[2012] UKFTT 265 (TC)
TC01958
Appeal number:
TC/2011/07149
INCOME TAX – Mobile motor technician – Provided with specially modified vehicle by employer – Whether a
goods vehicle – No – Appeal dismissed – s 115 Income Tax (Earnings and
Pensions) Act 2003
FIRST-TIER TRIBUNAL
TAX CHAMBER
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TIMOTHY JONES
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Appellant
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- and -
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THE
COMMISSIONERS FOR HER MAJESTY’S
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Respondents
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REVENUE &
CUSTOMS
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TRIBUNAL:
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JUDGE JOHN BROOKS
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NORAH CLARKE
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Sitting in public at Eastgate
House, Newport Road, Cardiff CF24 0YP on 13 February 2012
The Appellant in person
Jack Lloyd of HM Revenue and
Customs, for the Respondents
© CROWN COPYRIGHT
2012
DECISION
1.
Mr Timothy Jones is a mobile technician for Jaguar Land Rover who, by
reason of his employment, has been supplied with a new Land Rover Discovery 4
2.7 TDV6 GS Auto. He objects to his Notice of Coding for 2011-12 which was determined
by HM Revenue and Customs (“HMRC”) on the basis of information provided by his
employer that, despite the Land Rover having been specially modified to carry
engine components and tools for his job, the vehicle, which is available for
his private use, was a car.
Background
2.
The provision of the Jaguar Land Rover roadside assistance service is
put out to tender every three years. Until 2009 this service had been provided
by Mondial Assistance UK (“Mondial”). Mr Jones had been employed by Mondial
which provided him with a new Land Rover Discovery every year. However, in 2009
the Automobile Association (“AA”) successfully tendered for the contract to run
the service and Mr Jones, who had been employed by Mondial for nine years, was
transferred, in accordance with the Transfer of Undertakings (Protection of
Employment) Regulations 2006, to the AA.
3.
Although the AA continued to provide Mr Jones with a new Land Rover
Discovery each year, as had been the case when he was employed by Mondial, the tax
treatment of the vehicle for tax purposes changed. Instead of the Land Rover
Discovery being treated as a van for tax purposes, as it had been when he
worked for Mondial, the AA notified HMRC that as from 27 September 2010 Mr
Jones had a company car.
4.
Mr Jones explained that the change in the in tax treatment of the
vehicle, from a van to a car, was because HMRC had granted Mondial a “special
dispensation” which had not been transferred when the Jaguar Land Rover
contract was awarded to the AA in 2009. The difference between the vehicle
being treated as a van and car for tax purposes is illustrated in the following
table, included in a letter sent to Mr Jones and his colleagues by the AA’s
Dedicated Assistance Operations Manager:
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20% Tax
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40% Tax
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20% Tax
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40% Tax
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Van Benefit
£3,000
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£600
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£1,200
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Car Benefit £10,189
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£2,037.80
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£4,075.60
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Van Fuel Benefit
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£110
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£220
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Car Fuel Benefit £6,300
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£1,260
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£2,520
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The letter also explains that the AA unsuccessfully
“argued the case extensively [with HMRC] for a special dispensation to be
granted due to the use and modifications made” to the vehicles.
The Vehicle
5.
Not only did Mr Jones describe and produce photographs of the Land Rover
Discovery at the hearing, but as he was able to park in the Tribunal car park
we, along with Mr Jones and Mrs Jones (who was present at the hearing) and Mr
Lloyd of HMRC were able to see the vehicle for ourselves.
6.
The entire boot area of the Land Rover was filled with racking and tool
boxes which are bolted to the structure of the vehicle. In addition, although
the rear seats and seat belt fittings are in place the seats are impossible to
use as extra tool boxes have been securely fixed over them. Mr Jones explained
that when he was employed by Mondial it had been possible to use the rear seats
of the Land Rover but extra tool boxes had been fitted to the vehicles provided
by the AA. Although it was technically possible for these to be removed, he is
not permitted to do so by his employer.
7.
The modifications to the vehicle also include additional lighting,
electrics and special control systems. Despite these modifications taking two
days to fit using special lifting equipment and the services of trained
electricians there is no fundamental alteration to the structure of the
vehicle. This is because it has to be returned to Jaguar Land Rover for re-sale
after one year when it is replaced by a new vehicle.
Relevant Legislation
8.
Section 115 of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”),
which has the heading Meaning of “car” and “van”, provides:
(1) In this Chapter [of ITEPA dealing with cars,
vans and related benefits] –
“car” means a mechanically propelled road
vehicle which is not-
(a) a goods vehicle,
(b) a motor cycle,
(c) an invalid carriage, or
(d) a vehicle of a type not commonly used as a
private vehicle and unsuitable to be so used;
“Van” means a mechanically propelled road
vehicle which-
(a) is a goods vehicle, and
(b) has a design weight not exceeding 3,500
kilograms, and which is not a motor cycle
(2) For the purpose of subsection (1)
…
“goods vehicle” means a vehicle of a
construction primarily suited for the conveyance of goods or burden of any description;
…
Discussion and Conclusion
9.
For HMRC, Mr Lloyd contended that if s 115 ITEPA is constructed in
accordance with the guidance contained in HMRC’s Employment Income Manual (EIM
23115), the vehicle should be treated as a car as the modifications made to it are
not sufficiently permanent and substantial in scale to have altered its
original manufactured construction. He pointed out that in HMRC’s view, as
stated in their Manual (at EIM 23110), if a vehicle has side windows, which the
Land Rover Discovery does, behind the driver and passenger doors, it is
unlikely to be a goods vehicle and only if the primary purpose for which it is
constructed is the carriage of goods will it escape from being a car.
10.
Mr Jones accepted that there has not been any fundamental alteration to
the structure of the Land Rover but argues that it is unfair that the dispensation
that applied when the vehicle was supplied by Mondial was not continued when the
AA took over the Jaguar Land Rover contract especially as the vehicle now has
fewer usable seats than before and he is not permitted to remove any of the modifications.
11.
Although Mr Jones understood that the dispensation was granted by HMRC
because of modifications to the vehicle it appears, from papers that he
provided at the hearing, to have arisen as the result of an agreement between
HMRC and Mondial following a successful appeal, by a mobile technician employed
by Mondial, to the General Commissioners in September 1999. They had found that
a Land Rover Discovery provided to him did not fall within the statutory
definition of a “car”.
12.
HMRC (or rather the Inland Revenue as it then was) expressed
dissatisfaction with the decision and requested that a case be stated for the
opinion of the High Court (which was the appropriate appeal procedure at the
time). However, as the appeal (like the present case) was against a notice of
coding, and it was possible for either the taxpayer or HMRC to re-open the
issue via the self-assessment regime whatever the outcome of appeal, HMRC decided
not to take the case to the High Court. Instead a meeting was held between the
Inland Revenue, representatives of Mondial and two of its mobile technicians
during which an agreement was reached. The terms of the agreement were
described in the letter of 10 July 2002 from the Inland Revenue to the
technician who had successfully appealed to the General Commissioners as
follows:
Whilst the Revenue still maintains that your
vehicles are cars which, if made available to you for private use, should
attract the normal car and fuel scale charge it accepts that to uphold this
view would require recourse to the General Commissioners and the Courts. In
order to minimise the cost to the public purse, to Mondial and to yourselves
the Revenue is prepared to offer a compromise.
Without prejudice to the legal position, which if
this agreement does not hold will be argued before the Commissioners, the
Revenue will for the years 1998-99 to 2004-05 inclusive treat your vehicles as
if they were company assets rather than cars. The agreement will be subject to
review for years subsequent to 2004-05 or earlier if the Chancellor materially
alters the way car and fuel benefits are taxed.
13.
It would seem that this arrangement, which was “without prejudice to the
legal position”, continued until Mondial was replaced by the AA as the provider
of the Jaguar Land Rover roadside assistance contract in 2009.
14.
However, as the AA was not a party to the agreement between HMRC and
Mondial it is necessary for us to consider the legal position to ascertain
whether the Land Rover Discovery supplied to Mr Jones has been properly
described by his employer as a car. In doing so we note that the guidance published
in HMRC’s Manuals is their view of the law not necessarily what the law is.
15.
Mr Jones accepts that the Land Rover is a mechanically propelled road
vehicle and that it is not a motor cycle, invalid carriage or a vehicle of a
type not commonly used as a private vehicle and not suitable for such use.
Therefore, unless it is a “goods vehicle” it is a car as defined by s 115(1)
ITEPA.
16.
A “goods vehicle” is defined by s 115(2) ITEPA as a “vehicle of a
construction primarily suited for the conveyance of goods or burden of any
description” (emphasis added).
17.
Although the Land Rover Discovery supplied to Mr Jones may have become
primarily suited for the conveyance of goods or burden this is as a result of
modifications, which have been made to the vehicle so as not to fundamentally
alter its structure, and not because it was “of a construction” for such a
purpose.
18.
In the circumstances we are unable to find that the Land Rover Discovery
is a “goods vehicle” within the definition of s 115(2) ITEPA. As it does not
fall within any of the other exceptions contained in s 115(1) it must follow
that the vehicle supplied to Mr Jones by his employer is a “car” and that his
2011-12 Notice of Coding was correctly determined by HMRC.
19.
Accordingly we dismiss the appeal.
20.
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.
JOHN BROOKS
TRIBUNAL JUDGE
RELEASE DATE: 16 April 2012
