First-tier Tribunal (Tax)

[2011] UKFTT 232 (TC)

TC01097

Appeal number TC/2010/04426

Benefits in kind. “made available to”. Cars.

FIRST-TIER TRIBUNAL

TAX

MICHAEL GOLDING Appellant

- and -

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL:  GERAINT JONES Q.C.

Sitting in public at Field House, London on 21 March 2011.

Mr. Weintrob for the Appellant

Mr. Shorte, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2011

DECISION

1.       Mr Golding, as he accepts, was a Director of Huntington Antiques Ltd during each of the fiscal years ended 5 April 2002, 2003, 2004 and 2005. During an enquiry into the tax affairs of that company HMRC became aware that that company owned two cars. HMRC decided that as Mr Golding was a director employee of the company, those cars were made available to him by reason of his employment, and thus he should be taxed in respect of a benefit in kind.

2.       The assessment that was raised on 4 February 2009 included car benefit in respect of two cars, being a BMW and a Ferrari. The appellant, Mr Golding, requested a review of the assessment, which was completed on 29 March 2010. Upon review the assessments were upheld in an amended form, the amendment being to increase the amount of the assessment. The appellant appealed against the assessment by giving notice of appeal to the Tribunal on 7 May 2010, out of time. HMRC has taken no objection to the late notification of the appeal and permission to appeal out of time is granted.

3.       At the outset of this appeal Mr Weintrob took me and the respondent’s representative by surprise by indicating that the appeal was in respect of both motor cars said to give rise to a benefit in kind. That was a matter of surprise because the Notice of Appeal proceeded on the basis that the appeal was in respect of the Ferrari alone and that benefit in kind was accepted in respect of the BMW. Mr Golding explained that this was not in accordance with his instructions and accepted that that was a matter that he might subsequently have to deal with between himself and Mr Weintrob. I was not prepared to allow the Notice of Appeal to be amended and this appeal proceeded in respect of the Ferrari motor car alone.

4.       Unfortunately no witness statement had been prepared and submitted by the appellant. Nonetheless, Mr Golding gave oral evidence during which he said, in summary, the following. The company Huntington Antiques Ltd, as the name suggests, trades in antiques from retail premises. The appellant accepted that he was both a shareholder and director of that company in the material years and that he was also an employee with the company operating PAYE in respect of his remuneration. He said that he was not provided with a company car as he had ample motorcars of his own.

5.       Mr Golding explained that the Ferrari motorcar was owned by the company and had been paid for by the company in 1998. He said that when it was purchased it was a "challenge" car by which he meant that it was for use on tracks or circuits only and could not lawfully be used on the public highway. He described its purchase as being a marketing device or marketing tool because the company’s better clients or prospective clients would be invited to track event days where they would be wined, dined and allowed to ride (with a suitably qualified driver) in the Ferrari motorcar at the track. Naturally, the company's marketing brochures would be made available to such attendees.

6.       Mr Golding explained that these events took place, as one might expect, in the spring and summer. During the autumn and winter months the track car was taken to the premises of Italia Autosport in West Yorkshire. The car was stored, maintained and transported by that company which also provided a qualified driver when the car was being used for marketing purposes at various circuits or tracks.

7.       The appellant gave evidence that the Ferrari was used in this way until 2001 when, with the then economic downturn, a decision was taken to sell the car. That evidence is corroborated by the content of the letter, undated, sent by Italia Autosport in which it says that that company kept the Ferrari motorcar on behalf of its customer and attempted to sell it. It goes on to say that because it was unsuccessful and unable to sell the car, it was returned to its owner during the summer of 2003.

8.       Mr Golding's evidence is that once the company re-took possession of the car from West Yorkshire it was put on a trailer and taken to garage premises owned by the company in Stow on the Wold. He said that the car was only used when it was being shown to prospective purchasers and, for that reason, it was taxed and insured for only six months of each year, being the spring and summer months. He went on to say that the car was eventually sold in early 2005. That is reflected in the fact that the last benefit in kind assessment is for the fiscal year ended the 5 April 2005.

9.       Mr Golding explained that his home was only some 50m or so from where the car was stored at the company's garage premises.

10.    There was no cross examination. I accept that Mr Golding was a truthful and reliable witness.

11.    During his helpful submissions, Mr Shorte submitted on behalf of HMRC that upon the true and proper construction of sections 114 – 118 of the Income Tax (Earnings and Pensions) Act 2003 and the earlier applicable legislation the assessments were correctly raised. I was carefully taken through the applicable statutory provisions which place this appeal into its proper context. However, it must be noted that none of those statutory provisions, although using the words “made available”, seek to define those words as used in section 116 of the 2003 Act. Mr Shorte submitted that he was assisted by section 117 of the 2003 Act because it provides that where a car is made available by an employer to an employee, it is to be regarded as made available by reason of that employment unless certain exceptions apply. It is immediately to be noted that that section does not deal with when a car is "made available" but, rather, when it is to be regarded as made available "by reason of the employment". That is not the issue in this appeal.

12.    The central issue in this appeal is whether Huntington Antiques Ltd made the Ferrari motorcar available to Mr Golding in his capacity as a director or employee of that company. It might be observed that if, as a matter of fact, it was made available to him, then it is a taxable benefit in kind regardless of whether he made any use of the car or in fact derived any benefit from it.

13.    It is not the issue of use that is central to this appeal. The central issue is a simple one. It is whether the Ferrari was “made available” to the appellant by reason of his employment. That is not to be confused with an employee actually using a company car if required to do so in the course of his employment when such use is clearly the use of the employer itself.

14.    Mr Shorte relied upon various documents in support of his submissions. He first referred to the fact that when the car was insured it was insured on a "social, domestic and pleasure" basis which, ordinarily, would not permit business use. In my judgement that has to be seen in the context of this car being then available for sale rather than being used as a marketing tool at various events. It is, nonetheless, a point upon which Mr Short was entitled to place reliance. The weight to be attached to that reliance is a matter for me.

15.    Mr Shorte also placed reliance on the fact that the MOT Certificate issued on the 7 August 2001 showed that the car had travelled some 4256 miles whereas the MOT certificate issued on the 7 August 2002 showed that it had travelled some 6280 miles, that is, an increase of just over 2000 miles. Set against that fact is the evidence given by the appellant that when the car was stored in West Yorkshire and subsequently kept Italia Autosport whilst it was for sale, he did not drive it or use it in any way whatsoever.

16.     As I have indicated above, even if a director or employee does drive or use a vehicle owned by a company, that is not determinative of whether or not that vehicle has been "made available" to him by reason of his employment or directorship. In this appeal I accept Mr Golding's evidence that he made no personal use of this Ferrari motorcar and that it was, at all material times, either being used as a marketing tool or, when it was no longer being used in that way, it was up for sale initially in West Yorkshire and subsequently at the company’s garage premises in Stow on the Wold. In my judgement it would be artificial to regard the car, in those circumstances, as "made available” is to the appellant in his capacity as an employee for his use and benefit (whether or not he chose to use it).

17.    It follows that in my judgement the assessment insofar as it takes account of the Ferrari motorcar must be discharged. The appeal is allowed accordingly.

18.    This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.