Outer House case considering the meaning of “waste” in terms of the lease of a landfill site near Stranraer.  The lease provided that the tenants (Shanks) were to make royalty payments to the landlords (Landmore) for “inert waste” entering the site.

The question for the court was whether soil which had been brought on to the site for the purpose of capping cells of waste deposited at the site was also “inert waste” and therefore subject to the royalty payment.

Lord Menzies found that the soil was “inert waste”.  In coming to that conclusion, he noted that the exercise was one of construction of a private commercial contact and thus differed from cases in which the courts were construing EU directives or regulations (albeit he noted in passing that the decision he reached was in line with authorities concerned with the interpretation of the EU regime).

The soil came from a construction site on which houses were being built. It was discarded by the developer who paid haulage contractors to take it away and was an unwanted by product caused by the need to provide flat foundations for the houses. Nothing was done to it before it entered the landfill site. As such, Lord Menzies took the view that the soil fell within the ordinary and natural meaning of “waste”. Although it was useful to Shanks, Lord Menzies did not consider that it was appropriate when considering the parties intentions objectively to view the situation from the perspective of the potential user of the material pointing out that anything –or almost anything –can be put to use by someone.

“Having consumed all the meat from a roast leg of lamb, I may discard it into my household rubbish. It is useless to me. My dog may have a different view of its usefulness, and may retrieve it for his own purposes – but despite its usefulness to him, it remains waste.”

The full judgment is available from Scottish Courts here.

 All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Gateshead Talmudical College v HMRC

Upper Tribunal Finance and Tax Chamber 2011 UKUT 131 (TCC) 

This is an appeal by Gateshead College against the decision of the First-tier Tribunal.

The Upper Tribunal concluded that Capital Goods Scheme (CGS) adjustments were required when rental payments and VAT accounting stopped less than two years into a lease and leaseback arrangement.

CGS is a mechanism for regulating deductibility over the “VAT-life” of a capital good.   For VATpurposes a capital good is a developed property.  The scheme operates by ensuring that the deductibility for a property reflects the use to which the property is put over the VAT-life (adjustment period) of the property.

Facts

The main activity of Gateshead College is the provision of education.   The background to this matter is the building of an extension by Gateshead College.  Gateshead College leased these premises to a property company called Starburst Properties Ltd.   Starburst on the same day granted a sublease over the same premises to Gateshead College.   Gateshead College had registered for VAT two months earlier and had described its business as that of “property letting”.   Both Gateshead College and Starburst elected to waive the VAT exemption over these premises.

Gateshead College then took credit for the input tax on its construction costs relating to these premises and this led to a VAT repayment for Gateshead College.   However, after an initial period of less than two years the lease payments and the VAT accounting stopped.   In addition, Starburst was dissolved and struck off the company register.  Gateshead College took no action to forfeit the lease the benefit of which became vested in the Crown as bona vacantia.

HMRC assessed Gateshead College for failure to make adjustments under the CGS and Gateshead College appealed to the First-tier tax Tribunal.

At the First-tier Tribunal HMRC successfully argued that the making of taxable supplies had been reduced to nil once Starburst had been dissolved (as it could not be the recipient of any supplies).  In addition the ceasing in the making of taxable supplies had given rise to the requirement to make a CGS adjustment.   Gateshead College unsuccessfully argued that the continued existence in law of the lease meant that taxable supplies continued to be made after the initial period.

The arguments  

Gateshead College appealed to the Upper Tribunal on the basis that the First-tier Tribunal had erred in law.

Gateshead College made two arguments.  Firstly, it argued that the First-tier Tribunal had been wrong to include that no supplies were being made under the lease because the parties has stopped abiding by its terms and one of the parties had ceased to exist.   Gateshead College contended that it had continued to make supplies despite its failure to seek payment of rent.

Gateshead College also argued that that the First-tier Tribunal had wrongly concluded that an adjustment under the CGS should have been made because of a decrease in the making of taxable supplies.  Gateshead College argued that CGS adjustments are triggered not by the reduction in the value of taxable supplies but by a change in the extent of the use of the capital item for making taxable, as distinct from exempt supplies.

The decision

The Upper Tribunal dismissed Gateshead College’s first argument.   The Upper Tribunal accepted the lease existed as an item bona vacantia but that did not alter the fact that no rent was paid and accounted for after a period of less than two years.   A supply, i.e. rent, was therefore not being made once Starburst was struck off.

With regard to the “change of use” argument.   The Upper Tribunal stated, as had the First-tier Tribunal, that it was “completely untenable” to maintain this argument.  The parties had stopped abiding by the lease and the payment of rent had been abandoned completely.  Gateshead College’s argument that the premises were used exclusively for leasing supplies, despite there being no actual rental charges or payment nor any intention of any being made, could not be sustained.

Changes are being made to the SDLT IT system.  This means online returns cannot be submitted from midnight on Friday 24 June until 7.00am on Monday 4 July.  The reason for this is that HMRC is shutting down the system whilst the changes are made and tested.

The latest information from HMRC is available here.

The Law Society has arranged for a temporary relaxation of the 14 day limit on the period specified in the “classic” Letter of Obligation.  The time limit  will be raised to 21 days for all transactions which settle during the period from Friday 24 June to Friday 1 July inclusive.

The relaxation is necessary as a result of  changes being made to HMRC’s computer system which mean that the system will not accept SDLT returns submitted online or by paper from Saturday 25 June (at 00:01) until Monday 4 July (at 00:01).

The Law Society’s press release is available here

There is an error on page 187.   The 5% Stamp Duty Land Tax rate rate does not apply to non-residential property.  CCH has confirmed that they have amended the on-line version and that the next edition of  this publication will also include this correction.

Case considering the grant of planning permission for a wind farm at Fallago Rig in the Lammermuir Hills.  Due to the large capacity of the development, consent was required by the Scottish Ministers in terms of the Electricity Act 1989. Consent was granted by the Scottish Ministers by a decision letter in November 2010. In terms of the legislation that consent is also deemed to be planning permission for the development.

There were a number of interested parties who objected to the development leading to two public enquiries and what is described as voluminous correspondence.  The petitioners sought reduction of the decision letter on various reasons (including natural justice, ultra vires, unlawful conditions and inadequate reasons), however, the main thrust of their argument was bias.

The petitioners argued that, while it was quite lawful for elected representatives to be predisposed to renewable energy (it being Government policy to encourage the development and use of renewable energy from natural sources), it was not lawful to pre-determine an application which fits that policy without first considering the objections. In this case the petitioners argued that the government had made up their mind to bring about the conditions in which consent could be granted. They argued that the Government had had covert conversations with the MOD (which was the main objector to the development on the basis that the turbines could interfere with radar systems) and those conversations were successful as the MOD withdrew its objection. This, they argued, showed bias.

After detailed consideration of the authorities Lord McEwan looked to the test for bias in Porter v Magill (2002) in which Lord Hope came to the conclusion the test was:

“… whether the fair minded and informed observer, having considered the facts, would conclude that there was a real possibility that …” (the decision taker) “… was biased”

Lord McEwan took the view that the best guidance on the application of that test to a planning case was given in R (Lewis)v Redcar and Cleveland Borough Council (2009) which made it clear that a Minister’s position is different from someone holding a judicial or quasi judicial office:

“… the requirement made of such decision makers is not, it seems to me, to be impartial but to address the planning issues before them fairly and on their merits, even though they may approach them with a predisposition in favour of one side of the argument or the other. It is noticeable that in the present case no complaint is raised by reference to the merits of the planning issues. The complaint, on the contrary, is essentially as to the timing of the decision in the context of some diffuse allegations of political controversy. So the test would be whether there is an appearance of predetermination in the sense of a mind closed to the planning merits of the decision in question. Evidence of political affiliation or of the adoption of policies towards a planning proposal will not for these purposes by itself amount to an appearance of the real possibility of predetermination or what counts as bias for these purposes. Something more is required… ‘ unless there is positive evidence to show that there was indeed a closed mind, I do not think that prior observations or apparent favouring of a particular decision will suffice to persuade a court to quash the decision … “

After considering the documents and evidence, Lord McEwan found that, far from showing pre-determination on the part of the Minister, there was a great deal to indicate the opposite i.e. an open fair mind. He also failed to find that the conduct of the Minister could be criticised noting that “in the realm of administrative law there is nothing wrong with the decision taker meeting an objector.”

The full judgement is available from Scottish Courts here.

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Guidance on the Town and Country Planning (Environmental Impact Assessment) (Scotland) Regulations 2011. The Circular supersedes the guidance previously given in Circular 1/2003.

The Scottish Government, 1 June 2011

HMRC launched 9,368 investigations into Inheritance Tax valuations over the last year and is actively targeting estates and beneficiaries say tax advisers UHY Hacker Young.

In instances where additional tax was payable, this averaged £24,600 per case.  Based on HMRC figures, approximately £70 million of additional tax was raised as the result of HMRC challenging the valuations of properties included in the estate of a deceased person in 2010.

HMRC has previously advised estate beneficiaries to obtain several property valuations and strongly recommends the engagement of a professional valuer or chartered surveyor.

Major changes are being made to the computer system used by HMRC to process SDLT returns.  As a result, the system will be unavailable from 00:01 on Saturday 25 June until 00:01 on Monday 4 July.  It will not be possible to file returns during this period.  HMRC are expected to publish further information on this matter in the next few days.

In the meantime they have issued the following documents detailing their plans:

• Online arrangements
• Paper returns