John Jones Civil Engineering and Groundworks Ltd v The Commissioners for HMRC

The Appellant argued that with the exception of the 5^th ground of appeal, which was new, all the other grounds of appeal had been clearly signalled within previous grounds of appeal as a challenge to the validity of the assessment. The Appellant argued that this allowed the Tribunal to first consider whether it had been issued lawfully as a matter of course, then whether it ought to have been made under public law requirements. As such, the steps outlined in the (potentially new) grounds of appeal were ones that the Tribunal should have gone through in any case.

In the event that the Tribunal considered that the grounds of appeal were new, the Appellant asked for permission to admit these new grounds of appeal. The Appellant submitted that including them in the skeleton argument provided to HMRC 3 weeks in advance of the hearing was giving HMRC sufficient notice, and the arguments required no new evidence and could be dealt with in the current time allotted for the hearing. They submit that these new grounds have been submitted ‘late’ but not ‘very late’ when considering the principles set out in Quah Su-Ling v Goldman Sachs International [2015] EWHC 759.

The Appellants submit that there would be a severe impact on the Appellant, who has already been granted hardship in this Appeal, were the new grounds not to be granted, because this reframing and refocusing of the appeal is necessary for the appeal to continue at all.

The Appellant therefore submitted that the overriding objective of the Tribunal (to enable the Tribunal to deal with cases fairly and justly) would be best met by allowing the new grounds.

HMRC disagreed that the grounds of appeal now presented were contained within the original grounds. The argued that there had never been a prior objection to the validity of the assessment, nor a best judgement challenge. They further argue that the public law arguments raised were not an extension any of the original grounds (the most relevant being that removal of the waste was prevented by the presence of the Crassula, and that HMRC should not be permitted to recover Landfill Tax as it was already part of the fine).

HMRC submitted that they would suffer significant prejudice if the new grounds were admitted. If they had been put on notice of these with sufficient time, they would have sought to adduce further HRMC witness evidence on calculation methods, for example. As it is, that would involve either adjourning the hearing (which they do not want) or continuing without such evidence, which would be prejudicial.

HMRC submit that these amendments are brought very late, with no good explanation, as the same solicitor has been acting for the Appellants throughout, and that a previous vacation of the hearing was sought with the reason that specialists were being instructed at that time.

The original grounds of appeal were:

These were further particularised in a 9 page letter attached with the grounds.

The Tribunal considers that the grounds of appeal now advanced by the Appellant as the first 3 grounds (see para 8 above) are new, because the detailed particularisation of these was not set out at all in what was a reasonably detailed particularisation of the original grounds of appeal. The fifth ground is agreed as new. We consider that the fourth ground was reasonable clearly signalled within the original grounds of appeal.

We allow the fourth ground of appeal as a further detailed particularisation of the original grounds.

For the remaining new grounds, the Tribunal therefore looks to apply the principles set out in Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 to decide whether to allow the new grounds of appeal.

These principles are set out at para 36-38 of the judgement, as follows:

In relation to considering these principles against the new grounds, we have taken into account the following factors.

We consider that ground 5, whilst new, is not significantly prejudicial to HMRC as it requires very similar matters to be addressed to ground 4, and that these matters are the facts of the case that have been known from the outset. We consider that it would prejudice the Appellant if it were not raised, and that it has some prospect of success. We allow this new ground of appeal, notwithstanding that it is made ‘very late’ because we consider that this matter can be addressed within the current hearing.

In relation to grounds 1-3, we consider that the application is ‘very late’. We consider it is not possible for HMRC to fully address these new grounds of appeal without asking for an adjournment, and therefore we consider that this is one where ‘the trial date would be lost’. The Tribunal would require further witness statements from various HMRC officers, who may need to be cross examined, and this is clearly not possible on the day of the hearing, nor would it have been possible even had this been considered at the date that the skeleton argument was submitted.

We consider that no adequate explanation has been given for the delay.

We consider that the prospects of success, and the prejudice to the Appellant, are not so overwhelming as to overcome the high hurdle for the admission of new grounds which are so prejudicial to HMRC.

We therefore refused permission to admit grounds 1-3.

The grounds of appeal we therefore heard in full were:

The charge to tax is made under the Landfill Tax provisions in Finance Act 1996.

There is no dispute that there is a disposal of material.

The case law relevant to the decision has been quoted below in relation to each relevant part of the decision, rather than the law section above, to make it clearer which part of the case law is relevant to which part of the decision.

Considering first the matter of the tax, rather than the interest, the matter for decision is ‘Whether due to the inability, inadvisability or impracticality of moving the waste, the Appellant had a reasonable excuse for the waste remaining in situ by 1 April 2018 and thereby being deemed to have made a deposit on that date.’

We will break this down into a number of parts. In each part it will be important to consider whether the Tribunal has jurisdiction in this area as the matter is not straightforward.

The first part is whether the decision by the officer was a reasonable decision. In looking at this one of the arguments by the Appellant is that the language of the legislation is ‘the Commissioners may assess’ (emphasis added). The Appellant argues that HMRC (specifically, Mr Graham) did not appear to consider that they had any discretion in this matter, and as they did not exercise discretion, this led to an unreasonable decision.

What jurisdiction does the Tribunal have in this area?

The Landfill Tax legislation does not set out exactly the matters that the Tribunal has the power to consider. Therefore we turn to general principles, which derive from case law principally concerned with VAT appeals.

We consider it uncontroversial that the Tribunal has the power to consider whether the decision(s) made by HMRC are reasonable, in cases such as this, where the power to appeal to the Tribunal includes the appeal ‘a decision as to as to an assessment...’.

HMRC submit that because we ruled out new ground 2 ‘Whether the assessment made was unlawful as there was no exercise of HMRC’s discretion not to assess, or at least that it was unreasonable having failed to take into account or give sufficient weight to reasons why the Appellant had not removed the waste by 1 April 2018 in order to avoid liability.’ then the Tribunal should not consider the discretion that HMRC may or may not have used.

We disagree. We consider that the ruling out of that ground simply ruled out any finding that if HMRC had not exercised discretion, the decision was automatically unlawful. It still leaves open the decision as to what should be involved in the decision, and whether the decision itself was reasonable.

We draw here upon the decision in John Dee v Customs and Excise Commissioners [1995] STC 941 (1) where Lord Justice Neill wrote:

The decision as to whether any decision is reasonable, will include whether discretion was possible, and if it was, whether it was used, and used reasonably.

Here the decision is whether to assess the tax. No arguments (within the allowed Grounds of Appeal) were put to us that the amount assessed was flawed, and so we do not address that.

We agree the legislation ‘the Commissioners may assess’ does give HMRC discretion in this area. This has been helpfully discussed in the case of Scofield v HMRC [2011] UKFTT 199 (TC).

We consider that here, the ordinary an natural meaning of the word ‘may’ in this context, together with the fact that elsewhere (many times) in the same Act the word ‘must’ is used (see para 42 ‘The Treasury must..’) means that this word in this act is permissive not mandatory.

We therefore first must decide whether HMRC did use any discretion. The case put forward by the Appellant is that it did not. They point to the evidence of Mr Graham, who, as mentioned above, was asked in oral evidence whether, once he had decided that the Appellant met the criteria to be assessed on the tax, whether he had considered whether or not the Appellant should be assessed. Mr Graham replied ‘I decided the assessment should apply to the Appellant.’ He confirmed the fact that the Appellant was not able to remove the waste was always a consideration throughout the entire case, but that it was ‘not my authority to waive someone’s tax’.’ And ‘not in my power not to assess a tax that is liable’.

Mr Graham’s written witness statement says ‘The waste disposed of at Bage Farm, however, was unauthorised as the correct exemption or permit was not in place to permit the disposal. 410 loads of waste were disposed of at Bage Farm. The waste was deposited between 7 July 2014 and 15 November 2014. None of the waste had subsequently been removed since the disposals had taken place. The waste was on the site on 1 April 2018, therefore, this is the relevant date for the tax to be applied. I accepted that the loads were 15 tonnes each and not the standard 20 tonnes. The tax is chargeable by weight and only the standard rate applies to unauthorised waste. This amount is £88.95 per tonne for this period. 410 loads at 15 tonnes equals 6150 tonnes. The total tax calculated was £547,042.50.

We find, based on Mr Graham’s written and oral evidence, that he was not aware that he had discretion over whether or not to issue an assessment. We therefore find that he did not use any discretion when inputting into the decision to charge the tax.

However, we note that neither the legislation, nor the assessment itself, refers to a decision that needs to be taken solely by Mr Graham. The legislation refers to ‘the Commissioners’, and the assessment and the accompanying letter refer to ‘our decision’ and ‘HMRC’s view’. We therefore consider it relevant to decide whether the assessment was issued solely on the basis of a decision by Mr Graham, or not.

Mr Graham did refer to himself as ‘the decision maker in the case’ but he also said that as this was one of the first assessments to be made under the legislation that allowed Landfill Tax to be charged on disposals at unauthorised sites, this decision was discussed and reviewed by HMRC’s ‘Tax Assurance Committee’ which is chaired by the CEO of HMRC, and in addition it was considered by Mr Graham’s wider team, the policy team and the Individual and Small Business Compliance board.

Mr Graham confirmed that all the facts of the case, including the Crassula and the problems it meant for the remediation of the site, were known by the people discussing the case.

We consider that the fact that this case was reviewed by HMRC’s ‘Tax Assurance Committee’ and the fact that it did so because this was one of the first cases to be brought under this legislation, is evidence of HMRC using discretion in the decision making in relation to this case. It is also clear to us that the decision made by HMRC was not made by Mr Graham alone.

We therefore consider that HMRC did use discretion in this case.

We therefore turn next to whether the decision, including the discretion, was reasonable.

Within the permitted grounds of appeal, the Appellant does not dispute the rate of tax or the calculation of the tax. For the avoidance of doubt it is clear that the rate of tax is correct. This is given by s42 (1) (a) FA 1996. There is a reduction applicable if both the disposal was made at a landfill site, and the material was ‘qualifying’ material, but since the disposal was not made at a landfill site that does not apply.

We note that Mrs Jones, in her oral evidence, made reference to the fact that the calculation of the weight may not be entirely correct. We consider the method used by Mr Graham to calculate this to be reasonable, and the tonnage that this gives is within the estimate range given by the external reports in the criminal case. We also note that Mrs Jones did not put forward any alternative tonnage with reasoning or evidence nor a methodology for any alternative.

We note that apart from the matter of whether or not discretion was used, no other challenges to the reasonableness of the decision were made by the Mr Thornton. No unreasonable omissions or inclusions relating to the decision making process were apparent to us from the evidence provided.

We therefore conclude that, within the factors that the Tribunal has jurisdiction to consider within its appellate function, the decision was not unreasonable.

We turn next to matters of public law advanced by Mr Thornton.

Mr Thornton submits that, separately to the arguments on discretion above, the decision by HMRC was unlawful as a matter of public law.

We therefore next turn to the jurisdiction of the Tribunal to consider such an argument.

The Appellant pointed to the case of KSM Henryk Zeman SP zoo v HMRC [2021] UKUT 182 (TCC), in which it was decided that the FTT, whilst not having a general supervisory jurisdiction, can consider arguments in favour of the taxpayer made by challenging the decision on public law grounds.

Zeman concludes, after a detailed analysis of relevant case law and the specific legislation

This case considers a provision in VATA 1994, s83 (1) (p) which gives the right of appeal to the Tribunal in respect of:

S73(1) VATA 1994 states

It is therefore analogous to the legislation in this case, where a ‘may assess’ decision may be appealed to this Tribunal.

However, the decision in Zeman was made after, but with no reference to, the decision in the Court of Appeal in Metropolitan International Schools Ltd v HMRC [2019] EWCA Civ 156 which states:

Whilst Metropolitan Schools dealt with legitimate expectation arguments, we consider that it contains a very strong guidance on the generality of the advancement of public law arguments in the FTT. It is also following the line of reasoning used in the Upper Tribunal cases of HMRC v Hok [2013] STC 225 (“Hok”), and HMRC v Noor [2013] STC 998 (“Noor”). In both cases the UT concluded that no general supervisory jurisdiction had been conferred on the FTT.

Zeman agrees (with the judgements in Hok and Noor) that no supervisory jurisdiction has been conferred, but concludes that nevertheless public law arguments may be raised by the taxpayer in challenging (some) HMRC decisions.

We prefer the analysis of Metropolitan Schools and note that this relates to public law arguments before the FTT generally as well as in legitimate expectation cases.

The therefore reject the premise that we have the jurisdiction to consider wider public law circumstances in this matter.

However, in case we are wrong on this point, and because we heard fully the HMRC arguments both assuming there was a jurisdiction to hear these points, and that there was not, we do go on to consider, if the FTT did have jurisdiction to consider wider public law points, what our conclusion on those would be.

The argument put forward by the Appellant is that one public body (HMRC) was in effect saying ‘remove this waste or we will charge you tax’ and another public body was saying ‘do not move any deposit containing Crassula or you will be committing a criminal offence’. They say that this puts the Appellant in a ‘conspicuously unfair’ position, as there was nothing it could do to avoid being penalised by a public body.

Conspicuously unfair comes with a very high hurdle. Lord Justice Simon Brown, in R v Inland Revenue Commissioners, ex parte Unilever plc and related application [1996] STC 681, says:

To assess this, we first look at the alternatives available to the Appellant were the land not to have the Crassula on it.

We accept the evidence of Mrs Jones that JJCE offered, and was prepared to, remediate the situation and would have removed the waste from the site if asked and allowed to do so.

That waste would then have been taken to a landfill site.

However, we reject the evidence of Mrs Jones that the cost of doing so would have been the cost of digging and removing by JJCE (which they estimated at £6,000) and then the payment of landfill tax at the lower rate (that for ‘inert’ waste, which has been used in various pieces of evidence as synonymous for ‘qualifying’ waste).

We find, based on the evidence of the photos and the detailed descriptions in the report by Mr Baker, and the photographs taken by HMRC at their site visit, that the visible portions of the waste were not ‘inert’ but contained sizeable amounts of metal, plastic and other materials and therefore would have been liable for landfill tax at the higher rate (which is the amount of tax that HMRC have assessed here).

Alternatively, JJCE could have chosen to process the waste further, removing ‘non qualifying’ waste. This would have cost them further amounts to process the waste, and at the end of the processing they would have been left with some qualifying and some non-qualifying waste.

We therefore find that without the presence of the Crassula, the route that JJCE say that they would have taken would have led them to pay a considerable amount of landfill tax and/or further costs of processing.

We make no finding as to the actual amount, as that would depend on the specific directions made by the relevant authorities agreeing the remediation, but we do note that no landfill site would have given the Appellant credit for the amount of landfill tax already calculated as part of the fine in the criminal case.

Given that we find that whichever route the Appellant took (removing the waste or leaving it in situ) landfill tax would be due, we do not consider it ‘conspicuously unfair’ that HMRC has chosen to assess the tax due in this case.

We next turn to the decision by HMRC to charge interest.

The relevant legislation here states:

We are therefore considering whether there is a reasonable excuse for ‘the conduct giving rise to the liability to pay interest’ or whether, looking at the facts in the round, we consider it proper to reduce the interest due.

HMRC argue that the ‘conduct giving rise to the liability to pay interest’ is the original disposal of the waste and as such, the Tribunal should consider that no reasonable excuse exists.

The Appellant, whilst acknowledging that they were at fault for the original disposal, argues that the relevant conduct is the failure to remove the waste before the deemed disposal date of 1 April 2018, and their reasonable excuse is the presence of the Crassula and the lack of help from the relevant authorities to help them resolve the matter.

The assessment was made by HMRC on 23 October 2020 with a due date of 21 November 2020 and therefore interest runs from the due date. We consider that the main conduct giving rise to the liability to pay interest is the failure to pay the landfill tax assessment at the due date. We understand that the Appellant has been granted hardship in order to bring this appeal without payment of the tax due. The primary cause of the conduct giving rise to the liability to pay interest is the lack of funds on the part of the Appellant.

We consider that the original disposal is one of the matters that we take into consideration, in addition to the presence of the Crassula and the attempts to mitigate the original disposal in various ways.

However, having set out above our reasons why we do not consider the presence of the Crassula and the problems that therefore were present when attempting the mitigation of the effects of the original disposal gives rise to conspicuous unfairness, we similarly consider that, having considered all the matters in the round, we do not consider that the interest due should be reduced.

Accordingly, for the reasons above, we dismiss this appeal.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.