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Firm considers appealing VAT exemption ruling

A waste firm that challenged councils’ ability to be VAT exempt from trade waste collections is considering an appeal after the legal case was dismissed.

The Local Government Association (LGA) described the decision made in the High Court on 19 September as a “huge victory for councils”.

Had the ruling gone the other way, the LGA warned that councils could have lost up to £77m a year from their waste budgets.

LGA environment spokesman Martin Tett said his organisation had been at the forefront of campaigning for the exemption.

He said: “This is fantastic news and a huge victory for councils. It will mean savings of many millions to them at a time when many local authorities have experienced substantial budget reductions.

“Councils want to do everything they can to support local businesses, and potentially absorbing the extra 20% would have had a major impact on budgets, meaning them spending less on things like caring for old people and fixing potholes.”

The case was brought by north-east recycling business The Durham Company, trading as Max Recycle. Managing director Scott Hawthorne told MRW his company would now decide whether to appeal the decision.

“Both parties, HMRC and ourselves, wanted this dealt with on an across-the-board basis. The judge seems to have not wanted to make the decision that impacts everybody one way or another and would like to deal with it on a case-by-case basis.

“We need to have a conversation with HMRC and see whether we continue with an appeal on this preliminary issue or whether we single out one or two councils in the manner that the judge is suggesting.”

Hawthorne said his company would consider proceeding with a separate issue, regarding the extent to with the exemptions affect market forces and competition, if the current case is unsuccessful.

Nick Churchward, partner at Burges Salmon:

“This is a real grey area – resourcing pressures are incentivising councils to look for additional revenue streams to support front-line service provision. Where waste collection authorities (WCAs) are actively promoting their VAT-free trade waste services you can see the potential for the lines to be blurred between statutory service provision and commercial undertaking, notwithstanding the undoubted social and amenity benefits that WCA commercial waste services can deliver, particularly in areas with poor alternative service provision.

”While WCAs should consider the characteristics of their individual trade waste services in light of this judgment, it will no doubt be seen as welcome news for councils as they continue to explore opportunities for developing revenue streams. We are continuing to monitor this issue with interest to see how it develops further.”


Environmental Services Association (ESA) chief executive Jacob Hayler:

“ESA was hoping that this case would clarify the position on whether some local authorities are acting on a commercial basis, and therefore subject to VAT, when providing trade waste collections. We are therefore disappointed that the presiding judge felt unable to take this particular decision.

”ESA agrees with the claimant that it isn’t credible to believe that all local authority commercial waste collections ’are carried out only following a request and for a reasonable cost reflecting cost recovery and no surplus’, which seems to be the condition which would make those services genuinely VAT free. ESA will support any further action considered by the claimant in any way we can.”

The Local Authority Recycling Advisory Committee (Larac) chief executive Lee Marshall:

”Larac welcomes the judgement which is one of common sense and appropriate for the situation. Larac believes the VAT exemption for Councils does little if anything to distort the market and can help small businesses in areas where private trade collectors do not operate and councils have to provide collections.”

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