FIFE RESOURCE SOLUTIONS LLP AGAINST ROBERSTON METALS RECYCLING LTD

Factual and Procedural Background

The Plaintiff operates as a waste disposal and landfill operator at multiple sites in The City, under agreements with The Council, the owner of the sites. The Defendant runs a metal recycling business. The Plaintiff and Defendant entered into contracts whereby the Defendant regularly sent waste from a fragmentiser machine for disposal at a landfill site operated by the Plaintiff at The Site in The City.

Scottish landfill tax (SLFT) is charged on taxable disposals of waste by way of landfill, with different rates applied to qualifying (non-hazardous) and non-qualifying (hazardous) materials. Liability for payment rests on the landfill site operator, who is The Council in this case, but the tax burden is intended to be passed on to the waste producer through pricing.

Between April and December 2015, the Defendant sent approximately 7,000 tonnes of waste described as stone and concrete, qualifying for the lower SLFT rate, and was invoiced accordingly by the Plaintiff. However, subsequent sampling by the environmental regulator revealed the waste was predominantly non-qualifying, attracting the higher tax rate.

Revenue Scotland issued additional tax assessments, and after appeal, The Council and Plaintiff agreed an additional payment of £287,216 was due. The Plaintiff paid this amount to Revenue Scotland under its agreement with The Council and now seeks to recover this sum plus VAT from the Defendant, relying on a statutory provision allowing adjustment of payments under disposal contracts where tax chargeable changes after the contract is made.

The Defendant disputes the claim, including denying the waste classification and contending that the statutory provision relied upon does not apply to this contract.

Legal Issues Presented

1. Whether section 27 of the Landfill Tax (Scotland) Act 2014 applies to the contract between the Plaintiff and Defendant, permitting adjustment of payment due to a change in the tax chargeable on the landfill disposal.
2. Whether the discovery of an underpayment of tax at the time of disposal constitutes a "change in the tax chargeable" for the purposes of section 27.
3. The extent to which liability for payment of tax and incidence or burden of tax are distinguished and how this affects contractual obligations between parties other than the landfill site operator.

Arguments of the Parties

Defendant's Arguments

• Section 27 does not create an obligation on the Defendant to pay additional tax because the tax liability is on the landfill site operator (The Council), not on the Defendant.
• The Act's purpose is to impose tax liability on the landfill site operator; contracts not involving the operator do not attract tax liability and thus section 27 does not apply to them.
• Applying section 27 to contracts like that between Plaintiff and Defendant would create unworkable, retrospective obligations, causing uncertainty and interfering with private rights.
• There is no legal link between the settlement between The Council and Revenue Scotland and the contract between Plaintiff and Defendant affecting the Defendant's obligations.

Plaintiff's Arguments

• Section 27 applies to the Plaintiff-Defendant contracts because they relate to disposal of material at the landfill and payment is made under those contracts.
• The change in tax chargeable arose from notices of assessment issued by Revenue Scotland following discovery that the waste was non-qualifying, thus attracting a higher tax rate.
• The ordinary meaning of section 27 supports application to disposals already made where tax chargeable changes subsequently.
• The provision addresses practical difficulties in assessing waste composition at disposal and allows landfill operators to recover additional tax from waste producers.
• No statutory requirement exists for a direct legal link between the settlement with The Council and the disposal contract with the Defendant.
• There is no absurdity or unworkability in requiring the Defendant to pay additional amounts reflecting the increased tax burden.

Table of Precedents Cited

Court's Reasoning and Analysis

The court distinguished between liability for payment of tax and incidence (economic burden) of tax, noting that while the landfill site operator (The Council) is liable to pay SLFT, the economic burden is intended to be passed on to waste producers via pricing arrangements.

Section 27 of the Act is unusual in addressing incidence by allowing adjustment of contract payments to reflect changes in tax chargeable after contract formation. Its purpose is to ensure landfill site operators are not economically disadvantaged by tax regime changes.

The court accepted that the "disposal contract" in section 27 refers to the contract for disposal of waste material, here between Plaintiff and Defendant, not the contract between Plaintiff and The Council.

However, the court found no "change in the tax chargeable" had occurred. The higher rate of tax was chargeable at the time of disposal, but an error was made in classification and payment. The subsequent additional tax payment was a belated payment of tax originally chargeable, not a change in the tax regime.

The court rejected the Plaintiff's argument that practical difficulties in determining waste composition at disposal justified applying section 27 in this way, emphasizing that such commercial risks should be addressed contractually rather than by statutory rewriting of contracts.

The court also rejected the Defendant's argument that section 27 could never apply because of the interposition of the Plaintiff between Defendant and The Council, clarifying that the statute contemplates adjustment of payments under disposal contracts regardless of such interpositions.

Holding and Implications

The court DISMISSED the Plaintiff's action.

The decision means that the Plaintiff cannot recover the additional tax payment from the Defendant under section 27 of the Landfill Tax (Scotland) Act 2014 because there was no change in the tax chargeable, only a correction of an original underpayment. The ruling clarifies that section 27 applies only to genuine changes in the tax regime after contract formation and does not rewrite contracts to address errors or misclassifications existing at the time of disposal. No new precedent beyond this specific interpretation was established.