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United Kingdom VAT & Duties Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> Duncan (t/a G Duncan Motor Services) v Revenue & Customs [2007] UKVAT V20100 (10 April 2007)
URL: http://www.bailii.org/uk/cases/UKVAT/2007/V20100.html
Cite as: [2007] UKVAT V20100
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- Throughout the relevant period the Appellant had a garage business, servicing cars. He was not licensed to carry out MoT tests. He arranged for customers' cars to be tested at two independent garages, each of which was an approved testing station.
- The Appellant's customers were aware that he himself did not and could not carry out an MoT test on their cars. He was not involved in the MoT test procedure at the other garages and he had no control over it. In the event of a customer's vehicle being damaged during testing, liability adhered to the test station. (Such damage had occurred, and the expense had been met by the test station concerned). The Appellant simply delivered and uplifted the cars to and from the test station and carried out any necessary repairs to achieve test standard. Test certificates were issued by and in the name of the MoT station. If a car failed, the report referred only to the vehicle itself and not to the owner or the Appellant.
- The Appellant's invoices included the sum of £44 free of VAT for the MoT test in addition to charges for any other work. He paid £35 out of this to the approved testing station and retained £9 for himself. This apportionment was not shown on the Appellant's invoices to his customers although they were aware of both parties' involvement.
- On 22 June 2006 Mrs Rankin visited the Appellant's premises. She calculated the present assessment on the basis of the total sums paid to the two MoT stations during the relevant period, viz 1 January 2004 to 31 March 2006. The Appellant's business records were found to be accurate and sufficient to allow the calculation to be made to Mrs Rankin's satisfaction.
20100
Assessment to VAT – disbursements in respect of MoT charges – unapproved garage taking customers' cars to be tested at independent testing stations – Appellant's invoices charging one sum equal to standard MoT fee, free of VAT, part of which paid to MoT testing station, the remainder being retained by the Appellant – whether whole sum liable to standard rate – Appeal Allowed.
EDINBURGH TRIBUNAL CENTRE
GRAEME DUNCAN T/A G DUNCAN MOTOR SERVICES Appellant
- and -
THE COMMISSIONERS FOR
HER MAJESTY'S REVENUE & CUSTOMS Respondents
Tribunal: (Chairman): Mr Kenneth Mure, QC
(Member): R L H Crawford, BA., CA., CTA
for the Appellant Mr Graeme Duncan
for the Respondents Ms J Strachan, Solicitor, Shepherd & Wedderburn WS
© CROWN COPYRIGHT 2007.
Introduction
This is an Appeal against the assessment of £2,475 being VAT charged on sums invoiced by the Appellant to his customers for MoT tests, during the period from 1 January 2004 to 31 March 2006. The Appellant himself was not approved to carry out such tests, and he submitted customers' cars to two other garages which were approved testing stations. One sum was invoiced by the Appellant, viz £44, equal to the standard MoT fee, and exclusive of VAT. (The MoT test is itself outwith the scope of VAT). The Appellant paid £35 to the approved MoT station and kept the remaining £9 himself.
The witness statement of the Respondents' officer, Mrs Elizabeth Rankin, was agreed. We heard additionally evidence from the Appellant himself, which largely was not controversial. We make the following 'Findings of Fact', viz:
The Law
In terms of Section 4 VATA 1994 the tax is charged on supplies of goods and services. The value of the supply is determined by Section 19. Sub-section (2) thereof provides:-
"If the supply is for a consideration in money its value shall be taken to be such amount as, with the addition of the VAT chargeable, is equal to the consideration".
Article 11 of the Sixth Directive, para 3(c) allows the exclusion of –
"the amounts received by a taxable person from his purchaser or customer as repayment for expenses paid out in the name and for the account of the latter and which are entered in his books in a suspense account. The taxable person must furnish proof of the actual amount of this expenditure and may not deduct any tax which may have been charged on these transactions". (This provision apparently has not been implemented in domestic legislation).
Notice 700 of the Respondents considers the deduction of "disbursements" in section 25.1.1. It advises that inter alia the outlay should be separately itemised on the Invoice. At section 25.4 it advises that in the case of an MoT test being arranged for a customer by an unapproved garage, the exact charge by the testing station must be shown on the invoice to be allowed as a disbursement, and to enable the VAT charge to be restricted to the element received by the unapproved garage.
This practice was approved in the decisions of the Tribunal in – D Gillespie Ltd v C&E, (no 17492), A L Davis & Co v C&E (no 17802), and Genuine Car Services v C&E (no 18141).
Parties' Submissions
Having addressed us on the facts Ms Strachan referred us to the relevant statutory provisions. The basic charge arose under Section 4 VATA. In relation to valuation she referred us to Section 19 and Article 11, para 3(c), of the Sixth Directive. The supply, she argued, was the MoT itself together with the service of taking the vehicle to and from the test station. It cannot be divided into 2 parts. The MoT test element cannot serve to reduce the value of the Appellant's supply as a disbursement.
While she accepted that it did not have the force of law, Ms Strachan stressed the terms of the Respondents' Notice 700 at section 25.1 and 25.4 which relates to MoT tests. On the basis of that she argued that the terms of the invoice were crucial. If the charge in the invoice distinguishes an MoT test element and a delivery and collection element, then VAT is due only on the latter. Where (as in the present case) this distinction is not drawn ex facie of the invoice, then VAT falls on the total amount.
The decision of the Tribunal in D Gillespie Ltd (followed in A L Davis & Co and Genuine Car Services) reflected this approach, whatever reservations may have been expressed. The terms of the invoice determine the value of the supply. In these cases an omnibus amount including the MoT test charge, was set out. In such cases VAT fell due properly on the full amount.
Mr Duncan provided us helpfully with a Statement of Case setting out his arguments and to which we refer. While he did not contradict the accuracy of the Respondents' calculation, he considered that the basis of assessment should reflect the course which he would have adopted if aware of the Respondents' procedures. That course would have distinguished the sum retained by himself.
Decision
We consider that the assessment has not been made to "best judgement" and accordingly should be set aside. The value of the supply in this case in our view is the £9 per test element retained by the Appellant, and VAT is chargeable properly only on that amount. That reflects the reality of the contribution made by the Appellant.
Crucial to our decision is the fact that the MoT test is not a supply or service which could actually or lawfully be provided by the Appellant. An MoT test can be carried out only at an approved testing station. The Appellant does not have such authorisation. Hence he referred his customers' cars to the two other garages which held the necessary approval. The Appellant did not and in law could not become involved in the MoT testing process. It follows surely that the supply of the MoT test is made by the approved testing station and by it alone.
We consider that the extent of the service provided by the Appellant in relation to the testing was that of delivering and uplifting the vehicle. It cannot extend to the test itself as that was a supply by another independent party. The Appellant cannot duplicate or participate in making the supply of the MoT test itself. He acted as the agent of the vehicle owner in relation to the arrangement with the test station. This practice was known by and obvious to his customers and the test stations. The exact share of the MoT fee retained by the Appellant might not have been known to the customers, or certain of them, but in principle, given their awareness of the general arrangement between the Appellant and the testing station, it might be reasonable to impute to their understanding some sharing of the charge.
VAT on the MoT test fee has been considered also in the distinct context of second-hand car sales. In Depot Corner Car Sales (no. 16907 es pec at para 32), which we noted in the course of our own researches, VAT was held chargeable on the full sale price which reflected as an element the MoT fee. The Tribunal ruled that there was not a separate supply of the MoT. While the purchaser expected the car to be supplied with an MoT certificate, it was considered significant that the test was carried out before ownership of the vehicle passed to the customer. Thus the garage selling the vehicle could not have acted as the customer's agent.
Pace the Tribunal in D Gillespie Ltd we do not consider that there is a basis in fact or law to argue that the element of the MoT test should be deemed or "regarded" as part of the Appellant's overall supply. The terms of the invoice do not reflect the involvement of the testing station as an independent party, but the customers were aware of this. We appreciate that our approach runs contrary to Notice 700 section 25.1.1 and the suggested requirement that a disbursement should be itemised separately on the taxpayer's invoice. It does not, of course, have the force of law, and in our view the commentary there and in the case law cited does not pay sufficient regard to the legal monopoly of approved testing stations in relation to the conduct of MoT vehicle tests. Further, having regard to para 3(c) of Article 11 of the Sixth Directive it seems significant to us that the Appellant's records were sufficient in recording the expenses incurred to the independent testing stations.
Costs
The Appellant appeared in person and did not instruct professional assistance for the appeal, as we understand. While we appreciated the assistance of his Statement of Case, we do not consider that an award of costs in his favour is appropriate in this case.
Finally, we would thank both Mr Duncan and Ms Strachan for their assistance at the Hearing.
EDN/06/67