Loss Prevention Alerts

Alert No 4 Reclamation of Contaminated Land: landfill tax appeal

This case summary has been prepared by Louise Moore of the law firm Lovell White and Durant who acted for the successful appellants, Taylor Woodrow.

The case of Taylor Woodrow Construction Northern Limited v Commissioners of Customs and Excise highlights the difficulties that developers have faced persuading the Commissioners that certain reclamation projects should be exempt from landfill tax. In this important appeal, the Tribunal upheld Taylor Woodrow's contention that reclamation need not be the sole nor the primary object or purpose of waste removal works for the tax exemption to apply.

The Finance Act 1996, which introduced landfill tax from October 1996, provides that waste materials disposed of by way of landfill at a landfill site constitutes a taxable disposal in respect of which the landfill site operator is liable to pay landfill tax. Section 43A of the Act deals with contaminated land and provides that there is no taxable disposal if a contaminated land exemption certificate relating to the materials removed has been granted and materials are removed prior to the expiry of the qualifying period (in this particular case prior to the commencement of construction). The Tribunal in this case had to consider the relevant parts of s 43B which regulates what constitutes a "qualifying reclamation", in respect of which the Commissioners must issue an exemption certificate. The provisions of s 43B which were considered in this case, provide that a reclamation qualifies if it is, or is to be, carried out with the "object of facilitating development": and the reclamation constitutes or includes clearing the land of pollutants which are causing harm or have the potential for causing harm; and those pollutants would, unless cleared, prevent the object concerned being fulfilled.

In this case, the Commissioners had withdrawn a landfill tax exemption certificate granted for the reclamation of contaminated land on the basis that they considered that waste during a retail development had been removed, not because it was contaminated, but because of its engineering properties.

Expert evidence was adduced to demonstrate that the pollutants had the potential to cause harm and this evidence was accepted by the Commissioners and the Tribunal. The hearing therefore turned on the other elements of what constitutes a qualifying reclamation. The Tribunal ruled that the object of the reclamation was that of "facilitating development". This, it observed was something less than fulfilment of the development itself.

 "Facilitating" for this purpose, it held, meant to render easier; to promote; to help forward. It therefore determined that the views expressed by the Commissioners and the views expressed in the Commissioners' Landfill Tax Information Note 1/97 at paragraph 4.2 were incorrect in that they ignored the existence of the term "facilitating" in the legislation. Not only was this point clear in the face of s 43B(7)(a) but it was further supported by s 43A(3) which refers to a qualifying reclamation under s 43B(7)(a) as being one of which "involves" the construction of a building or civil engineering work.

Further, the Tribunal held that reclamation need not be the only or primary object of the work. Nor, it held, does the legislation disqualify work from being reclamation if it has more that one object providing that it is carried out, or is to be carried out, with a specified object. Thus, the views expressed in paragraph 4.2 of Information Note 1/97 which imposed a primary motive test were not supported by the legislation itself. The Tribunal having rejected the Commissioners' submissions ruled in favour of the Appellants and reinstated the certificate.

Where a reclamation scheme had been devised to remove pollution or to reduce pollution potential, the fact that there may be other reasons why materials might be removed will not justify the Commissioners refusing to grant an exemption certificate. Indeed if this was the case, many beneficial reclamation schemes would be unduly penalised, potentially hindering Government objectives to ensure the regeneration of brownfield sites.

Developers will benefit from the clarity provided by the Tribunal as to how the exemption for reclamation schemes should be applied.

Any questions about this decision should be referred, in the first instance, to Steven Francis on the AGS Hotline: 0345 262 728