Secondary liability for landfill tax

Secondary liability for landfill tax

It is understood that Schedule 5 of Part VIII to Finance Act 1996 was introduced by Schedule 37 to the Finance Act 2000 as a result of a leakage of tax in situations where the real operator of some landfill sites was somebody other than the person actually holding the waste disposal licence issued under the provisions of the Environmental Protection Act 1990. Whereas the Value Added Tax Act 1994 makes registration for VAT dependent upon the making of a certain level of taxable supplies, sections 41(2), 67(a) and 66(a), Finance Act 1996 provide that registration for landfill tax is dependent upon who is actually, rather than who should really be, the holder of the waste disposal licence.
In the consultation paper leading up to the introduction of the tax in 1996, Customs clearly envisaged that they would form part of the licence policing operation. Schedule 37 to the Finance Act 2000 seems, however, to amount to an abandonment of that role, apparently because Customs have no power in law to force local authorities to ensure that, in relation to any particular site, the correct person is registered. This is the only conclusion that can be drawn from the example given in both paragraph 24 of the Explanatory Notes to this part of the Finance Bill and paragraph 1 of a Landfill Tax Briefing issued on 7 August 2000, following the enactment of Schedule 37 in an unamended form.
The case postulated is that of a farmer holding a waste disposal licence who leases the site to an extractor. It is clearly envisaged that the 'real' operator is the extractor and that the provisions of Schedule 37 to the Finance Act 2000 are required in order to make him account for the tax due on the waste tipped. This is, however, not the case. Under section 35(2)(a), Environmental Protection Act 1990, the person required by law to hold the licence is 'the person who is in occupation of the land'. Under English land law, as well as the law of rating as expounded by the House of Lords, that person is the tenant, i.e. the extractor, and not the farmer. It would therefore have been possible for Customs to achieve their objective by pointing out to the local authority that the tenant was an unlicensed person, in the expectation that it would enforce the licensing requirements of the 1990 Act.
It must be said, in this context, that considerably more than tax is at stake here. The purpose of licensing is to ensure that waste disposal sites are properly managed, and, when full, are shut down in accordance with a plan which is environmentally satisfactory. This leads to the suspicion that there may be some sites where the proprietor has been allowed to get away with granting a lease to a £2-capital limited company under his control with a view to not only short-changing the Exchequer but also defaulting on the site restoration obligations.
Jeremy de Souza,
Consultant to White and Bowker.

 

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