'Fluff' layer at landfill site not 'disposed of as waste', Tribunal says

The case involved four landfill tax operators, including Biffa and Veolia and related only to the period before 1 April 2018, when the rules changed.

"This case is something of a lead case in this area and there are many taxpayers who stand to benefit from the decision," said Steven Porter, a tax disputes expert at Pinsent Masons, the law firm behind Out-law.

"The decision in this case cannot be a complete surprise to HMRC as the landfill tax regime has now been amended to remove the requirement that material is 'disposed of as waste' making it easier for landfill tax to be chargeable," he said.

Fluff is placed either at the base or sides of a landfill cell as a buffer layer to absorb the impact of any sharp objects that are later disposed of and crushed above it, to protect the liner which contains the waste, to stop pollution leaking into the surrounding earth and to prevent the escape of landfill gas.

Fluff will also be laid near the top of a landfill cell to accommodate differential settlement in the waste disposed of below it and to ensure a smooth and consistent layer before the cell is capped with a permanent impermeable layer.

Landfill tax is an environmental tax which is paid by the operator of a landfill site on waste material disposed of at the site. In the recent case, the waste companies argued that waste used as fluff was not subject to landfill tax because it was not 'disposed of as waste'.

Overturning the decision of the First-tier Tribunal (FTT), the Upper Tribunal judges said, "the clear conclusion is that the taxpayer companies, when disposing of fluff at their landfill sites, intended to and did make use of the properties of the fluff for their own purposes, namely providing a layer of protection for the geomembrane and drainage layer in the cell and the cap of the cell, thereby complying with the regulatory requirements for use of the landfill cell."

The FTT had decided that the fluff was disposed of as waste because even though it was used to protect the lining system of the cells, it was destined for landfill in any event, if not used as fluff. The FTT said that the fact that waste used as fluff continued to serve a useful function after disposal did not negate the fact that the taxpayers intended to discard it.

In 2008 in a case involving Waste Recycling Group (WRG), the Court of Appeal decided that materials used as daily cover of waste at a landfill site or used for the construction of roads on the site were not disposed of 'as waste' and were therefore not subject to landfill tax.

"The only relevant question is whether, at the time of disposing of the material by way of landfill at a landfill site, the operator intended to discard it. In our view, WRG decides, as a matter of principle, that if a site operator disposes of material at a landfill site, but in doing so intends to and does make use of its properties for his own purposes, including compliance with regulations, licenses, permits or any other requirements for the site, that use means that the operator does not make the disposal with the intention of discarding the material", the Upper Tribunal judges said.

"Material is not disposed of by the site operator 'as waste' because it had previously been discarded as waste by someone else. Whether it is disposed of as waste at the critical time depends on the intention of the person who deposits the material on or under the land at a landfill site," the Upper Tribunal judges said.

Since 1 April 2015 anyone disposing of waste at a landfill site in Scotland is subject to Scottish Landfill Tax and since 1 April 2018 Landfill Disposals Tax applies to waste disposed of in Wales.