United Kingdom VAT & Duties Tribunals Decisions

Smith (t/a Smiths Auto Services) v Revenue & Customs [2006] UKVAT V19702 (14 August 2006)

19702

VAT - MOT tests - unapproved garage charging commission on tests but failing to identify it as disbursement on invoices – assessed to tax on basis that charges on invoices tax inclusive - appeal dismissed

MANCHESTER TRIBUNAL CENTRE

ROGER MARTIN SMITH

T/A SMITHS AUTO SERVICES Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: David Demack (Chairman)

Gilian Pratt

Sitting in public in Manchester on 3 August 2006

The Appellant in person

Nigel Bird of counsel, instructed by the Acting Solicitor for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1. Mr Roger Martin Smith, who is now retired from business, appeals against assessments to tax of £4,826.00 for periods 06/02 to 03/05 inclusive. The assessments were made to recover the tax on the charge he made for MOT tests carried out on vehicles he had accepted for test purposes but which he, as an unapproved garage, could not carry out, and had to pass on to an approved garage for the purpose. Had he gone on to invoice the charge of £28 made by the approved garage as a disbursement, and charged the £10 as commission for his trouble, he would have been liable for VAT only on the commission. Unfortunately, Mr Smith did not treat the £28 charge as a disbursement, but rather included it in the charge made to his customer. Consequently, in line with the policy outlined in HMRC Business Brief 21A/96, he was liable to account for VAT on the entire £38 charged.
2. (The relevant paragraphs of that Business Brief read as follows:

"Any amount charged by an unapproved garage to its customer over and above the amount charged by the test centre is consideration for its own service of arranging the test as agent of the customer and is taxable at the standard rate. Where the unapproved garage shows the exact amount charged by the test centre separately on the invoice to the customer, and meets the other conditions of para. 10.8 of [Notice No. 700] "The VAT guide", it may treat this element as a disbursement and also outside the scope of VAT.

If the unapproved garage chooses not to treat the amount charged by the test centre as a disbursement, or otherwise does not satisfy all the conditions set out in para. 10.8 [Notice N. 700] "The VAT guide", it must account for VAT on the full invoiced amount. "

3. The total amount assessed took account of overdeclarations Mr Smith made throughout the assessment period in respect of road fuel scale charges on a commercial vehicle totalling £263.00. Had those charges not been deducted, the total tax assessed on Mr Smith would have been £5,199.
4. Of the sum assessed, Mr Smith has accepted liability for and paid £1,122.92. That sum represents tax on a VAT inclusive sum of £10 commission on each MOT test.
5. Before us, Mr Smith explained quite candidly that he was an engineer and left it to others to deal with his VAT records and returns. He acknowledged having received the Business Brief referred to above, but admitted not having read it.
6. His only claim before us was that he had been treated unfairly by HMRC. We explained to him that that was not a matter we could take into account: we could only apply the law.
7. Whilst we have considerable sympathy for Mr Smith, we have no alternative but to dismiss his appeal. We would, however, invite HMRC to allow him time to pay the tax assessed, and consider remitting the interest charged. We make no direction as to costs.

David Demack

CHAIRMAN
Release Date: 14 August 2006

MAN/00/0056