Landfill restoration and tax exemption

The Court of Appeal has given its first ruling on the interpretation of the statutory provisions designed to exempt materials used in restoring waste disposal sites from the landfill tax. In doing so, it upheld the view of Customs & Excise that the exemptions essentially relate to material deposited after the completion of waste disposal operations as understood in normal business practice.

Commissioners of Customs and Excise v Ebbcliff Ltd ([2004] EWCA Civ 1071, 30 July 2004) concerned a former quarry in Essex which was infilled with a wide range of waste materials during the 1960s. The then Greater London Council decided that the site had been restored to a poor standard, and in the 1990s a new planning permission and waste disposal licence provided for the proper restoration and landscaping of the site over a five-year period.

The issue concerned the extent to which landfill tax was payable on the material deposited at the site. Landfill tax was introduced under the Finance Act 1996, but it was recognised in a review by Customs & Excise in 1998 that the tax had led to a shortfall of inert waste for use in landfill restoration (ENDS Report 276, pp 20-23 ). As a result, amendments introduced in 1999 provided for certain exemptions from the tax (ENDS Report 290, pp 23-24 ).

Under section 43C of the 1996 Act (as amended), the key exemption relates to material used in the restoration of the site, with "restoration" being defined as "work, other than capping waste, which is required by the relevant instrument to be carried out to restore a landfill site to use on completion of waste disposal operations."

Given the particular history of the site and the fact that the new planning permission and waste licence were designed to ensure proper restoration, the site's owners, Ebbcliff, argued that the exemption should extend to all waste materials deposited on the site prior to capping.

The Commissioners did not accept this argument, but last year the VAT and Duties Tribunal agreed with Ebbcliff, and held that the work being undertaken by the company was not disposal for the sake of disposal but was essentially a continued restoration of the site to modern standards. The High Court overturned this decision, and Ebbcliff appealed to the Court of Appeal.

Lord Justice Peter Gibson noted that the planning permission and waste licence required the deposit of waste to be carried out as part of an operation designed to restore the site - "but the question raised by the 1996 Act is whether that work, which was to be followed by capping and then the deposit of top-soil, was what Parliament intended to be comprehended within the section 43C exemption."

He concluded that the use of undefined terminology in the Act such as "capping waste" implied that the section was drafted in language which presupposed a knowledge of the ordinary terms in use in the business of operating landfill sites.

Evidence indicated that conventional practice involved three phrases - filling, capping and restoration. Parliament had excluded capping waste from the exemption and, in his view, "if the exemption was designed to cover all disposals of inert waste made for the purposes of restoring a derelict site to beneficial use, it is hard to see what policy reason there would be for excluding the capping layer from the exemption while including both the waste below and the soil above in the exemption."

The court accepted that the more generous interpretation urged by Ebbcliff would encourage the greater provision of inert waste at landfill sites, but did not feel that its ruling defeated Parliament's interpretation. A substantial amount of material deposited as the final layer still remained exempt.

The court also agreed that no capping might be required for certain sites where there had been no previous deposit of putrescible waste, making it more difficult to determine the boundaries of what was taxable and what was exempt. In that case, as so often with this area of law, "it will be a question of fact to be determined in the light of the evidence the point at which the filling of the site ends and the restoration of the site commences."

It is arguable that the ruling failed to recognise the distinctive history of the site in question and the primary purpose of the waste disposal operations being undertaken there. Nevertheless, it has the benefit of applying a commonsense interpretation of the legislation, and one that should be intelligible in ordinary practice.

Richard Macrory, Professor of Environmental Law, University College

Richard Macrory is a board member of the Environment Agency but the views expressed here are personal.

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