Case: Aggregate not ‘slate’ and not exempt from aggregate levy

Judge Guy Brannan

Decision released 23 February 2019

AGGREGATES LEVY – rock extracted from opencast gold mine – whether rock exempt from aggregates levy as consisting of ‘mainly shale or slate’ – section 17(4) Finance Act 2001 – related penalty – appeal dismissed

Omagh Minerals Ltd [2019] UKFTT 0130 TC06996

Summary

Omagh Minerals Ltd operates one of the few gold mines in the United Kingdom. It is an opencast mine and in order to excavate the gold seam rock must be extracted from the pit. Much of the rock extracted is kept in order that, when the gold seam is exhausted, the mine can be closed and the site restored. However, some was removed by a contractor for use in road building. Although the contractor did not pay for the rock, the removed rock was (unless it was exempt) subject to aggregates levy as it was ‘subject to commercial exploitation’ (section 16 Finance Act 2001).

HMRC determined that the rock was subject to the levy and raised assessments in respect of the periods ending 31 January 2009 and 30 April 2009. The assessments against which Omagh Minerals appealed included the penalties as well as the levy itself.

The FTT considered three issues:

(i)Had the HMRC officers exercised their best judgement and, if so, should the Tribunal consider whether the assessments were correct;

(ii)Was the rock removed from the mine slate (and therefore exempt from the levy); and

(iii)Were the penalties valid?

In regard to the first issue the FTT was invited to consider whether its jurisdiction was supervisory (in which case it should only consider whether the assessments were made to best judgment) or whether it had full appellate jurisdiction to consider whether the rock in question was, in fact, exempt from aggregates levy. The FTT concluded that, given the ‘substantive’ amount of tax at stake (>£300k) it had full appellate jurisdiction.

The FTT heard a great deal of evidence regarding the character of the rock in question. The mine had been sampled and surveyed several times over a period of years. The judgement sets out the evidence of three of Omagh’s employees and three independent experts, one engaged by Omagh Minerals and two by HMRC. The FTT concluded that both the HMRC assessing officer and the review office had made ‘an honest and genuine attempt to raise an accurate assessment’ (para 247) and therefore the assessment was made to best judgement.

The FTT then considered whether the rock was exempt from the levy. Having considered the extensive evidence provided by Omagh Minerals and the expert witnesses, the FTT concluded that it was not slate and, therefore aggregates levy was due.

Thirdly the FTT considered penalties. The assessments related to two returns. One for the period ending 31 January 2009 and one for the period ending 30 April 2009.

The return for the period ending 31 January 2009 was liable to penalties under para 9(1)(a), schedule 6, Finance Act 2001. The only defence to a penalty for an inaccurate return under this provision is that of reasonable excuse. As Omagh Minerals did not present any argument that it had a reasonable excuse its appeal against this penalty was dismissed.

The question of penalties due in respect of the period ending 30 April 2009 was described by the FTT as ‘unclear’ (para 276). The FTT invited written submissions on this point from the parties. Omagh Minerals argued that the penalty provisions contained in para 9(1)(a) Schedule 6, Finance Act 2001 had been repealed with effect from 1 April 2009.

Comment

The detailed technical specifications of the rock removed from the mine, and the approach of the FTT to dealing with the evidence, will be of interest to other businesses removing aggregate from similar landscapes. The FTT’s reasoning as to whether it had supervisory or full appellate jurisdiction and the application of penalties will be of wider interest and we await the Tribunal’s conclusion on the outstanding penalty issue.

The FTT was previously asked to consider whether the assessment and penalties were criminal charges for the purposes of the Human Rights Act (see [2018] TC06842). Omagh Minerals successfully argued that the penalties were criminal charges for Human Rights Act purposes, but not the assessment itself. It is unclear from the judgement in this case how this previous decision affected the FTT’s reasoning.

For commentary on aggregates levy, see our In-depth Commentary at ¶76-500.

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