In a ruling of significance to those engaged in major construction projects involving the use of materials quarried on site, a water company has convinced the First-Tier Tribunal that it should not be charged aggregates levy in respect of gravel utilised in raising the level of a reservoir.
In constructing various dams and a causeway as part of the £45 million project, the company had used gravel quarried from a pit (the pit) which was approximately 500 metres away from the reservoir. Her Majesty’s Revenue and Customs (HMRC) argued that the gravel had been subjected to commercial exploitation and was thus subject to aggregates levy under part two of the Finance Act 2001.
However, in upholding the water company’s case, the Tribunal ruled that the pit and the reservoir were part of the same site and that, on a correct construction of section 19(3)(e) of the Act, the gravel fell within the exception available to aggregates which ultimately become part of the land at the site from which they are won.
HMRC had argued that the footprint of the quarry should be viewed in isolation and that the exception would only have applied where the aggregate was returned to that particular area. However, the Tribunal ruled that that interpretation was ‘too narrow’ and, if applied, would largely strip the exception of any meaningful application.
Ruling that there was a ‘clear functional link’ between the pit and the reservoir, notwithstanding their geographical separation, the Tribunal noted that they had been treated as a single unit for planning purposes. The pit had been used to achieve the common purpose or raising the reservoir’s level and would itself be covered by water on completion of the project.
The Tribunal ruled that, in the context of a very large construction project, the word ‘site’ within section 19(3)(e) did not mean the particular location where the aggregate was won but bore a wider meaning in order to reflect the purpose of the provision. The entire area on which works were being carried out, including the pit, had been delineated by a fenced-off boundary and would have been viewed as a single site by an ordinary person.