Cardiff Council must pay millions to HMRC after landfill tax dispute

Cardiff Council is facing a substantial payment to HMRC following a landfill tax dispute that has been ongoing for nearly a decade. The council has agreed in principle to pay over £12 million in unpaid landfill tax to HMRC, which will increase to £16 million with interest. The dispute centres around the type of landfill material brought to Cardiff Council’s Lamby Way site, with several companies, including Neal Soils, being taxed at lower rates than deemed appropriate by HMRC.

David Neal, the owner of Neal Soils and Dauson Environment Group, which has faced scrutiny for controversial donations to former Welsh First Minister Vaughan Gething, is among the companies involved in the dispute. Despite facing a potential liability of £45 million initially, the council managed to negotiate the amount down through discussions with HMRC. Cardiff Council’s cabinet member for finance, Cllr Chris Weaver, explained that changes in landfill tax rules had contributed to the confusion surrounding the issue.

The disagreement with HMRC was triggered during an audit in January 2017, focusing on the categorisation and taxation of materials brought to the now-closed Lamby Way landfill site. While the council maintains that there is no hint of impropriety or illegality, HMRC insisted that some materials should have been taxed at higher rates. The complexity of the landfill tax regime during the period in question, with varying rates for different materials, further complicated the situation.

Cardiff Council has already repaid a portion of the outstanding amount and is set to pay approximately £15 million in total. Cllr Weaver expressed the challenges of the situation, stating that litigating the matter could result in even higher costs for the council. The cabinet will review a report recommending the acceptance of the settlement with HMRC, along with proposals for payment methods and pursuing any remaining unpaid landfill taxes.

Despite the connection between Neal Soils and Mr. Gething’s campaign donations, Cllr Weaver emphasised that the primary focus is on resolving the tax dispute in the best interest of Cardiff taxpayers. The council’s efforts to comply with tax regulations and enhance waste management practices have been highlighted in response to the situation. Cardiff Council’s cabinet members are set to consider the recommendations in the report at a forthcoming meeting, with decisions on payment methods and pursuing outstanding taxes to be made.

The complexity and ambiguity surrounding the landfill tax regime have caused challenges for various organisations, with Cardiff Council now working towards resolving the dispute with HMRC in a manner that ensures compliance and fiscal responsibility.