for this decision to refuse to grant the exemption was that the waste would have had to have been removed anyway because of its unsuitability due to the risk of settlement. Taylor Woodrow requested a review of this decision by Customs & Excise Appeals and Complaints team. In May 1997 this review was issued and upheld the Officer's decision.

At this time, Customs & Excise policy was broadly consistent with the Information Note, issued that month. Taylor Woodrow then appealed to the VAT and Duties Tribunal, which is independent from Customs & Excise. In coming to its decision in the present case the tribunal took issue with a number of points in the Customs Information Note. Firstly the Information Note states that to qualify for an exemption "the reclamation [must] include clearing the land of pollutants which would unless cleared prevent the land being put to the intended use". This is subject to proof by the developer that removal is necessary due to the potential for the pollutants to cause harm and that if not removed the pollutants would prevent the intended use of the land. On this point, the tribunal stated that Customs & Excise were setting excessively restrictive rules. There was nothing in the legislation requiring the reclamation to be necessary in order to develop the land or for the development to be the primary or only purpose of the work. Secondly, the Information Note also states that Customs & Excise "will not accept any claims that, though the pollutants fall below the limits generally recognised as safe for the intended use of the land, they have to be removed for other reasons" including unsuitable soil structure or a need to reduce the site level. On this point, the Tribunal agreed with Taylor Woodrow that this was also imposing a primary motive test which was not in the legislation. The Tribunal looked to Section 43B(8)(a) of the Finance Act 1996. This requires that, for an exemption to be permitted, the reclamation must constitute or include cleaning the land of pollutants which are causing or may potentially cause harm. The Tribunal was satisfied that in the present case the waste removed had the potential to cause harm. Section 43(B)(8)(b) does, however, require that, in addition to the this, "the pollutants would (unless cleared) prevent the object concerned being fulfilled". The Tribunal held the relevant "object" was "facilitating development", defined in Section 43B(7). Therefore, Taylor Woodrow needed only to show that the removal of the pollutants was necessary to "facilitate development". This imposes a much less onerous obligation on the developer than the Customs & Excise requirement that the developer demonstrate that failure to remove the pollutants would prevent the land being put to its intended use. The Tribunal held that the condition is satisfied if "best current practice" would require the pollutants to be removed. In the present case, removal of the waste was best practice as there was no safer alternative.

The Tribunal upheld the appeal and awarded costs against Customs & Excise and the certificate of exemption from landfill tax was reinstated.
(ENDS Report 286, p17)