Waste Recycling Group Ltd v Commissioners for HMRC (Revenue and Customs)

This is an appeal by Waste Recycling Group Ltd (“WRG”) against a decision (“the Decision”) of the Value Added Tax and Duties Tribunal (“the Tribunal”) dated the 8^th March 2007 dismissing WRG’s appeal against the rejection by the Commissioners for HM Revenue and Customs (“HMRC”) of WRG’s voluntary disclosure for recovery of allegedly overpaid landfill tax (“tax”) in the amended sum of £2,120,552. The sum referred to in the Decision is £2,116,892, but it is common ground that this is incorrect.

All the tax was paid in respect of amounts of inert material which were used by WRG on its landfill sites for engineering purposes (for example road making) or in order to provide the required daily cover of the landfill site.

The Tribunal was asked to determine the issues in dispute in principle in the context of eleven sets of facts. These sets, or categories as they have been called, are not mutually exclusive; they may in certain cases overlap.

If any particular disposal of inert material at a WRG landfill site represented a “taxable disposal” within the meaning of section 40 of the Finance Act 1996 then by virtue of section 41(1) of that Act WRG was liable for the relevant tax as the operator of that site.

To be taxable a disposal must fulfil four cumulative conditions:

it must be “a disposal of material as waste” (section 40(2)(a) )

it must be “made by way of landfill” (section 40(2)(b) )

it must be “made at a landfill site” (section 40(2)(c) )

it must be “made on or after 1 October 1996” (section 40(2)(d))

In the present appeal the only issue relates to the first of these conditions. It is accepted that in regard to all the inert material with which this appeal is concerned the three other conditions are satisfied. Therefore at the heart of this appeal is the question whether, in each of the postulated categories, the relevant disposal of the inert material was “a disposal of material as waste” within the meaning of sub-section 40 (2)(a).

In order to examine that question it is necessary to identify the person who is making the disposal of material by way of landfill at a landfill site after 1 October 1996, then to consider whether the person making that disposal is doing so “on behalf of another person”, which by virtue of sub-sections 64(3) and 64(4) of the Act includes doing so “at the request” or “in pursuance of a contract with another person”, and finally to determine whether the person making the disposal (or, if appropriate, the person who is to be “treated” as so doing by virtue of those sub-sections) is disposing of that material “as waste” ie “with the intention of discarding the material” (section 64(1) ).

If A is identified as the relevant disposer of the material when the relevant disposer is actually B, then things may go wrong because A and B may well have entirely different intentions vis à vis the material. This is the reason why in HM Commissioners of Customs and Excise v Darfish Ltd (unreported judgment of 20 March 2000 referred to in more detail below) Moses J (as he then was) differed from the tribunal in that case.

A Statement of Agreed Facts and two unchallenged witness statements were put before the Tribunal and are available to me. The basic facts are not in dispute, and for present purposes are very clearly set out in the Decision and I set out the relevant paragraphs verbatim.

The “modest concession” referred to in paragraph 1 of the Decision representing tax to the tune of £3,660 related to material bought by WRG from suppliers of inert materials who raised invoices which WRG paid. HMRC conceded before the Tribunal and also before me that tax is not exigible where WRG purchases inert material for engineering or daily cover purposes.

The Finance Act 1996 provides as follows (so far as relevant to this appeal).

This legislation has been considered by the Court of Appeal in Customs and Excise Commissioners v Parkwood Landfill Ltd [2002] EWCA Civ 1707, [2002] STC 1536, where Aldous LJ gave a judgment with which both Jonathan Parker LJ and Aikens J agreed. The legislation has also been the subject of a decision at the High Court level by Moses J in HM Commissioners of Customs and Excise v Darfish Ltd (unreported judgment of 20 March 2000). It has in addition been considered on a number of occasions by the VAT and Duties Tribunal.

The decision of the Court of Appeal in Parkwood is heavily relied upon by Mrs Hamilton, who appears for WRG in the present appeal. Mr Puzey, for HMRC, places corresponding weight upon the judgment in Darfish. It is therefore appropriate for me to describe those decisions in a little more detail.

Parkwood Limited (“Parkwood”) operated a landfill site. It owned another company (‘Recycling’) which carried on business as a recycler of waste at a separate facility in the same town. Under the terms of a contract between the local authority and Recycling, the authority delivered waste to Recycling’s site. The local authority paid a fee per tonne of waste delivered. Recycling divided the waste between recyclable material and waste. The recyclable material was processed by separating it into aggregates and fines. The aggregates were then sorted, crushed and mixed so as to form mixed aggregate in pieces of 70mm or less in diameter. Fines were produced by sorting and mixing suitable materials to form a product which has the appearance, and many of the characteristics, of soil. Recycling then sold the aggregates and fines produced by the above process. Amongst its customers was its parent company Parkwood, which bought the recycled material for use in road making and landscaping on its landfill site. Recycling had no transport of its own and Parkwood collected the recycled material it had purchased and delivered it to its own landfill site. The two companies, although associated, dealt with each other at arm’s-length.

The issue in that case was whether the condition in sub-section 40(2)(a) was satisfied ie whether the disposal was “as waste”. Parkwood argued before the Court of Appeal that the condition was not satisfied as it was they who were disposing of the material at their own landfill site and they did not intend to discard it. Whilst accepting that the local authority was making a disposal “as waste” Parkwood contended that if that was the relevant disposal the other conditions required by section 40(2) were not complied with. In order for a disposal to be taxable all the conditions needed to be satisfied in respect of that disposal.

The Commissioners argued that Parkwood were concentrating on the wrong disposal: it was the local authority who were disposing of the material, and they were clearly disposing of it “as waste”; therefore the condition in sub-section 40(2)(a) was satisfied when the material was deposited at Recycling’s premises. It did not matter that that particular disposal did not satisfy the other conditions in section 40(2) as it was not necessary for the same disposal to fulfil all the conditions provided that all the conditions were satisfied. The remaining conditions were satisfied when either Parkwood or Recycling disposed of the material at Parkwood’s landfill site.

The Court of Appeal upheld Parkwood’s submissions. The following paragraphs of the judgment of Aldous LJ contain the essentials of the decision:

Aldous LJ also referred to the objectives of the legislation at paragraph 10 of his judgment, quoting from the White Paper entitled Making Waste Work (cm 3040):

He prayed in aid these purposes of the legislation in rejecting an argument put on behalf of the Commissioners which would have had the result that the use by a landfill site operator of recycled material for engineering at a landfill site would be taxable whereas use of fresh material for the same purpose would not. (See paragraphs 27 and 28 of the judgment, set out above.)

In relation to the identity of the person whose intention was the relevant one, Aldous LJ made clear that this was “the intention of the disposer at the site”. Thus, in a case such as the one before the Court of Appeal it was not the fact that there was an intermediary inserted between the original waste producer and the landfill site operator who intended to use the waste for engineering purposes that was relevant. What was relevant was the fact that the intention of the “disposer at the site” was not to dispose of it “as waste”. (Paragraphs 30 and 31 of his judgment)

Mr Puzey contended that the correct analysis of Parkwood is that there was a new disposal by Recycling who did not intend to dispose of the material “as waste”. Mrs Hamilton argued that the Court of Appeal regarded the relevant disposer to be Parkwood itself.

Aldous LJ did not expressly identify the person whom he considered to be the “disposer at the site”. As I have said, Parkwood had purchased the recycled waste material at arm’s length from Recycling, who operated from a different location and who did not have any transport. Parkwood arranged its own transport of the material to its landfill site where it was used for engineering and like purposes (paragraphs 6-8 of the judgment). In those circumstances it is unreal to regard Recycling as the “disposer at the site” and it is difficult to see how Parkwood could have been disposing of the material there “on behalf of” Recycling from whom it had bought the material for its own engineering purposes. It seems to me that when Aldous LJ said (paragraph 31) that the tribunal “were correct to concentrate upon the disposal at Parkwood’s landfill site” he was not endorsing the tribunal’s view that Recycling made the relevant disposal, but rather he was underscoring the Court of Appeal’s conclusion on the main issue in that appeal, namely that all the conditions in section 40(2) had to be satisfied at the same time so that an earlier disposal “as waste” by the original waste producer other than at the landfill site was not the relevant disposal. On the facts of Parkwood it probably did not matter whether the relevant disposer was Recycling (as Mr Puzey contends) or Parkwood (as Mrs Hamilton contends): if it was Recycling the disposal was not “as waste” because they were not discarding it but selling it as recycled material to Parkwood; the same applied if Parkwood was the disposer, as the material was not being discarded by them but used for engineering.

There is no obstacle in the legislation to the landfill site operator being also the relevant disposer. Indeed that was the position in the decision of the tribunal in ICI Chemicals and Polymers Ltd –v- Commissioners of Customs and Excise dated 18 March 1999. There the manufacturing processes of the appellant ICICP resulted in a by-product which ICICP used on its own landfill site for containment of contaminated waste including mercury. So much of the by-product as it did not use in this way was sold by ICICP. The tribunal clearly regarded ICICP as the relevant disposer. No other candidate existed. Further, in considering whether the by-product when used by ICICP for engineering purposes on the landfill site was disposed of “as waste” the tribunal stated:

Interestingly, the tribunal in ICI recorded by way of postscript to their decision that the Commissioners had conceded prior to the hearing in that case that hardcore transported to the landfill site and used there for engineering purposes was not liable for landfill tax.

Darfish Limited (“Darfish”) operated a landfill site at Huthwaite in Nottinghamshire. Darfish had a subsidiary company referred to as DNS. DNS had agreed with two companies, known as Wilson Bowden and Hallamshire, to remove various types of soil from those companies’ sites. The prices which DNS charged them under the contract for removing the soil reflected the fact that the materials had substantial value to DNS. Property in the soil passed to DNS on removal. DNS transported the material to Darfish’s landfill site at Huthwaite initially for storage but later to be used by Darfish for engineering purposes at the site. The tribunal had found that the disposal was not taxable because it was made by or on behalf of Darfish and the material was not disposed of “as waste”. Moses J did not agree with the tribunal. He stated:

Mrs Hamilton submitted that the Court of Appeal in Parkwood disapproved of these passages in the judgment of Moses J. Mr Puzey disagreed. I shall return to this point below.

The Tribunal having considered the decisions in Parkwood and Darfish concluded:

that the correct approach to the condition in sub-section 40(2)(a) of the Act is to consider not merely the time when the material is deposited at the landfill site but the process of disposal, and to do so from the perspective of the person relinquishing the material and not from that of the person acquiring it, namely in this case WRG. (Paragraph 27)

that the fact that in categories (b) to (e) and, in so far as there is any real difference, category (h), the supplier of inert waste exploits WRG’s need for the material in order to negotiate the best possible terms for disposal of the material does not transform what would otherwise in his hands be waste into useful material. It remains material of which he wished to rid himself. By virtue of section 64(2) the fact that the recipient can make use of it and is prepared to accept it on terms which are advantageous to the supplier is rendered irrelevant. The only relevant consideration is the supplier’s desire to divest himself of the (as he perceives it) waste material. It makes no difference whether the supplier receives or makes a payment or whether the recipient pays for the transport. There is a distinction between a disposal of material which is of no use to the disposer and the production of material for the purpose of exploiting it commercially. (Paragraphs 28 and 29)

that the process carried out at WRG’s transfer stations and civic amenity sites (which consists of separating out the inert material from the other waste so that the useful inert material can be taken to the landfill sites for use as daily cover or for engineering purposes) is not sufficient to render it useful material so as to bring it within the scope of the Court of Appeal’s approach in Parkwood at paragraph 23 of the judgment of Aldous LJ. (Paragraph 30)

that the assumption by WRG of title to the waste is irrelevant; because of sub-sections 64(3) and (4) of the Act WRG is (or is deemed to be) disposing of the waste on behalf of the person who brought it to the transfer site or civic amenity site. The fact that WRG or someone else may make use of the waste is irrelevant; it remains waste absent true processing. (Paragraph 31)

that as with categories (f) and (g) the waste in category (i) remains waste despite the sorting. (Paragraph 32)

that for these reasons all the material in categories (b) to (k) was disposed of as waste within the meaning of sub-section 40(2)(a), and was therefore taxable, the other conditions in sub-section 40(2) being agreed to be satisfied.

Mrs Hamilton on behalf of WRG puts her case under four main heads. The first three arguments relate to matters which in her submission lead to the conclusion that the disposer of the material whose intention is relevant is WRG itself. The fourth head of appeal is on the basis that, contrary to her primary case, the relevant intention is that of a person other than WRG.

Mrs Hamilton, under her first ground of appeal, argues that the landfill site operator will be the relevant disposer whenever the inert material is used by that operator for engineering purposes or for daily cover. Her reasoning is as follows: in the light of the decision of the Court of Appeal in Parkwood, which must be taken to have rejected the approach of Moses J in Darfish, the relevant disposal occurs at the point when the material is deposited at the site by the site operator, or by his customer on the operator’s instructions; by that stage property in the material will have passed to the site operator, with the result that the disposer whose intention is relevant is the site operator; in so far as the operator’s intention is to use the material for engineering or daily cover the operator is not intending to discard it, and so the disposal is not taxable.

In my view Mr Puzey is right in saying that this argument relies too heavily on the passing of ownership of the material. As Moses J pointed out in Darfish, title will almost always have been transferred, so that the landfill site operator would be the relevant disposer at the site in almost every case. That does not seem to be what the legislation has in mind: there is no reference to the passing of title anywhere, and the provisions clearly distinguish between “the person making the disposal” and “the landfill site operator” thus clearly allowing for situations where they are not one and the same person. Further, I see no reason why making a disposal at someone’s request or pursuant to a contract with someone should be treated as limited to cases where legal title was not passed as part of the process of disposing of the material “on behalf of” that other person. This is not to say that the passing of property, and the circumstances in, and stage at, which ownership passes may not have some bearing on the question whether the disposer at the site is acting on behalf of another person. To the extent that the Tribunal in the present appeal were saying that such matters are always irrelevant in this context I would respectfully disagree. The point is simply that the fact that property has passed cannot in my view be conclusive in the way that Mrs Hamilton’s first argument assumes.

WRG’s next ground of appeal is to the effect that the Tribunal was wrong in law to hold that at the time the material was deposited at the landfill site it was waste rather than recycled, useful material produced from waste material. The Tribunal also erred in holding that the separation out of inert material by WRG or others at its civic amenity sites and transfer stations (paragraph 30 of the Decision), and the separation out of inert material from other waste carried out by muckshifters (paragraph 32 of the Decision), fell short of what the Court of Appeal in Parkwood considered sufficient to transform waste into useful material. The Tribunal ought to have concluded that all the inert material used by WRG for engineering or daily cover was within the principles enshrined in the Court of Appeal judgment, which did not in any event regard recycling as crucial to the production of useful material out of waste.

Mr Puzey sought to uphold the conclusions of the Tribunal by reference to section 64(2) of the Act. He argued that the fact that at the moment of the deposit the material is useful to the landfill site operator does not mean that it is no longer being disposed of “as waste” by the disposer. WRG’s reliance on the Court of Appeal decision was misconceived: in that case the material was sold to Parkwood after processing into a product which was an asset rather than waste to the processor. Mr Puzey accepted that even without any processing material would not be disposed of “as waste” if it was sold to someone. However he argued that absent a sale mere sorting of inert from other material was not sufficient to render the inert material other than waste.

In my view both the Tribunal and Mr Puzey have failed to attribute its full effect to the decision of the Court of Appeal in Parkwood. In the light of that decision it is clear that if a disposal is to be a taxable disposal then the material must be being disposed of “as waste” at the time of its deposit at the landfill site. As we have seen, whether that condition is satisfied depends upon whose is the governing intention and what that intention is. In Parkwood the governing intention was held to be not that of the original waste producer, but of someone else (“the disposer at the site”) who did not intend to dispose of the material “as waste”. This was because the material had been recycled (sorted, mixed and/or crushed) and was no longer being disposed of “as waste”. Aldous LJ treated recycling and discarding as mutually exclusive (see paragraph 30, last sentence). However I do not consider that the Court of Appeal were intending to limit the concept of recycling in the way the Tribunal and Mr Puzey have stated. In the hypothetical example discussed at paragraphs 29 and 30 of the judgment of Aldous LJ the material was not even stated to have been subject to separation or sorting, yet it was regarded by the Court as being “recycled” rather than discarded because it was sold to the landfill site for roadmaking.

I consider that the Court of Appeal in this context equated recycling with the production (by whatever means) of useful material from waste material. That is what the Court said in paragraph 28, and it is consistent with the view the Court took of the objectives of the legislation. I therefore see no justification for denying the description “recycled” to useful material produced by means of processes such as separating out or sorting. To treat such material differently from material which had been, for example, crushed would produce artificial distinctions which would have no justification based on the objectives of the legislation.

Mrs Hamilton pointed out in argument that in their non-binding guidance in Notice LFT1 dated May 2004, at paragraph 2.2.2., HMRC state as follows under the heading “Recycled material”:

Two points are worth noting about this statement: first it acknowledges that intervening events (in this case recycling) can result in a change in the governing intention. Second, the scope of the recycling envisaged is somewhat wider than the Tribunal were prepared to accept in the present case.

I see no justification for limiting the application of the Court of Appeal’s judgment to cases where the recycled material is sold to the landfill site operator. Although the case there happened to involve a sale of the material the Court of Appeal nowhere stated or implied that a sale is a necessary prerequisite of this kind of recycling. Mr Puzey submitted that you must look at the evidence to see what the intention is, and in particular whether there exists an intention to dispose of the material as waste. I agree. He said that in treating disposals of inert material as non taxable when there had been a sale, his clients were adopting a pragmatic approach. The same applied to their position in relation to disposals where the landfill site operator had paid for the transport to the site where the material was to be used for engineering etc. In my view the very fact of recycling provides strong if not conclusive evidence that there is no intention to dispose of “as waste”, regardless of whether the recycler charges for the goods or has simply recycled them in order to render the resultant material attractive to someone who will take them away and use them or sell them.

It is no answer to the above to point to sub-section 64(2). The effect of this provision is simply that if a person would otherwise be considered to be disposing of material “as waste” because he or she is discarding it, the potential usefulness of the material to the disposer or to someone else cannot be taken as affecting that finding. It does not deal with the separate question of whether the fact of recycling (or indeed any other aspect of the evidence) shows that there is no intention to discard.

It follows that in my view the Tribunal misunderstood the effect of the judgment of the Court of Appeal in regard to what “recycling” is to be taken to include in this context. The Tribunal ought to have asked itself whether in relation to each of the various categories of factual circumstances under consideration any process had taken place (including sorting or separating out) to produce useful material from waste at any time up to the disposal of the material at the landfill site. If the answer was that such process had indeed taken place then in my view that would bring the disposal at the site within the scope of the Court of Appeal’s decision in Parkwood. Nor would it be likely to matter whether the recycling was carried out by WRG itself or by someone else, including the original waste producer, nor whether the recycled material was sold to WRG, or given to it. Moreover, where the material disposed of at the site had been recycled it would not matter whether the disposer at the site was WRG or the recycler (if someone other than WRG): the disposal would not be “as waste” in either case, as in Parkwood.

However, Mrs Hamilton’s argument under her second ground of appeal goes further than this: her contention is that it is sufficient for the material to be re-used to bring it within the concept of “recycling”. Thus, she argues that inert material within either category (j) or category (k), having been re-used by WRG, ipso facto falls to be treated as re-cycled and therefore disposed of other than “as waste”. In other words one need have regard merely to what happens to the material at the landfill site. If it is dumped in the cell as waste, then it is disposed of, “as waste”; if on the other hand it is used for road making or daily cover, it is not.

I do not think that this is correct. If it were then in Parkwood the Court of Appeal would not have needed to consider the circumstances in which the waste material came to be recycled prior to being brought to the landfill site for engineering purposes. It would have been sufficient just to look at the use made of the material at the site. I do not consider that it is right to exclude the possibility that material can be re-used at the landfill site yet still be disposed of there “as waste”, nor (which amounts to much the same thing) that without looking at all the surrounding circumstances one can exclude the possibility that, notwithstanding engineering use at the site, the governing intention is of someone who is not the landfill site operator and who intends to discard.

Mrs Hamilton’s third ground of appeal largely overlaps with her first, in that she again criticises the Tribunal’s finding that the assumption of title by WRG was irrelevant. I have already dealt with that point. Mrs Hamilton argues in particular that the Tribunal’s reliance in that context upon the judgment of Moses J in Darfish, and in particular the passages at paragraph 22 of the judgment, is misplaced because this was in effect overruled by the Court of Appeal in Parkwood.

However I do not consider that the Court of Appeal was overruling or disapproving the approach taken in Darfish. The facts of that case were completely different. No recycling process was involved. Nor did the case raise any question as to whether the conditions in section 40(2) were capable of being satisfied at different times, such as arose in Parkwood. The issue in Darfish was whether in delivering the soil in question to the landfill site DNS were acting on behalf of the landfill site operator or on behalf of the person with whom DNS had contracted for the removal of the material. Moses J held that the disposal was on behalf of the latter and that the latter’s intention was therefore the relevant one. I agree with Mr Puzey and the Tribunal that Moses J was not saying anything inconsistent with the Court of Appeal as to the time when the disposal conditions must all be satisfied. Nor do I understand him to be saying that one should ignore what happens at the site. He pointed out that in order to ascertain who is the relevant disposer (ie on whose behalf DNS was disposing of the material) one needed to have regard to the whole process culminating in the deposit at site and not just the moment of deposit. This is consistent with the approach adopted by the Court of Appeal. Further, in drawing the distinction in that case between disposal and retention I do not understand Moses J to be intending to exclude the possibility that the relevant disposal at the site might in certain circumstances be made by or on behalf of the landfill site operator himself, so that the governing intention would be his. For the reasons I have given I consider that such cases are not excluded by the legislation. ICI is an example of such a case.

In the context of Mrs Hamilton’s fourth head of appeal it is of relevance that in Darfish the learned judge did not make any finding as to what the intention of the original producers of the material actually was, and that in remitting the matter to the tribunal he identified the fact that the contract price paid to DNS for removal of the material reflected the material’s substantial value as a factor that was relevant in determining whether the disposer intended to discard the material (see paragraph 27 of the judgment).

Under the fourth head of appeal WRG submits that even if the governing intention in relation to each of the 11 categories was not that of WRG, nevertheless the intention of the disposer was not to discard the material, and in holding to the contrary the Tribunal misdirected itself particularly in relation to the meaning of sub-sections 64 (1) and (2). An intention to divest oneself of something was not to be equated with an intention to discard it. Nor are the economic consequences of the transaction irrelevant, as the Tribunal held. In considering whether the disposer was intending to discard the material Mrs Hamilton argued that the correct approach was to consider whether he was exploiting the inherent value of the material by obtaining payment for it or by negotiating more advantageous terms ie paying less for disposal than would otherwise be the case. If there was some financial benefit of that kind to the disposer then that was sufficient to establish that the material was not being disposed of “as waste”. She submitted that this was the case in each of the eleven categories.

Mr Puzey contended that if the economic consequences of the disposal were relevant this would be importing the words “as useless” after “discard” in the statute. There was no justification for that gloss, and it was inconsistent with sub-section 64(2). Inert material was almost always useful. Further, any businessman will want to get rid of waste as cheaply or advantageously as possible but the concept of relative financial benefit does not appear in the legislation. Whilst HMRC agreed that a sale would not result in a taxable disposal, any lesser form of financial advantage was not relevant to the issue whether the material was being discarded. The agreement by HMRC not to tax material brought to landfill at the site operator’s expense was by way of a concession not a principled stance. Mr Puzey submitted that in such a case the material was still discarded. He also contended that if WRG’s argument about a financial advantage less than sale was correct it would render administration of the tax unworkable, as it would require HMRC to investigate in detail the background to each transaction. It would also have a “knock-on” effect on the taxability of deposits of active waste, as there was value in the methane which arose from such waste.

In reply Mrs Hamilton said that she was not arguing that a concept of “uselessness” should be added as a gloss to the statutory words: the word “discard” has inherent in it the idea that the material is useless to the person who is discarding it. This is to be contrasted with merely wishing to be rid of something. As for the alleged unworkability of the tax if financial consequences are relevant to intention, Mrs Hamilton stated that the types of transactions in question were relatively limited in number, and the documents which were kept by the site operator would provide the necessary details. Nor was there anything in Mr Puzey’s point that if financial consequences were relevant the principle would also apply to active waste in that valuable methane was produced; although it was true that methane may be produced, that would not, she argued, affect the fact that active waste would be disposed of “as waste”, as section 64(2) would apply in those circumstances. Mrs Hamilton said that her approach was completely within the objectives of the regime as it would encourage recycling by waste producers, and encourage them to find sites where the inert materials were used for site engineering, as the disposal would then be tax free.

Both parties also addressed me, in the light of the general points they made, on each of the eleven categories of factual circumstances. As I have said, Mrs Hamilton’s fourth ground of appeal represented her fall-back position and was on the assumption that the relevant intention was of someone other than WRG. To that extent the structure of her argument appeared to assume that if she was wrong about the significance of (1) the assumption of title by the landfill operator and (2) the actual re-use of the material for engineering by the landfill operator, then the relevant intention would be that of someone else. Whilst this may well be so in many cases, it does not seem to me that it will inevitably be the case. In my view all the circumstances will still need to be examined in order to see whether events have occurred which shift the governing intention from, for example, the waste producer, to some intermediary, or to the landfill site operator.

The Tribunal’s conclusions in relation to the relevance of financial terms of supply/disposal of inert material are set out at paragraphs 28 and 29 of the Decision. It is appropriate to quote the relevant passages.

In my view the Tribunal erred in law in holding that the economic circumstances of a transaction represent an impermissible consideration by virtue of section 64 (2). No factors which serve to indicate as a matter of fact whether material is being discarded by the person concerned should be excluded from consideration unless such an interpretation of the provision is unavoidable. As I have already said, the effect of section 64 (2) is that if the material is in fact being discarded a mere potential for usefulness is not to be taken as changing the position. However it is not the inherent usefulness of the material which is being put forward by WRG as relevant to an intention to discard, but the behaviour of the parties to the transaction as reflected in the financial consequences thereof. The latter are not, in my view, excluded from consideration by section 64 (2). As I have pointed out (paragraph 44 above), Moses J in Darfish also took the view that a reduced disposal charge was a factor which was relevant to the intention of the disposer.

The Tribunal acknowledged that the logical consequence of its conclusion was that material within category (a) (i.e. material which had been sold to WRG) is also taxable. I agree that this would be the logical consequence if the economic circumstances of the disposal were impermissible considerations. For in this context there is no obvious distinction between a sale and all other financial terms upon which inert material may be transferred. In my view it would be an extraordinary if not perverse situation if the fact of a sale were to be a permissible, indeed conclusive, consideration whereas all other financial terms were excluded from being taken into account. All such terms can and should be considered, although their respective weights will no doubt vary considerably. It might well be said, for example, that the more the financial terms are weighted in favour of the supplier, the less that aspect of the evidence would be held to point to an intention on his part to discard. Conversely the fact that a supplier, who brings material to a landfill site at his own expense and without the supply having been specifically requested by the site operator, is able to negotiate a small discount off the operator’s normal tipping charge, may not in itself provide much support for an argument that the intention was not to discard. However, I do not think one can avoid the need to assess the evidence in each case.

It follows from this that the Tribunal misdirected itself in its consideration of categories (b) to (e) and (h). It ought not to have excluded from its consideration of those categories the financial terms upon which the material in question came to be disposed of at WRG’s site.

Although it appears that the Tribunal reached its conclusion in relation to categories (b) to (e) and (h) mainly because it felt driven to it by virtue of sub-section 64(2), the Tribunal also said, when looking at category (a):

However, I see no logical reason why a supplier’s or site operator’s intentions should not be conditioned by fluctuations in supply and demand and their effect on prices and availability, so as to be reflected in the financial terms of the transactions they enter into.

As for Mr Puzey’s suggestion that the need to examine the financial terms relating to a disposal would render the administration of the tax unworkable, I do not see why this should be so. It will be for the landfill site operator to ensure that the necessary records of transactions are available - the operator will no doubt wish to preserve them in its own interests regardless of any legal obligations in that regard. I do not see why it should be more difficult to keep details in categories (b) to (e) and (h) than in category (a).

Nor was I impressed by Mr Puzey’s argument that there would be a knock-on effect on active waste because of the potential value of methane; that seems highly improbable for the reasons given by Mrs Hamilton and noted above. In any event the question whether a particular factor is relevant to intention, or is prevented from being treated as relevant by virtue of section 64(2), is a question of law the resolution of which is not greatly assisted by speculation as to the possible knock-on effects.

Having reached those conclusions in relation to the grounds of appeal argued it may be helpful for me to comment briefly on the specific categories of factual circumstances. In doing so I am conscious that this appeal is on points of law only.

No money changes hands and WRG accounts for any tax levied. HMRC accept that if WRG pays for transport of the material to the landfill site then the HMRC will treat the disposal as non-taxable, presumably on the basis that there is a net payment by or cost to WRG, making the transaction analogous to a sale. Although Mr Puzey emphasised that this was by way of a concession, the HMRC approach appears to me to be entirely appropriate. It is difficult in the case of a sale or where WRG has waived its normal tipping charge and incurred a net cost by paying for transport, to regard the disposal at site as being a disposal “as waste”. Moreover, in my view those circumstances also call into question whether the “disposer at the site” is the original waste producer or WRG. As in Parkwood it seems to me to be somewhat unreal to suggest that where WRG is so keen to obtain the material that it is willing to pay for it or pay for its transport, nevertheless the material is being disposed of at site “on behalf of” the original supplier. In my view it may well make more sense to say that in such cases the governing intention is that of WRG, since it is WRG who wants the material at its site and who has taken steps to achieve this.

Similarly in relation to cases such as category (h), where WRG needs inert material for engineering purposes and approaches known suppliers in order to procure the required amounts, I find it difficult to regard such material as being disposed of “as waste” or disposed of “on behalf of” anyone other than WRG, even in the absence of a sale or payment for transport. The reality is that WRG needs material for its own purposes, locates a willing supplier and brings the material or arranges for it to be brought to its site for those purposes. The transaction has its origin in WRG’s own requirements and in WRG’s request for the material. If in these circumstances the supplier of the material disposes of it at the landfill site he or she surely does so “at the request of” WRG and therefore “on behalf of” WRG for the purposes of sub-sections 64(3) and (4). It seems to me that there is a distinction between such a case and the circumstances confronting Moses J in Darfish, where a significant feature was the existence of a contract requiring DNS to remove and dispose of the material on behalf of the supplier, even though the material was in the event useful to the landfill site operator. In such circumstances it is not perhaps surprising that Moses J considered the governing intention to be that of the supplier. Even so the learned Judge left open the possibility that the latter may not have been discarding the material given the reduced disposal charge.

On the assumption that these disposals at the landfill site are not specifically requested by WRG it may be less likely that the governing intention would be held to be that of WRG. That does not of course mean that the disposal is inevitably a taxable one; the disposer at the site may not in these circumstances be discarding the material. As I have said, the harder the commercial bargain the disposer drives in the knowledge of the requirements of the landfill operator for material for engineering purposes, the less likely it is that the disposer will be intending to discard. However, as Moses J said in Darfish, the financial terms will be but one factor in that assessment. All the circumstances must be considered.

I have already said that it is not clear that the Tribunal directed its mind to what the intention in categories (b) to (e) and (h) would have been absent the constraint the Tribunal felt by reason of section 64 (2), which does appear to have been central to the Tribunal finding that the relevant disposals were all “as waste”. Subject to hearing counsel it seems to me that those categories are therefore matters which should probably be remitted to the Tribunal for determination on the evidence if they cannot be agreed in the light of the contents of this judgment.

As far as categories (f), (g) and (i) (and any other categories where the evidence shows that sorting, separating out, screening or other recycling to produce useful inert material has taken place) are concerned, it will be for the parties to consider whether in the light of this judgment there is any need for the matters to be remitted to the Tribunal for reconsideration, or whether the result can be agreed.

I therefore allow this appeal to the extent stated and will hear counsel on the precise form of relief which I should give in the light of the conclusions I have reached.