Home » Cardiff Council agrees to pay £12m in landfill tax dispute with HMRC
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Cardiff Council agrees to pay £12m in landfill tax dispute with HMRC

County Hall, Cardiff (Pic: Seth Whales, Wikimedia Commons)

A COMPANY owned by a man who made a controversial donation to former Welsh First Minister, Vaughan Gething, was one of the firms at the centre of a council landfill tax dispute.

Cardiff Council announced today that it reached an in-principle agreement with HMRC to pay them more than £12m in unpaid landfill tax, rising to £16m with interest, dating back nearly 10 years ago in relation to the type of landfill arriving at the local authority’s Lamby Way site.

A number of companies, including Neal Soils, were taxed at lower rates than what HMRC said they should have been when delivering soil and other materials to the site.

The council insists that the dispute with HMRC is one over definitions and categorisations and said it initially faced a liability of £45m before bringing this figure down in negotiations.

David Neal runs Dauson Environment Group, which donated £200,000 to Mr Gething’s Welsh Labour leadership campaign. Mr Neal is also the owner of Neal Soils.

The donation to Mr Gething was contentious because Mr Neil had previously been convicted for environmental offences – once in 2013 and again in 2017.

Cardiff Council’s cabinet member for finance, Cllr Chris Weaver, said: “Landfill tax rules changed around the time issues arose, and this contributed to the confusion.

Cllr Chris Weaver (Pic: Cardiff Council Website)

“The materials assessed, and the rules and rates around those materials were not always clear.

“The landfill tax regime is complex and ambiguous, and this Council is not alone in receiving landfill tax assessments from HMRC.

“The errors should not have arisen, but since we cannot go back to 2015 and do it differently, our job now has been to resolve this.”

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The issue came to light during a HMRC landfill tax audit in January 2017 and initially related to two companies that brought material to the Lamby Way landfill site.

Lamby Way landfill site was closed in 2015, but Cardiff Council said soil was needed to help contour, cap and remediate it.
Bridgend Biomass/South Wales Wood brought material to the site which was taxed at a lower rate.

HMRC disputed the categorisation saying it should have been taxed at a higher rate. This dispute was eventually resolved.

Neal Soils delivered soil to the site which was charged as unprocessed soil and at the lower rate, but HMRC said this soil was processed and should have been taxed at a higher rate.

Cardiff Council said there is no suggestion of any impropriety or illegality here, only a dispute over definitions and categorisations.
Landfill tax is charged at two rates depending on the type of material.

During the period affected by the dispute, the standard rate of landfill tax was between £82.60 and £86.10 per tonne, while the lower rate was between £2.60 and £2.70 per tonne.

The council has paid back a portion of what it owes already, so the total amount it has to pay will be about £15m.

Cllr Weaver added: “HMRC maintain that soil from Neal Soils was processed and so should have been subject to testing.

“We disagree, but going to litigation, given its inherent uncertainty could cost us significantly more.

“We have been in negotiations with HMRC over several years. Although this outcome will result in a significant cost to the Council, I understand it may be the best way forward now.

“The Council is not able to retrospectively rectify the issues that have arisen since we cannot open up the landfill to isolate and carry out testing on the material at issue.

“Although the council no longer runs a landfill site, the authority has reviewed waste management practices, implemented improved control measures, and worked closely with legal and tax experts to ensure tax regime compliance.”

Speaking on the involvement of Neal Soils, Cllr Weaver said: “That company has been involved in this industry for many years and obviously they were delivering soil products to Lamby Way… long before Vaughan Gething was running for leader.

“I understand that connection will be drawn, but this is an issue around that complexity of how to categorise the right level of landfill tax.
“Many organisations and companies fell foul of this in that period, post 2015.

“Whichever company is involved in this, this is about trying to secure the best outcome for the taxpayers of Cardiff in the way we think is right and is the best way to move forward.”

Cardiff Council cabinet members will consider a report recommending acceptance of the settlement with HMRC at a meeting on Thursday, September 26.

The report will also propose a payment method, which will be presented to full council on the same day for approval.

Additionally, the cabinet will be asked to approve a recommendation to pursue any outstanding, unpaid landfill taxes following HMRC’s re-categorisation of soil brought to the site.

It is proposed for the total amount owed to HMRC to be borrowed and paid in full, with the amount borrowed being paid back over a period of time.

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