UT (Tax & Chancery) UT/2023/000101 - [2025] UKUT 00072 (TCC)

As stated above, the QMO revoked and replaced a qualifying materials order from 1996. The QMO was preceded, in April 2009, by a consultation paper published by HMRC and the Treasury on “Modernising landfill tax legislation”. The consultation encompassed the definition of qualifying material for the lower rate of tax. The intention was to review how landfill tax reflected current environmental protection regulation and waste industry practice; both had changed considerably since the tax was introduced. The consultation expressly recognised:

The lead option for change identified in the consultation was based on whether the waste was inert or not. Whilst this option was not ultimately adopted, it did focus on the characteristics of the output of a waste generating process rather than the inputs.

An alternative option was based on additional criteria in addition to the inert characteristics of the waste. However, it recognised that any additional criteria could not be based on their impact on a particular industry. Note 9(a) therefore is not concerned with promoting the production of titanium dioxide. Another option considered was to restrict the lower rate to inert wastes, so as to strengthen the environmental rationale underpinning the lower rate.

As Mr Nawbatt rightly pointed out, and as one might expect, environmental objectives were at the heart of the consultation.

Cristal provided a written response to the consultation on 24 July 2009. It noted that EU BAT guidance documents included two possible treatment processes for dealing with the acidic ferrous chloride: either roasting or neutralisation and filter pressing. It stated that the neutralisation and filter pressing treatment resulted in less CO₂ emissions than the roasting treatment process and achieved the government’s environmental policy objectives. It submitted that any landfill tax regime which encouraged a taxpayer not to adopt a best available technique would be contrary to the government’s stated aims and a perverse outcome for an environmental tax. Cristal’s representations were based entirely on the low environmental impact of the Cristal Waste and emphasised the short aftercare period of the Camp Wood landfill site where the Cristal Waste was sent.

Cristal proposed two options for the definition of qualifying material. First, that wastes landfilled in accordance with a best available technique should be exempt from the tax. Second, that wastes which are landfilled at sites with an aftercare period of 5 or 10 years should be treated as inactive waste and taxed at the lower rate. Cristal did not refer to the FCC Waste in its response to the consultation. We understand that at that time ferrous chloride and APCR were not mixed to produce waste such as the FCC Waste.

HMRC and the Treasury published a ‘Government response to modernising landfill tax legislation’ in March 2010. Annex A set out draft Treasury criteria for the purposes of section 42(4) FA 1996 which the Treasury would be required to have regard to in listing qualifying material for the lower rate of tax. The criteria were that qualifying material should (i) be non-hazardous; (ii) have low organic content so as to be non-biodegradable with low potential for greenhouse gas emissions; and (iii) have low polluting potential in a landfill environment where the aftercare period agreed with the Environment Agency is significantly lower than would normally be required for a non-hazardous waste landfill.

These criteria were adopted and published as Annex A to HMRC Brief 08/11. In explaining what changes were being made to the QMO, the Brief stated:

Whilst it is not clear why titanium dioxide itself was referred to as a waste, it is common ground between the parties that the “industry views” referred to were those of Cristal, as expressed in its response to the consultation. One of the changes made in the QMO in 2011 was therefore intended to apply the lower rate of landfill tax to the waste generated by the treatment process described in Cristal’s response, namely the Cristal Waste.