Councillors in war of words over £16 million landfill tax dispute

Councillors were not properly briefed about how much money was at stake during a landfill tax dispute that will see Cardiff Council have to pay millions of pounds, an opposition leader has said.

The Liberal Democrats group leader at Cardiff Council, Cllr Rodney Berman, made his comments at a governance and audit committee meeting of the local authority on Tuesday, January 28.

Cardiff Council announced in September 2024 that it had agreed to pay HM Revenue and Customs (HMRC) £16m over a dispute relating to the amount of money it was charging companies to take soil to its former landfill site at Lamby Way.

The council said at the time said that there was no suggestion of any impropriety or illegality over the issue, only a dispute over definitions and categorisations about materials.

Taxed

Cllr Berman said at Tuesday’s meeting that there “was no briefing whatsoever of opposition group leaders throughout this whole process” on the amount of money that the council might have to pay.

He later added: “We weren’t briefed about the quantum involved and that is the significant part.

“knowing that there is a debt, it could be £100,000, but knowing that you are talking about… £16m, there is a huge, significant difference and not once were any opposition members briefed that it was anything like that quantum.”

The landfill tax dispute goes back nearly 10 years, with a number of companies being taxed at lower rates than what HMRC said they should have been to deliver soil and other materials to the Lamby Way landfill site.

One of the companies taxed at a lower rate was Neal Soils.

David Neal

The company’s owner, David Neal also runs Dauson Environment Group, which donated £200,000 to Vaughan Gething’s Welsh Labour leadership campaign last year.

The donation to Mr Gething was contentious at the time because Mr Neal had previously been convicted of environmental offences – once in 2013 and again in 2017.

When announcing how much it would have to pay out as a result of the landfill tax dispute, Cardiff Council said that it initially faced a liability of £45m before bringing this figure down in negotiations.

Members of the council’s governance and audit committee also heard this week how lessons have been learnt since the issue was first picked up on and that a number of actions have been put in place to prevent it from happening again.

Cardiff Council’s head of finance, Ian Allwood, said: “We have [had] a significant increase… over the last five years in terms of senior management team, in terms of compliance reports being put into that arena at a range of issues, not just within my financial space, but in terms of procurement, HR, regulations change.

“I think it is also probably on myself and in terms of corporate services when we are aware of tax changes or regulatory changes to be working with those directorates and making sure that where those directorates say they are working on it that we are working as a partnership and working very closely together.”

He added: “We have increased the presence of VAT officers between one and three.

“There is a significant VAT training programme across the organisation.

“We have monthly meetings with an external VAT expert who provides us updates in VAT, but we also workshop any particular issue that are coming through on the horizon or actual matters coming through.”

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

Closed

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.

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.

In September 2024, council cabinet members approved a recommendation to pursue any outstanding, unpaid landfill taxes following HMRC’s re-categorisation of soil brought to the site.

It was agreed that the total amount owed to HMRC would be borrowed and paid in full, with the amount borrowed being paid back over a period of time.