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High Court criticises HMRC's conduct finding that it breached taxpayer's legitimate expectation

20 July 2016. Published by Adam Craggs, Partner

The High Court, in the recent case of R (Biffa Waste Management Services Ltd) v the Commissioners for HMRC [2016] EWHC 1444 (Admin), has provided helpful clarification on the circumstances in which taxpayers are entitled to rely on rulings by HMRC where the ruling is general in nature. In delivering his judgment, Sir Kenneth Parker was highly critical of HMRC's conduct in the litigation, particularly in relation to their failure to disclose documents and alterations to their pleaded case.


The claimant, Biffa Waste Services Limited (Biffa), is a supplier of waste disposal services that operates a number of landfill sites in the UK.

On 1 September 2009, a new landfill tax regime came into force under the Landfill Tax (Prescribed Landfill Site Activities) Order SI 2009/1929 (the Order), under which changes were made to the definition of 'taxable disposal', within the context of landfill tax (the new regime).

Prior to this, Biffa had planned a restoration operation at its North Herts landfill site (North Herts), which involved the construction of a 'regulation layer', which is placed below the 'cap' used to seal the waste containment system.

Biffa sought clarification from HMRC as to whether the regulation layer would be treated as a taxable disposal under the new regime. HMRC issued a ruling on 28 September 2009 that Biffa's proposed construction of the regulation layer at the North Herts site would be outside the scope of the new regime and would not be subject to landfill tax (the Ruling).

In reliance upon the Ruling, Biffa did not account for landfill tax in respect of the regulation layer at the North Herts site, nor at any of its other landfill sites. This decision was made on the basis that the regulation layer at each site was materially the same.

On 31 May 2012, HMRC revoked the Ruling and stated that the regulation layer was in fact subject to landfill tax. HMRC issued assessments to Biffa for more than £69m in relation to landfill tax since the introduction of the new regime.

Biffa requested an internal review which led to HMRC issuing a decision to Biffa on 20 October 2014, that Biffa was to treat the regulation layer as being subject to landfill tax (the Decision).

Biffa filed appeals against the assessments with the First-tier Tribunal (FTT) and challenged the validity of the Decision on public law grounds by way of judicial review proceedings in the High Court (it could not rely on public law grounds before the FTT).

Biffa contended that the Decision breached its legitimate expectation under EU law and its right under Article 1 of Protocol 1 of the European Convention of Human Rights. It contended that:


  1. the Decision was contrary to the Ruling which represented that the regulation layer was not subject to landfill tax; and


  2. HMRC could not apply the Decision retrospectively ie in respect of the regulation layer prior to 31 May 2012.


The Court noted that the doctrine of legitimate expectation is based on the principle that public authorities, such as HMRC, must not act conspicuously unfairly towards those with whom they deal.

The Court considered the following two main issues:

  1. the meaning and scope of the Ruling; and
  2. whether Biffa had disclosed to HMRC all relevant facts and matters before the Ruling was made so that it would be conspicuously unfair for HMRC to revoke the Ruling with retrospective effect in respect of all Biffa's sites.

With regard to the first issue, after careful consideration of both internal HMRC correspondence and correspondence between the parties, the Court concluded that there was nothing in the available evidence to suggest that the Ruling was confined to the North Herts site only, on the contrary, it bore the clear hallmarks of a general policy statement of the correct tax treatment of the regulation layer in general. Moreover, there was nothing to suggest that the regulation layer was unique to the North Herts site, or that the Ruling turned upon characteristics that were specific to the North Herts site.

In respect of the second issue, the Court held that there was no material non-disclosure by Biffa such that it could not legitimately rely upon the Ruling. The Court was of the view that it would be unduly burdensome for taxpayers to have to identify how else they might rely on such a ruling and an overly demanding test for disclosure would lessen the incentive for taxpayers to seek advance rulings which would be contrary to the public interest.

The Court therefore allowed Biffa's claim.



This case provides helpful guidance on the right of taxpayers to rely on HMRC rulings. HMRC often attempts to issue rulings by reference to a specific scenario. However, if a taxpayer has requested general guidance, and the issued guidance is clear and devoid of relevant qualification, any attempt by HMRC to limit the scope of such a ruling may well be unsuccessful.

It is also worth noting that the judge was highly critical of HMRC's conduct in this case, particularly in relation to its failure to disclose relevant documents. He commented that:

"It is deeply unattractive, to put the matter at its lowest, for HMRC to advance a case, based upon incomplete material known to the taxpayer, that a particular representation should be given a very narrow scope, when HMRC has in its possession further significant documents that, on a fair reading, show that no such narrow scope was intended at the time by HMRC. The position reached in this case, as far as I am aware, is without precedent, and I sincerely hope that it will never recur."

The judge also commented that for a public authority to put forward as the true meaning of a particular representation an interpretation that is wholly inconsistent with what the public authority intended at the time was "simply offensive to justice and unlawful".

The judge commented on the lack of proper disclosure by HMRC of significant internal correspondence, even following specific requests from Biffa, and took the extraordinary step of notifying the parties that he was minded to order HMRC to provide further disclosure after the conclusion of the hearing. Following this indication, HMRC filed a further witness statement and disclosed additional documents. The documents disclosed by HMRC after the hearing demonstrated that the central thrust of its case regarding the scope of the Ruling had been "seriously misleading".

Given the large number of current HMRC judicial review cases which remain to be determined, it is to be hoped that HMRC will comply with its duty of candour in those other cases and that there will be no repeat of its shortcomings in this case.

A copy of the judgment can be found here.