In The Durham Company Ltd (t/a Max Recycle) v HMRC & Anor [2016] UKUT 417 the Upper Tribunal found that supplies of commercial waste collection services by Local Authorities can be exempt from VAT.

The case was an application for judicial review of the lawfulness of the VAT treatment afforded to local authorities carrying out trade waste collection and disposal services. 

Under section 41A(a) VATA 1994 and Article 13(1) of the VAT Directive, Local Authorities are not regarded as taxable persons in respect of activities in which they are 'engaged as a public authority' provided this does not significantly distort competition. 

  • The taxpayer carries on a business including commercial / trade waste collection services.
  • It is required to charge VAT at the standard rate on those supplies.
  • It competes with a growing number of Local Authorities, and claims that as they do not have to charge VAT this gives them an unfair competitive edge.

The Upper Tribunal only considered a preliminary issue, finding that where a Local Authority makes supplies of trade waste collection services in the performance of its legal duties, those supplies are activities in which it is engaged as a public authority and no VAT has to be charged.

They also noted that:

  • Whether any particular Local Authority is acting as a public authority will depend on the facts relevant to them.
  • Since different Local Authorities work in different ways considerable care must be taken.
  • If the taxpayer is to succeed in its application for judicial review they will have to show that:
    • The competition proviso applies to the Local Authorities in which it operates, or
    • That those Local Authorities are operating beyond their powers.

Case reference

The Durham Company Ltd (t/a Max Recycle) v Revenue And Customs & Anor [2016] UKUT 417