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Cite as: [2005] UKVAT V19403

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Leisure Karts (Uk) Ltd v Revenue and Customs [2005] UKVAT V19403 (22 December 2005)

19403

ZERO-RATING — mobility scooter — whether "designed solely for use by handicapped person" — meaning of the word "designed" — VAT Act 1994 Schedule 8 Group 12 Item 2(g) — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

LEISURE KARTS (UK) LIMITED Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Lady Mitting (Chairman)

J David Kippest

Sitting in public in Birmingham on 28 November 2005

Mr A D Ferrington, VAT consultant, for the Appellant

Mr James Puzey of counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents

DECISION

The appeal concerns the VAT treatment of the Grasshopper All Terrain Mobility scooter ("the Scooter"), manufactured and supplied by the Appellant company. The issue is whether the Scooter qualifies for zero-rating under Item 2(g) Group 12 of Schedule 8 VAT Act 1994. This provides for the zero-rating of:

"2. The supply to a handicapped person for domestic use or his personal use, or to a charity for making available to handicapped persons by sale or otherwise, for domestic or their personal use, of —

(g) equipment and appliances not included in paragraphs (a) to (f) above designed solely for use by a handicapped person;

Note (3) adds:—

(3) 'Handicapped' means chronically sick or disabled."

The Appellant maintains its vehicle does so qualify, whereas the Respondents by letter dated 24 November 2004 ruled that it did not because it had not been designed solely for use by a handicapped person. It is common ground that due to the specification to which the Scooter is built, Note 5 (g) prevents the vehicle from qualifying for zero-rating under Note 4.

The Respondents had originally raised a corresponding assessment but this was later withdrawn when they accepted that the Appellant had been misdirected. We are therefore concerned solely with the VAT liability of the Scooter for the purpose of future sales.

We heard oral evidence from Mr Paul Grafton, director and company secretary of the Appellant and Mr Richard Robinson, the Officer whose decision it was. We were also shown a bundle of correspondence passing between the parties, the original design drawings for the Scooter and some promotional materials. A Scooter had also been brought to the Tribunal which we viewed.

Mr Grafton told us the company manufactured and supplied golf buggies. It was founded in 1999 by himself and a Mr Moore and its original product was a golf buggy with a 36 inch wheel base, marketed as the "Classic". A pared down version of the Classic known as the "Basic" was also sold rather more cheaply. The Classic seems to have been a heavy duty but portable buggy which separated into two parts to fit into vehicles. Over the winter, there was obviously a dip in the sale of golf buggies which the company was looking to fill. The company had had enquiries from people who were disabled asking if the buggy could be purchased free of VAT on the grounds of their mobility and this gave Mr Grafton the idea of developing what he referred to as a "mobility scooter" for the disabled. This, he told us, was not to be for golfing but was for use by the disabled on and off the road and over more rugged ground than could be covered by a standard invalid vehicle.

The basic shape, style and framework of the Scooter were identical to those of the Classic golf buggy. As Mr Grafton told us, one cannot forever be redesigning the wheel. The vehicle was to be a mechanically propelled motor scooter with a choice of wheel base of 27 inch or 30 inch, the latter being more suitable for people who wished to travel over more rugged ground. It was easily manoeuvrable with 4.5 inch tyres which allowed for easier turning. It had a central steering column and could travel at speeds up to eight miles per hour. Because it was to be used on the road, Mr Grafton designed the Scooter to comply with the Use of Invalid Carriages on Highways Regulations 1988 and it was accepted by both parties that it was capable of meeting the specification of a Class 3 invalid carriage when fitted with certain attachments.

In a letter dated 27 July 2004 to the Respondents, the company described the attachments which could be added in the following terms:

"The following would also be fitted, at the behest of the individual, and subject to their health status and requirements:

Swivel seating

Sprung seating

Horn

Lighting

Carrying basket

Brackets for carrying walking sticks / crutches"

In terms of its weight, power, braking, speed capability and limitation, the Scooter fell within the Regulations as a Class 3 vehicle. Additionally, to meet the specification, it required lighting, a horn and a rear view mirror, all of which were available if required. The lighting was not an integral part of the machine but came in the form of clip on lights, very similar to bicycle lights, operated from the light itself and not from the machine. The mirrors were also clipped on by means of a bolt.

Once developed, the Scooter was sold with zero rating in accordance with a direction from the Respondents as an all terrain vehicle for use on and off the road but specifically not for sporting purposes. Each purchaser would be asked to sign a form in the Respondents' standard wording declaring they were chronically sick or disabled and setting out the nature of their condition. Mr Grafton told us that it was no concern of the company to monitor the veracity of the completed form and indeed no member of the company would be qualified to form any view on the nature of a declared disability. The form was then kept, attached to the receipt and later produced as required to the Respondents to support the zero-rated sale. Mr Grafton accepted in cross-examination that it was perfectly possible that the vehicle had unknowingly been sold to people who did not qualify but had certified that they would.

We were told that subsequent to the development of the Grasshopper Mobility Scooter, the company turned its attention to any possible extended capability it might have. One of the features of the Scooter was that, with its smaller, lighter frame, it could be transported much more easily than the Classic golf buggy. The Classic had to be separated into parts before it could be packed away into a car. However, with the provision of ramps, the Scooter could be wheeled intact, under power, into the back of a hatchback. This, Mr Grafton described, as a considerable advantage to anyone, not merely people with disabilities. He also saw its manoeuvrability and flexibility as being very useful on the golf course. He realised that with only minor alteration, the Scooter could very easily be adapted into a golf buggy. All that he saw as being necessary was to remove the basket on the back of the Scooter and to fit a bracket into which golf clubs could be placed. This was the only difference between the Scooter and what the company later went on to market and sell as the "Invalid Golfer 27". Both the Scooter and the Invalid 27 had the option of being fitted with a swivel seat which was useful for some nature of handicaps but not by any means all.

With this newly discovered potential, the company therefore developed a Junior 27 golf buggy ("the Junior 27"). The only difference between the Scooter and the Junior 27 would be that the latter did not have the lighting, rear view mirror, horn or basket. Instead it would have the bracket for the golf clubs. In cross examination, Mr Grafton accepted that with the exception of these extras, the Scooter, the Invalid 27 and the Junior 27 were in essence the same vehicle. What happened in marketing terms was that once the Junior 27 was on the market, the Basic was phased out as being no longer price competitive. Its place in the market had, on price, been taken by the Junior 27.

Mr Grafton produced to us copies of his design drawings for the Scooter. The title of the drawings was "Assembly details. Motorised vehicle for the disabled". It should be noted that there were no separate design drawings for the Junior 27 or the Invalid 27. We also saw three sets of promotional and marketing material. One was a price list which listed the golfing buggies which the company manufactured and marketed but made no reference to the Scooter. Nowhere was there a separate price listed for the Scooter and Mr Grafton, who had been away from work through ill health for some months, did not know whether there was a separate list for it but he was able to tell us that the price was identical to that of the Invalid 27.

We were also shown the brochure advertising the Scooter. The vehicle was pictured and described as an all terrain mobility scooter. It was "ideal for countryside walks and attending country shows with the family". It was nowhere referred to as being for the disabled but, as Mr Grafton explained to us, this was because, in his view, this would have been unnecessary because the use of the word "mobility" was sufficient to imply that that was its purpose. Finally, we saw the company's golfing brochure detailing its range of golfing buggies. The Junior 27 was described in the following terms:

"The Junior has been designed to fit into cars with smaller boot openings. Made in both a 27 inch and 30 inch wheel base which allows the buggy to fit through most doorways and gates. An invalid all terrain version is also available."

The Appellant also produced to us a copy of a letter from a Mrs Gemma Clark who described how pleased she was with the mobility scooter which she had purchased, in particular she liked its ability to cover up to 30 miles, its manoeuvrability and its swivel seat. Mr Grafton did not know the origin of this testimonial or whether it had been specifically asked for or was volunteered.

In cross-examination and in questions from the tribunal, Mr Grafton was pressed on the precise chronology and timescale of the production and marketing of the three vehicles. He told us that it was while he was testing and carrying out trials on the Scooter that he realised its potential for use on the golf course in a slightly adapted form and he told us that the mobility scooter and the Junior 27 were in fact put on the market at exactly the same time. The Invalid 27 followed very shortly afterwards.

Mr Robinson's evidence was brief. He told us of his visit to the Appellant's premises on 10 June 2004 when he was shown a Junior 27. He became aware, when looking through the invoices that zero-rating was being offered in relation to an Invalid 27 which he was told was an adaptation of the Junior 27, adapted for disabled persons and on which zero-rating was being claimed pursuant to advice given by the VAT office.

Submissions

It was Mr Puzey's submission that in all but name and with very minor differences, the three vehicles, the Scooter, the Junior 27 and the Invalid 27 were but one and the same and they had been designed as one. It was not accepted by the Respondents that the latter two were merely spin offs of the first. He questioned the absence of any mention of disability in the promotional material of the Scooter and it was his contention that there was nothing on the Scooter that made it any more suitable for the disabled than for people who just were unable or unwilling to walk. It was not a specialised vehicle and had not, in his contention, been designed solely for use by the handicapped.

Mr Puzey referred us to the tribunal's decisions in Foxer Industries (13817) and C F Leisure Mobility Limited (16790). The tribunal in C F Leisure had drawn the following conclusions from the authorities to date, including Foxer:

(i) The expression "solely" has the same meaning in this context as "specially".

(ii) A product may be designed solely for use by handicapped persons notwithstanding that is capable of use by a normal person

(iii) The designer's evidence of intention must be approached with considerable circumspection and must be considered in the light of the surrounding evidence including the promotional material.

He also referred us to paragraph 21 which reads in the following terms:

"The tribunal's view is that the statutory test is demanding and restrictive: it is not whether the products are used wholly or mainly by the disabled, or perhaps designed wholly or mainly for such persons. The use of 'solely' implies necessarily that any non-disabled use should be merely accidental or incidental and not normal or frequent. It is not sufficient only that the majority of sales should be to the handicapped: there must be a clear and overwhelming bias towards use by the handicapped before the test will be met. And in this context, 'designed' has to be interpreted in the light of what the taxpayer intends for the product; and that intention is to be inferred in substantial measure from the sales material through which the public are invited to make purchases."

Mr Ferrington submitted that it was the intention of the designer which was paramount in determining whether something had been designed solely for the disabled and the question to be answered was what had Mr Grafton originally set out to achieve. Mr Ferrington contended that he had set out to achieve (as evidenced by the heading on his design drawings) the design of a vehicle which the disabled could use on and off the road. It had been designed for this purpose and not as a golf buggy.

Mr Ferrington went on to refer us to the Respondents' Guidance Notes and in particular to two factors which should be taken into consideration. First, does the appearance and method of operation of the equipment or appliance suggest that it was designed solely for use by disabled persons and secondly is it something of a single purpose design, that is, manufactured to a design for the sole use of people with disabilities. Mr Ferrington contended that the answer to both these questions was yes.

The Guidance Notes go on to say that if something is designed solely for use by disabled people but is then subsequently developed or adapted for a wider range of people then the original device would continue to qualify for zero-rating. Mr Ferrington argued that this is precisely what had happened here. The mobility scooter had been designed solely for the disabled. It was then later realised that it could be used as a golf buggy and was marketed as such but this would not detract from its original purpose or deny the original machine its zero-rating status.

Conclusions

For what purpose something was designed is a question of fact and must be answered in its context. In the case of a manufactured article, it is necessary to look at the finished article and to discern from this the purpose for which it was designed. When we canvassed with Mr Grafton our view that the word "designed" could have a meaning rather wider than the mere drawings, he disagreed, telling us that what followed from the drawings, namely the trials and the testing were merely to establish the safety of the vehicle before it was put on the market. We do not believe that the word "design" in the context of a manufactured article can be so narrowly construed. The drawings are part of the design process but are not, alone, the design. What emerges from the drawings is a prototype, which is then trialled. At that stage, it is possible that no alterations to the original are made; there could be minor adjustments or tweaking or there could be a wholesale redevelopment. Whatever changes may be made, they all form part of the design of the final product and if one looks at the final product, as marketed, one sees the design of the product as a continuing process. How the vehicle was conceived or how the designer labelled it in his design drawings is not determinative but is one factor in the design process.

Applying that here, when one asks what was the final product that emerged and was put on the market, and it is central to our reasoning that they were put on the market at the same time, the answer is that one vehicle emerged with a dual purpose. With minimal adaptation, the machine could either be the mobility scooter or the Junior 27 golf buggy. The adaptations, the fitting of clip on lights, the removal of the basket and fixing of a bracket for golf clubs, would be achieved in a matter of minutes. In the out turn, what Mr Grafton designed was one vehicle with two purposes, it was a mobility scooter with lights and a basket or a golf buggy with no lights or basket but with a bracket for clubs. These additions do not alter the essential character or function of the vehicle and are not of use only to the disabled. What Mr Grafton designed could not therefore be said to have been designed solely for the disabled. His design, with minimal adaptation, was produced and marketed in two forms, only one of which Mr Grafton seeks to contend was for the disabled.

If this approach is incorrect, or if the conclusions which we have drawn from it are wrong, then in the alternative, we look solely at the motor scooter itself, without any adaptation and consider the use of that vehicle. It was Mr Grafton's contention that as designed it was aimed solely for the disabled and that the terminology "mobility scooter" was sufficient to define its status. No evidence was produced to us that the term "mobility scooter" has any technical connotation which would limit its use to vehicles solely for the disabled. We accept that the term is widely used in this context but one has to look beyond the description to the vehicle itself, how it was used and how it was marketed. It was promoted as an all terrain vehicle, ideal for the more rugged and uneven surfaces of the countryside. It is certainly possible that the majority of sales of the Scooter will be to the disabled, but in our view, the Scooter would be highly attractive to a not insignificant number of people who are not disabled within the statutory definition in Group 12 but perhaps through age or increasing infirmity are not so good on their feet or as mobile as they once were and an easily transportable vehicle such as this would be ideal for their needs. Indeed, one of the factors raised in the Respondents' Guidance Notes but not referred to by Mr Ferrington, was the consideration of whether the item being considered would be of similar value to people other than those with disabilities and in our view it would.

Considering therefore how highly marketable this machine could be to the able bodied, it is difficult to see how this possibility was not within Mr Grafton's mind when he designed it. Mr Grafton has designed a scooter capable of travelling at speeds of up to eight miles per hour and adapted for use on and off the road. In its basic form, with the possible exception of the optional swivel seat, it has no features which are of use only to a disabled person. Equally, it has no features which would make it less useful to a person who was not disabled. Its purpose cannot therefore be said to be solely for the disabled.

For all these reasons, we conclude that the Grasshopper All Terrain Mobility Scooter was not designed solely for the disabled and does not therefore qualify for zero-rating within Item 2(g). The appeal is therefore dismissed.

Mr Puzey made no application for costs and we make no order.

LADY MITTING

CHAIRMAN
Release Date: 22 December 2005

MAN/05/0054