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First-tier Tribunal (Tax)
You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> McKenna Demolition Ltd & Anor v Revenue & Customs [2011] UKFTT 344 (TC) (23 May 2011)
URL: http://www.bailii.org/uk/cases/UKFTT/TC/2011/TC01204.html
Cite as: [2011] UKFTT 344 (TC)
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McKenna Demolition Ltd & Anor v Revenue & Customs [2011] UKFTT 344 (TC) (23 May 2011)
NATIONAL INSURANCE CONTRIBUTIONS
Liability
[2011] UKFTT 344 (TC)
TC01204
Appeal numbers: TC/2009/14944 and TC/2010/01458
National Insurance Contributions (Class 1A) – Section 167 of the Income Tax (Earnings and Pensions) Act 2003 – whether company car, pool or emergency vehicle – private use found – appeal dismissed
FIRST-TIER TRIBUNAL
TAX
MCKENNA DEMOLITION LIMITED Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS Respondents
Mr RICHARD MCKENNA Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY’S
REVENUE AND CUSTOMS Respondents
TRIBUNAL: TRIBUNAL JUDGE MANUELL
Mrs C E FARQUHARSON
Sitting in public at Holborn Bars, 138-142 High Holborn, London EC1N 2NQ on 17 September 2010
Mr C Winter (Winter & Co, Chartered Accountants) for the Appellants
Mr P O’Reilly, HMRC Presenting Officer, for the Respondents
© CROWN COPYRIGHT 2011
DECISION
3. It was common ground and agreed by the parties that
(a) The saloon car was provided by the company to Mr McKenna;
(b) The fuel for the car was supplied by the company; and
(c) The car was used for journeys between Mr McKenna’s home and the company’s business premises.
4. The method for calculating the benefits was also agreed although the final figures required revision and were set out in tables annexed to the respondent’s skeleton argument. These were not contentious and are the figures referred to later in this determination.
5. Statements of case were exchanged by the parties. The appellants’ argument was that there should be no charge on either the company or Mr McKenna because:
(a) Mr McKenna was on 24 hour call;
(b) He should be treated in the same way as employees who use vans for business;
(c) Because Mr McKenna was on 24 hour call there was no home to work travel;
(d) The car was taken home so that if Mr McKenna had to visit a site early, then he could travel directly rather than having to drive to the office first;
(e) There were security concerns with leaving the car overnight at the office;
(f) The car was a pool car as other employees could use it if necessary; and
(g) Mr McKenna owned his own car(s);
(h) Mr McKenna’s residence should be treated as one and the same as the company and he as the major shareholder kept the car on the premises of the provider.
6. The respondents contended that the car was available for Mr McKenna’s private use, was used for normal home/office commuting which was a form of private use, thus creating a chargeable benefit. It was not a pool car, let alone an emergency vehicle.
7. Mr Winter for the appellants agreed the following facts set out in the respondent’s statement of case, i.e.-
(a) The company’s business premises were at Saltbox Hill, Biggin Hill, Westerham, Kent;
(b) Mr McKenna lived at 5 Melody Road, Biggin Hill, Westerham, Kent;
(c) Successive Mercedes saloon cars were made available to Mr McKenna by the company from 2002 to 2007;
(d) Such cars were used for daily travel by Mr McKenna between his home and the company, a distance of 1.6 miles (one way);
(e) Fuel for the cars was purchased by the company;
(f) The cars have been used by other employees from time to time but no mileage records were kept; and
(g) The cars were kept overnight at Mr McKenna’s home.
It was not accepted on behalf of the appellants that any of Mr McKenna’s use of the car was private.
8. Mr McKenna was tendered for cross-examination. He could not say how often he had been called out after hours. The last time was in April 2010 but you never knew. He kept tools in his car, which to him was a glorified van. He did not like to use a van for pricing jobs, he liked to keep low key. Someone else used his car every week but no records were kept. He agreed that the car was kept at his home overnight.
9. Re-examined, Mr McKenna said that he owned two other cars, an Aston Martin and a Rolls Royce. These were mainly for pleasure. He had no need of another car. The company vans were signwritten. The only reason the company car was at home was for call outs.
10. Submissions were made by both representatives. Mr O’Reilly contended that Mr McKenna commuted the short distance to his office from home each day. It was a simple case of private use as “emergency vehicles” were defined by statute. Mr Winter accepted that the cars had not been emergency vehicles, but maintained that Mr McKenna had to be available. He kept the car at home to protect it. Other employees were not precluded from using the car.
11. Mr Winter referred in submissions to the Tribunal’s decision in Industrial Doors (Scotland) Limited [2010] UKFTT 282 (TC), released on 17 June 2010. That decision, which might have been persuasive although not binding, was reached on very different findings of fact. Those findings included accepting that the cars in question had been used regularly by a number of employees and that private use had not been permitted by the company. It is not necessary for the Tribunal to review any of the well known authorities relied on by the respondent, which included Kirkwood v Evans [2002] EWHC 30 (Ch), Miners v Atkinson [1997] STC 58, Gilbert v Hemsley [1981] STC 703 and Ricketts v Colquhoun [1926] AC 1.
12. The relevant legislative provisions are extensive, embracing many familiar statutes and regulations which it is not necessary for the Tribunal to set out here. It was conceded that the saloon car(s) in question were not emergency vehicles. The key provision is Section 167 of the Income Tax (Earnings and Pensions) Act 2003:
Section 167 Pooled carsE+W+S+N.I.
This section has no associated Explanatory Notes
(1)This section applies to a car in relation to a particular tax year if for that year the car has been included in a car pool for the use of the employees of one or more employers.
(2)For that tax year the car—
(a)is to be treated under section 114(1) (cars to which this Chapter applies) as not having been available for the private use of any of the employees concerned, and
(b)is not to be treated in relation to the employees concerned as an employment-related benefit within the meaning of Chapter 10 of this Part (taxable benefits: residual liability to charge) (see section 201).
(3)In relation to a particular tax year, a car is included in a car pool for the use of the employees of one or more employers if in that year—
(a)the car was made available to, and actually used by, more than one of those employees,
(b)the car was made available, in the case of each of those employees, by reason of the employee’s employment,
(c)the car was not ordinarily used by one of those employees to the exclusion of the others,
(d)in the case of each of those employees, any private use of the car made by the employee was merely incidental to the employee’s other use of the car in that year, and
(e)the car was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making the car available to them.
13. The Tribunal found, in addition to the agreed facts set out at paragraphs 3 and 7 above, that the evidence heard by it showed plainly that
(a) Mr McKenna was the main user of the company car, i.e., he was the ordinary user to the exclusion of others;
(b) Mr McKenna was not “on call” as that term was normally used but simply responded to rare emergencies as part of his executive position. The car was not essential to enable him to perform his work. Another employee could have been sent to deal with an out of hours emergency. Any of the company’s vans could have been used for a call out and they were kept less than 2 miles away;
(c) The company car was a 4 door saloon fitted with seats and thus was not a van in law;
(d) Nor was it a “pool car” as defined in Section 167 of the Income Tax (Earnings and Pensions) Act 2003, because Mr McKenna’s private use of the car was daily on weekdays and it was kept overnight at his home;
(e) Nor had the car the special characteristics required for an “emergency vehicle” as defined in Section 248A of the same Act;
(f) Mr McKenna’s home was not the company’s property and was not his place of business; and
(g) Mr Richard McKenna’s use of the company car between his home and his place of business was voluntary and was ordinary private commuting, albeit for a distance of under 2 miles each way.
14. The appeals of McKenna Demolition Limited against the determinations issued on 12 June 2009 under Section 8 of the Social Security Contributions (Transfer of Function, etc) Act 1999 (Class 1A NIC) amounting to £9,195.06 and the associated penalty determinations issued on 23 September 2009 amounting to £4,800 are dismissed.
15. The appeals of Mr Richard McKenna against the discovery assessments issued on 15 October 2009 under Section 29(1) of the Taxes Management Act 1970 amounting to £24,904.34 and the associated penalty determinations issued on 7 December 2009 amounting to £2,491 are dismissed.
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.
TRIBUNAL JUDGE MANUELL
RELEASE DATE: 23 MAY 2011