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United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Robbins v Customs & Excise [2003] UKVAT V18302 (27 August 2003)
URL: http://www.bailii.org/uk/cases/UKVAT/2003/V18302.html
Cite as: [2003] UKVAT V18302
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- This is an appeal against an assessment in the sum of £3,149 plus interest in the sum of £46.40 issued to the Appellant on 16 July 2001 in respect of input tax deemed to be overclaimed by the Respondents.
- The disputed item is value added tax on the purchase of a motor vehicle, a Toyota Previa MPV.
- Section 25 of the Value Added Tax Act 1994 provides:
- The Value Added Tax (Input Tax) Order 1992 provides as follows:
- The sole issue in this case is whether the Appellant had intended to make the vehicle available to any person for private use. It was conceded by the Respondents that the Appellant intended to use the motor car exclusively for the purposes of his business.
- We heard evidence from the Appellant himself and from Miss Faye Elizabeth Harris, an administrative officer with Customs and Excise and Michael A Hill, a senior officer with Customs and Excise.
- The Appellant had retired from the Police Force on medical grounds and in early December 2000 had together with his wife purchased the Bewdley Hotel in Newquay in Cornwall. He ran the business in partnership with his wife.
- As an ex-policeman the Appellant was very familiar with the various legal requirements regarding motor vehicles, including their registration and insurance. At the time the hotel was purchased he owned a Ford Fiesta which was insured with the Direct Line insurance company for private use.
- The Appellant and his wife ran the hotel together, and initially had no manager. It quickly became apparent that they needed another vehicle because the majority of the guests in the hotel were elderly and in need of transporting into the town or to the hospital etc. It was also thought a larger vehicle was necessary for making purchases from the cash and carry. It was therefore decided to purchase a multi-purpose vehicle, the Toyota Previa.
- The Appellant was informed by his book-keeper that he would be able to reclaim value added tax on the purchase of a vehicle. In order to check that this was so he approached the local Value Added Tax office in early January 2001. He did not recall the name of the person to whom he spoke, and considers it possible that he was referred to an advice team. He told the person he spoke to exactly what he wanted to use the vehicle for, and was given a verbal indication that he would be allowed to reclaim the value added tax on it. He was sent VAT Notice 700/64, which was issued in May 1996.
- Section 16 of the VAT Notice is as follows:
- The Appellant also spoke to his accountant and was advised by him that he would be able to reclaim the value added tax.
- Prior to purchasing the vehicle the Appellant made enquiries about insurance. He learned that even if he insured the vehicle for business purposes only, the policy would still contain a clause allowing for personal use by the policyholder (i.e. the Appellant himself) and the cost of a business use policy was higher than that for a personal use policy. The Appellant rang several companies prior to the purchase and was given the same answer by all of them.
- At the time of the purchase the Appellant and his wife lived in a flat at the back of the hotel itself. They had a private parking space opposite the entrance to their flat for their Fiesta car. The Previa was parked in a space at the front of the hotel, i.e. round the other side from where the Appellant and his wife lived. The keys to the Previa were kept locked in the hotel safe, but the Appellant himself had the keys in the safe.
- The car was insured for personal use by the Appellant because of the fact that he would not disqualify his own personal use by obtaining a business policy and it would in fact have cost him more money.
- Miss Harris was asked to check why there had been such a large repayment claim in respect of the Appellant's first return. She spoke to the Appellant and asked that she be sent copies of the invoices with regard inter alia to the vehicle. In her witness statement she said:
- Miss Harris, who had only been in her post for some six months at the time, consulted with a colleague. On 16 July 2001 she issued the assessment the subject of this appeal with a covering letter in which she stated:
- In her evidence Miss Harris stated in terms that she was not aware that the input tax in respect of non-commercial vehicles was in certain circumstances deductible.
- The Appellant requested a reconsideration of the assessment and this was carried out by Mr Hill. In Mr Hill's opinion the correct reason for not allowing the claim for input tax was that the car was available for private use. He therefore wrote to the Appellant asking various questions to which the Appellant replied in a letter dared 28 December 2001. In answer to a question by Mr Hill: "What is to prevent what person(s) who have access to the car using it to make private journeys during or outside normal working hours?" the Appellant replied: "The vehicle was purchased for the sole use on company business and the self-restraint of the partners and their knowledge that they would be doing an illegal act. The partners have their own vehicles for private use and have no need to use the MPV for any private whether during or outside working hours." In addition, in answer to another question, he stated that there was no reason to keep a log book to show private mileage, as the vehicle was only used for business purposes.
- Following upholding the decision, Mr Hill was advised that the Appellant was lodging an appeal and he therefore conducted a review. In furtherance of this review he visited the Appellant's premises. He drew a map of the layout of the hotel and the parking areas. He considered it important to see if the vehicle was in proximity to where the Appellant lived thereby making it available for private use.
- Mr Hill gave it as his opinion that the wording in section 16 of the VAT Notice with regard to a motor trade garage with attached domestic accommodation being treated as business premises applied exclusively to the motor trade, and did not mean that in any other case where a taxpayer lived on the premises that the domestic accommodation could be treated as business premises.
- The Appellant had spoken to the Respondents' Solicitor's Office and had been told that it was impossible to comply with the requirement in his circumstances, and when pressed the man he spoke to had said well it would be possible if the Appellant kept the keys in the safe. The Appellant was quite certain that he had been given bad advice by the Solicitor's Office since he himself had the keys to the safe and could at any time take the keys out.
- The Appellant's case was that he had never been told that he needed to put the vehicle beyond personal use when he spoke to Customs and Excise, the leaflet which they supplied to him did not say that this was so and it was not the basis of Miss Harris' decision.
- Miss Harris' decision was taken on the wrong basis of law, in that she had based her decision on the fact that it was not a commercial vehicle.
- Mr Hill had based his refusal to allow the claim on the fact that because the vehicle was on the premises the Appellant could not succeed, but this was based on his erroneous interpretation of the phrase `a motor trade garage with attached accommodation is treated as business premises' as applying only to the motor trade. The phrase was only illustrative, and should be applied in the Appellant's circumstances..
- It was submitted that it would in fact, even with business only insurance, be impossible to put the vehicle beyond personal use. In the first place, business only insurance allowed for personal use by the policyholder, secondly the vehicle itself would still be available in that as the policyholder he had the keys to the vehicle. The moment he was in the vehicle as the driver it became available for private use, even if it was not being used for private purposes at the time. It made no difference that the car was kept on the premises, if he himself had lived 200 miles away, and was in possession of the keys, it would still as a matter of law be available to him for private use.
- The Respondents relied on the case of Upton [2002] EWCA Civ 520, a Court of Appeal decision. In that case the tribunal had allowed the appellant's appeal, the commissioners had appealed to the High Court which allowed their appeal and the appellant had further appealed to the Court of Appeal.
- The headnote in that case states as follows:
- It was submitted that in the present case the correct approach was to look at the facts and see whether as a matter of fact the car was available for private use, and if the answer to that question was yes, then did the Appellant intend that to be the case? It was accepted by Mr O'Connor that the presumption that a person intends the natural consequences of his act was a rebuttable presumption.
- It was further submitted that there had to be evidence to show that at the time of the purchase the Appellant did not intend to make the vehicle available for private use, which was not the same as evidence that he was not intending to use the vehicle privately.
- Paragraph 16 of the 1996 Value Added Tax notice was not misleading at the time, the situation only having been clarified recently in the case of Upton. In the present case it was necessary to look to see if there was evidence to rebut the presumption the Appellant did intend to make the car available for private use.
- The Tribunal was referred to various cases which had been heard in the Tribunal since the case of Upton, all of which had followed Upton. These were:
- The Tribunal was also referred to the case of Charles Henry Skellett t/a Vidcom Computer Services v Commissioners of Customs and Excise [2002] VTD 17855. This case is one in which an appeal was allowed by the taxpayer and the tribunal sitting in Edinburgh in that case distinguished the case of Upton. It was submitted by Mr O'Connor that the tribunal was not entitled to distinguish Upton in the way it had done in that case. The tribunal said at page 12:
- It was submitted that the tribunal in Skellett erred in not properly interpreting Upton.
- In the present case we consider that we have to determine whether there is evidence of an intention not to make the vehicle available for private use even though, in the present case there is evidence that it in fact it was available for private use. In our view the case of Upton makes clear that it is the intention to make the vehicle available which is the main issue, not the availability. We do not follow the reasoning of the Tribunal in Skellett that a two-stage test is inappropriate.
- We have been invited to infer from the fact of the insurance cover being for personal use and the fact of the proximity of the car to the Appellant's residence at the relevant time that not only was the vehicle available for private use, but it was Mr Robbins' intention that it should be so available. On the evidence before us we are not prepared to draw that inference, although we do accept that as a matter of law a man is deemed to intend the natural consequences of his actions, those actions in this case being insuring the car for personal use and keeping it close by. When pressed by us Mr O'Connor quite properly accepted that such a presumption was a rebuttable one. In the present circumstances we are satisfied that Mr Robbins never intended the vehicle to be available for private use. The evidence on which we rely is first of all the fact that he made enquiries of several insurance companies with regard to taking out business only insurance. For perfectly good reasons, he did not in the end do this. The companies of which he made inquiries informed him that business only insurance would not preclude personal use by the person in whose name the vehicle was insured, in this case Mr Robbins himself. In the second place he made full inquiries of the requirements which had to be met in order to enable him to reclaim the input tax. In our view he was perfectly entitled to take the phrase "a motor trade garage with attached domestic accommodation is treated as business premises" which appeared in the 1996 VAT Notice 700/64 as being illustrative of the type of situation where a trader could claim the tax despite keeping the vehicle at home, and as not being relevant only to the motor trade.
- Mr Robbins carefully read paragraph 16 which in its opening statement properly describes illegal requirement in that it says: "`exclusively for a business purpose' means that you do not intend to make the car available for the private use of anyone ". We found Mr Robbins to be a man of integrity, who thoroughly went into what was expected of him. The fact that he was undoubtedly misled by Miss Harris in her letter when she said that because it was not a commercial vehicle he was not entitled to reclaim the input tax, is in fact irrelevant. The time when a taxpayer has to have the necessary intention is at the time of purchase. We are quite satisfied from all his actions that Mr Robbins fully intended to comply with the VAT requirements, he consulted his book-keeper, his accountant and he contacted the Commissioners. We accept his view that the location of the car and the fact of its being insured for personal use are no more than matters of evidence which are in many ways unsatisfactory. A car does not become unavailable for private use merely by being insured only for business purposes, just as, had Mr Robbins lived two miles down the road and kept the car at the hotel, it would still not be unavailable for private use. If Mr Robbins had made no enquiry either as to the statutory position or as to the availability of business insurance, then we might well have accepted the Respondents' case that the evidence does point to his intending to make it available for private use. However, in the present case he did make such enquiries, and we are satisfied that on the balance of probabilities the evidence shows that he did not intend to make it available for private use.
- In all the circumstances this appeal is allowed.
- Appellant's costs, being expenses only, to be paid by the Respondents.
INPUT TAX Motor vehicle Commissioner accept intended to be used for business purposes only Whether Appellant intended to make it available for private use where insured for private use and kept on Appellant's domestic premises Upton followed Appeal allowed
LONDON TRIBUNAL CENTRE
PHILLIP JAMES ROBBINS Appellant
- and -
THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: MISS J C GORT (Chairman)
MR M L JAMES
Sitting in public in Plymouth on 5 August 2003
The Appellant appeared in person
Mr A O'Connor of counsel, for the Respondents
© CROWN COPYRIGHT 2003
DECISION
The legislation
(1) The taxable person shall
(a) in respect of supplies made by him, and
(b) in respect of the acquisition by him from other Member States of any goods,
account for and pay VAT by reference to such periods at such time and in such manner as may be determined by or under regulations and regulations may make different provisions for different circumstances.
7-(1) Subject to paragraph (2) below tax charged on
(b) the acquisition by a taxable person from another Member State;
of a motor car shall be excluded from any credit under section 25 of the Act.
(2) Paragraph (1) above does not apply where
(a) the motor car is
(iii) the relevant condition is satisfied;
(2E) For the purposes of paragraph (2)(a) above the relevant condition is that the acquisition is to a taxable person who intends to use the motor car either
(a) exclusively for the purposes of a business carried on by him, but this is subject to paragraph (2G) below;
(2G) A taxable person shall not be taken to intend to use a motor car exclusively for the purposes of a business carried on by him if he intends to
(b) make it available (otherwise than by letting it on hire) to any person (including, where the taxable person is an individual, himself, or where the taxable person is a partnership, a partner) for private use, whether or not for a consideration.
The Issue
The facts
16. What is meant by "exclusively for a business purpose"?
"Exclusively for a business purpose" means that you do not intend to make the car available for the private use of anyone, save where you do so in the course of a commercial leasing or rental operation.
This is a very restrictive test and the main beneficiaries are leasing companies because there is self-evidently no private use of the cars purchased by them, although there may be private use in the hands of their customer.
Cars that may also qualify under this test are genuine pool cars, some demonstrators, and service rental ("courtesy") cars. The test is that they are not available for private use, and not allocated to a single individual and are never kept overnight at home. (For this purpose, a motor trade garage with attached domestic accommodation is treated as business premises.)"
"I received the copy invoices, including the invoice for the vehicle. This showed that the vehicle was not a van, but a MPV (multi-purpose vehicle), which is classed as a motor car. If it had been a van we would have accepted that it was for the purpose of his business and it would not have had to meet the strict test applicable to motor cars and therefore VAT would have been allowed. As an MPV is classed as a car, I telephoned Mr Robbins to enquire whether the vehicle was actually made available for private use. Mr Robbins explained that the vehicle was used solely for business purposes and that the vehicle was kept at the hotel because that was also where he lived, I asked if the insurance covered him for business purposes only to which he replied that it also covered him for Social, Domestic and Pleasure purposes."
"I refer to the above input tax reclaim (£3,149.25 reclaimed on the purchase of a vehicle). As this vehicle is not classified as being commercial, input tax is non-deductible."
The Appellant's case
The Respondents' case
"The tribunal had treated the test of para (2G)(b) as being in effect the same as that of para (2E), so that if the taxable person intended to use the car exclusively for the purposes of a business carried on by him, he could not intend to make it available to himself for private use. However, the intention specified in para (2E)(a), viz to use, was not synonymous with the intention specified in para (2G)(b), viz to make available for use, nor did an intention to use a car exclusively for business purposes exclude the possibility of an intention to make the car available for private use. The tribunal did not recognise that use U's deliberate action in acquiring the car and obtaining insurance permitting private use was to make the car available to himself for private use and that he must be taken to have intended that result in the absence of evidence to the contrary, even if he did not intend to use the car privately. Accordingly, the tribunal had erred in law in their approach to, and application of, the disqualifying condition of para (2G)(b) and the vice-Chancellor had reached the correct conclusion in allowing the commissioners' appeal. U's appeal would therefore be dismissed."
Joyce and Duncan Scobbie t/a D.S.I. [2002] VTD 17751
Squibb & Davies (Demolition) Ltd v Commissioners of Customs and Excise [2002] VTD 17829
Christopher Leonard Cherry t/a Country Taverns of Oxford v Commissioners of Customs and Excise [2003] VTD 17995
Courtesy Property Services Ltd v Commissioners of Customs and Excise [2003] VTD 18027
"Absent the Court of Appeal's decision in Upton we would have little hesitation in finding for the Appellant in this case. As a matter of statutory language, there seems to us to be one test or question applicable in this case namely, whether on acquiring the new Shogun the appellant intended to use it exclusively for the purposes of his business. In answering that question it is necessary to follow the statutory direction that the appellant will not be taken to have intended to use the new Shogun exclusively for the purposes of his business, if he intended to make it available to any person including himself for private use; and to give effect to the consequences for that statutory direction. It seems to us that if the Appellant falls foul of the statutory direction then he cannot meet the statutory test. The only way he can meet the statutory test is to elide the statutory direction. He cannot comply with Article 7(2E) and then fall foul of the statutory direction. As a matter of statutory language therefore we do not see the issue as a two stage test as Mr Scott suggested.
We do not see how, in practical terms, if a finding of intention to use exclusively for the purposes of a business is made, there can be any room for a finding that there was an intention to make available for private use.
Having considered the Vice-Chancellor's views, Peter Gibson LJ seems to dilute them by saying that the fact of acquisition "means that at least ordinarily (emphasis added) he (the taxable person) must intend to make it available to himself for private use, even if he never intends to use it privately". He went on to examine the findings of the tribunal and noted that the tribunal did not find that Mr Upton did not intend to make the car available to himself for personal use. In the instant appeal we have made such a finding because in our view the evidence amply justifies it. His Lordship's examination of the facts is consistent with his use of the words "ordinarily" referred to above. It may very well be that ordinarily the relevant condition will not be satisfied, but tribunals must be astute to detect facts and circumstances that are not ordinary and apply the statutory provisions in a sensible manner. At page 647h-j Peter Gibson LJ states that "the tribunal did not recognise that Mr Upton's deliberate act in acquiring the car and obtaining the insurance permitting private use was to make the car available to himself for private use and he must be taken to have intended that result in the absence of evidence to the contrary even if he did not intend to use the car privately (emphasis added)." Even if that is correct, we consider that in the instant appeal there is evidence to the contrary. We also considered that the insurance evidence as an adminicle of evidence from which intention may be inferred is neutral. His Lordship does not appear to endorse the Vice-Chancellor's statement [2001 STC 918e-f) that "in the case of private use by the taxable person the consequences of his acquisition of the car will be to make it available for his private use unless he takes positive steps to remove it". For what it is worth, we too would not endorse that statement."
Reasons for decision
MISS J C GORT
CHAIRMAN
RELEASED:
LON/02/180