Biffa has lost a £63m case against HM Revenue & Customs (HMRC) fought over whether shredded household waste used as a protective layer in landfill sites is liable to tax.
Biffa is understood to intend to appeal.
It had argued that since the shredded waste, known as EVP, formed a barrier to help seal in other material, it was in use and was therefore not ‘discarded’ and liable to landfill tax.
The First-Tier Tribunal Tax Chamber heard the case on 11 April. This followed a 2016 case which upheld a 2014 HMRC ruling that black bag waste known as ‘fluff’ used to line landfill cells was discarded material and so liable to landfill tax.
Giving judgment, Judge Kevin Poole said the case concerned material deposited in Biffa’s landfill cells above the main body of waste and below the capping liner, which was shredded “but which was otherwise essentially the same as the ‘fluff’ ”.
Biffa’s appeal was for £63m it paid in 2016 relating to work at 22 sites between 2010-12.
Judge Poole said that after negotiations in 2009 between Biffa and HMRC: “HMRC accepted that the installation of the 300mm regulating layer immediately under the artificial cap was outside the scope of landfill tax, not because it was part of the ‘restoration works’ but because they implicitly accepted it was being used and not discarded as waste.
“[Biffa] took the view, without consulting HMRC on the matter, that this ruling could be regarded as applying equally to the 1.7m layer immediately below the regulating layer, which they regarded as ‘used’ to protect the geo-membrane cap just as much as the regulating layer itself.”
This had enabled Biffa to lower charges to customers from which it bought pre-shredded EVP material, which “afforded them a significant competitive advantage over other landfill site operators”.
The judge added: “It appears that complaints were made to HMRC about the matter by other operators in late 2010/early 2011.”
But in 2012 HMRC gave a formal ruling that both the protection layer and the regulating layer were taxable, claiming the £63m from Biffa.
Judge Poole said the tribunal had to decide if EVP was a “disposal of material as waste” and was it “made by way of landfill”.
This turned on whether Biffa intended to discard the EVP. “In our view, the answer to this question is it did, and the fact that the material continued to serve a useful function after such disposal does not affect this conclusion,” he said.
“[Biffa] was simply disposing of the material carefully, as the regulatory regime required it to do.”
He added: “All of the relevant material is being disposed of into the cell, whether or not it is ‘needed’ for ‘use’ in the protection layer.
“There is no physical difference, apart from the shredding, between the material put into the protection layer as EVP and the rest of the similar (but unshredded) material which is simply landfilled along with all other general waste in the cell.”