United Kingdom VAT & Duties Tribunals (Excise) Decisions

 


MW Plant (Contracts) Ltd v Revenue & Customs [2006] UKVAT(Excise) E00962 (06 June 2006)

EO962

Hydrocarbon Oils Duties Act 1979 sections 12, 13, 27 and Schedule 1; rebated gas oil; "red diesel"; whether tractor used on public road solely for purposes relating to agriculture; yes.

EDINBURGH TRIBUNAL CENTRE

M W PLANT (CONTRACTS) LIMITED Appellants

- and - THE COMMISSIONERS FOR HER MAJESTY'S REVENUE & CUSTOMS Respondents Tribunal: (Chairman): J Gordon Reid, QC., F.C.I.Arb., (Members): Ian M P Condie, CA W Ruthven Gemmell, WS
Sitting in Edinburgh on Monday 8 and Tuesday 9 May 2006

for the Appellants Paul Santoni, Freelands, Solicitors, Wishaw

for the Respondents Andrew Scott, Shepherd & Wedderburn WS

© CROWN COPYRIGHT 2006.

DECISION

Introduction

This appeal is about red diesel (rebated gas oil). In particular, the issue is whether a "tractor" was being used on public roads solely for purposes relating to agriculture. The Hearing took place at Edinburgh on 8 and 9 May 2006. Paul Santoni, Solicitor, Freelands, solicitors, Wishaw, appeared on behalf of the Appellants. He led the evidence of Ronald Bell, the Managing Director and principal of the Appellant company, and Ian Fleming, Group Indirect Tax specialist in the employment of Armstrong Watson, a firm of accountants, having offices in Lockerbie, Carlisle, and elsewhere. Andrew Scott, Solicitor, Shepherd & Wedderburn, solicitors, Edinburgh, appeared on behalf of the Respondents ("Customs"). He led the evidence of Lorraine Flockhart and Frances Manley, both Customs Officers. Both parties lodged a variety of documents, the authenticity of which was not in dispute. There were, in addition, a number of statements from various other Customs Officers. These were not referred to in evidence and were not relied upon at all in submissions. We have therefore not considered them.

Parties were agreed that all questions of quantum should be deferred meantime.

Facts

From the oral evidence and documents, we found the following facts admitted or proved:-

1. The Appellants are a company incorporated under the Companies Acts and have their principal place of business at Gillesbie Rigg, Boreland, Lockerbie, Dumfriesshire. They carry on business as drainage contractors, principally in the south west of Scotland and the north of England although they do carry out some work further afield. The drainage work is agricultural drainage work and drainage for civil engineering projects such as roads improvements. The Appellants commenced trading on or about 1/4/03.
2. Ronald Bell is, in effect, the principal of the Appellants. He is a motor mechanic by trade, but has worked in the contracting business since the late sixties either as an employee or on a self-employed basis. He set up his own drainage contracting business in about 1989, as a sole trader. He specialised in agricultural drainage but also carried out a significant amount of civil engineering drainage works. In about 2003, he transferred his business and assets to the Appellants which he controls.
3. Since at least about 2004, the Appellants have employed about eight men. Mr Bell's wife is a Director and she looks after the books. The Appellants have, since at least 2004, owned or possessed six excavators, two tractors and a JCB Fastrac vehicle, registered number R638 UUX. These are the Appellants' main items of plant and machinery. One of the excavators weighs about 7 tonnes. The others vary in weight from about 13 tonnes to about 30 tonnes. The excavators have steel tracks. It is impractical to drive them on metalled roads. They are very slow, and are liable to damage the road unless mats or tracks are laid out.
4. Since about 2000 Mr Bell and subsequently the Appellants have carried out work for NACAP Telecom UK, also referred to in the documents produced as Nacap or Newcap Telecom Ltd, and its successor, a BT company, referred to by Mr Bell as BT Wholesale. British Gas and/or Transco laid part of a gas pipeline in the locality about 20-30 years ago. The pipeline was laid across country and thus through the agricultural land of many different landowners. In the nature of things, the installation of such a pipeline frequently had an adverse effect on the drainage of the agricultural land through which the pipeline passed. Often these adverse effects did not manifest themselves for many years. When they did it was usually in the form of a permanently wet area of a field. In about 2000 NACAP laid ducting to contain fibre optic cabling generally along the line of the gas pipeline. This too often led to similar adverse effects. If a landowner's land were so affected, he would contact NACAP or their successor with a view to having them repair the damage or replace the drainage. NACAP's preferred contractor, or at least one of its preferred contractors for this type of drainage work was Mr Bell and subsequently the Appellants. He would be contacted by NACAP and invited to attend a meeting on site with the landowner, his land agent and a NACAP representative. A decision would be taken as to what was to be done. This might involve Mr Bell and subsequently the Appellants carrying out exploratory work to ascertain the problem and then rectifying it by repair, replacement or redirection of the existing land drainage. Mr Bell received his instructions from NACAP and not from the Landowner. Mr Bell and subsequently the Appellants were paid by NACAP and not by the landowner of the agricultural land in question.
5. Sometimes the drainage work was undertaken before the ducting was laid. The drainage work, referred to as curtain drainage was part of the preparatory works prior to the installation of the ducting. This type of preparatory drainage must have been carried out at latest in about 2000 when the ducting was laid.
6. The Fastrac vehicle was manufactured by JCB. It or a similar model is depicted in JCB's brochure [R/21]. The brochure contains details of the Fastrac's specification. It is a tractor. It weighs about 6.3 tonnes. Its front wheels are much larger than an ordinary tractor's front wheels and are the same size as its rear wheels. The Fastrac has better suspension than an ordinary tractor; it has four wheel braking, which an ordinary tractor does not, and travels at a speed of 35-40mph. It can hold about 40 gallons of fuel. It also has attachment facilities at front and rear. Overall, it is a more sophisticated and luxurious vehicle than an ordinary tractor. It is generally faster, safer and more comfortable to drive than an ordinary tractor. It is, however, a tractor.
7. Mr Bell purchased the Fastrac second hand in about 2001 for about £25,000 and subsequently transferred it to the Appellants with his other assets as described above. The Appellants own the Fastrac and in particular owned and possessed it throughout the period between 1/4/03 and 3/9/04. When purchased by the original owner, the Fastrac was registered as a Special Vehicle [R/4]. Neither Mr Bell nor the Appellants has sought to have that taxation class changed. According to a Leaflet produced by the Driver and Vehicle Licensing Agency [R/5] the taxation class Special Vehicles includes mobile cranes, digging machines, works trucks, road rollers, showman's HGV, showman's haulage, special trailer (for showman's rigid goods vehicles over 12,000kg pulling laden trailers over 4000kg).
8. The Fastrac cannot pull or haul any plant or equipment greater in weight than about 10-11 tonnes. The only excavator which it has hauled is the said 7 tonne excavator.
9. The 7 tonne excavator is particularly suited to drainage work on agricultural land because of its relatively light weight and even spread of load over its tracks. It is unsuited to civil engineering drainage work because it is not powerful enough and did not have sufficient reach for that type of work.
10. Typically, once the Fastrac has hauled the 7 tonne excavator to a site on agricultural land, the Fastrac does not remain idle. It is used on site in connection with land drainage work there. For example it will haul a trailer of gravel and other materials across a field to the site of drainage excavations for the purpose of backfilling around drainage pipes. A low loader could not perform these tasks.
11. At about 2pm on or about 3/9/04 the Fastrac was on a public road, namely the C19A Barony Templand Sandyholm road, in the vicinity of Lockerbie, about 4.5 miles from the Appellants' premises at Boreland. It was and is a public road. The Fastrac was being driven by Roland Nelson, an employee of the Appellants acting in the course of his employment with them. The Fastrac was pulling a trailer carrying the said 7 tonne excavator. The Fastrac had been in the Appellants' workshop all that day for repair and was making its way to the Appellants' premises at Boreland, a distance of about 22 miles. It was intended that it carry out work on a neighbouring farm. The Appellants' vehicles are fuelled at their premises at Annan.
12. The Fastrac was stopped by the police and Customs officers acting together. Samples of fuel were taken. Roadside analysis revealed that the Fastrac was being fuelled by 100% gas oil i.e. red diesel which is heavy oil within the meaning of section 1 of the Hydrocarbon Oil Duties Act 1979, as amended. No amount equal to the amount of rebate on such oil had been paid to the Respondents.
13. Lorraine Flockhart spoke, by 'phone', to a colleague in Bristol who appears to have advised her to seize the Fastrac. She did so.
14. Mr Bell was contacted and he went to the scene at about 4pm. He was cautioned and interviewed by Customs Officers Flockhart and Michael Roddie. The first part of the interview was tape recorded and subsequently transcribed [R/20]. The tape machine developed a fault before the interview was completed. After a break of about twenty minutes, Mr Bell was cautioned again and the interview continued. Lorraine Flockhart wrote out each question, read it out, and Mr Bell answered; his answer was written down. This laborious process continued until the whole interview was completed some 2 hours and 12 minutes after it had begun. The interview was based on an aide memoire in the possession of Lorraine Flockhart which provided a framework for appropriate questions. The interview concentrated on the Fastrac and its use and the type of fuel it used. Mr Bell readily acknowledged that it used red diesel. Following the conclusion of the interview, the Fastrac was formally seized and then offered back to Mr Bell for £1000. He paid that sum there and then by credit card.
15. In the course of the interview, the following exchange took place between Mr Bell and Ms Flockhart:-

L.C.F. What does the business M W Plant Contract Limited do?

R.P.B. Mainly drainage work. Quite a bit of agricultural land drainage (about 50%).

L.C.F. Are there any other aspects to the services you conduct?

R.P.B. Civil Engineering drainage work.

L.C.F. What vehicles do you use to get plant to a site?

R.P.B. We'll use hire transport for moving machinery any distance, locally (rural) we'll use the Fastrac.

L.C.F. Do you ever use either of your other two tractors to move equipment to and from sites?

R.P.B. No.

L.C.F. What type of work was the excavator on the back of the tractor carrying out?

R.P.B. Drainage work.

L.C.F. What type of drainage work?

R.P.B. Agricultural drainage over a duct line.

L.C.F. Who is the contract with?

R.P.B. NACAP.

L.C.F. Does the Fastrac tow anything other than plant or machinery?

R.P.B. It'll work on site.

L.C.F. Does it ever leave these sites carrying anything other than plant or machinery?

R.P.B. The only other thing would be a dump truck.

L.C.F. Have you executed contracts locally for civil engineering drainage?

R.P.B. Not that I can recall, at the moment we are working away mainly. Not that I can think of off the top of my head.

L.C.F. Can you state that the Fastrac is only ever used for hauling plant or machinery from the yard to agricultural drainage sites?

R.P.B. I can't say that for definite.

L.C.F. So what your saying is you would use the Fastrac on the public road for hauling plant and or machinery to both agricultural drainage sites and civil engineering drainage sites?

R.P.B. If they were locally.

L.C.F. Have you in the past used the Fastrac on the public road to haul plant or machinery to and from your yard to local civil engineering and agricultural drainage sites?

R.P.B. Yes.

16. The transcript [R/20] was checked by Mr Bell at the end of the interview and one or two alterations made. He signed it. It accurately recorded what he said.
17. Between 1/4/03 and 3/9/04, the Fastrac was used on a variety of contracts at various sites. Apart from one in the Lancaster area, all of these sites were in the general vicinity of one or other of the Appellants' two places of business. The work carried out by the Appellants in which the Fastrac was used (except in relation to the Lancaster contract) was land drainage work on agricultural land. The Fastrac was used on all of those contracts. It hauled a seven tonne excavator to each site and hauled stone or gravel and other materials from the edge of the site to the point where the drainage work was being carried out. The Fastrac remained on site while the work was being carried out. It hauled the excavator back to the Appellants' premises or on to a new site where land drainage work was carried out on agricultural land. The Fastrac was transported to and from Lancaster on another vehicle for the contract there. It was not used on public roads in connection with that contract. The nature of the contract at Lancaster was heavy engineering work. The Appellants carried out drainage work before the main works began there. The Fastrac was on site there between about 5 April 2003 and 24 August 2003. It was not used on the public roads there. The only other contract which the Appellants were engaged upon during the period between 1/4/03 and 3/9/04 was a long term roads project at Auchenkilns, Cumbernauld. The Fastrac was not used on that project.
18. Following the interview and seizure, Customs corresponded with the Appellants initially through Mr Bell and subsequently through his accountants, Armstrong Watson, who have their principal office in Carlisle, but also have an office in Lockerbie. Armstrong Watson have been the Appellants' and Mr Bell's accountants for about ten years and have prepared their annual accounts. They are familiar with the Appellants' business and his books and records.
19. Ian Fleming is an employee of Armstrong Watson. He is their Indirect Taxes Specialist. He was a Customs Officer between about 1964 and 1989 and latterly was Head of the VAT Fraud Investigation Unit for Cumbria. He is a Director of the Institute of Indirect Taxation, a non-profit making body with a membership of about 600. He had no previous dealings with the Appellants or Mr Bell. He visited Mr Bell's premises on four occasions, three of them being before February 2005; he noted information from him and examined his books and records. He had no major concerns over the adequacy of these books and records. The annual accounts of the Appellants, which he had examined, were not qualified in any way.
20. In particular, by letter dated 13/1/05 [R/6], Armstrong Watson, per Mr Fleming, informed Customs that their client had only used the Fastrac since 2001 "on farm drainage work under a contract with Newcap [sc NACAP] Telecom UK Ltd" and stated that "Despite the company's name, we must stress that no telecommunication work has been undertaken". The letter also pointed out that the Fastrac had not been used on roads or on site since its return to the Appellants, that the cost of running it on white diesel at 3-4 miles per gallon was prohibitive and if it were subsequently confirmed that this has to be used when the vehicle is engaged on farm drainage work, he would dispose of the vehicle and make alternative arrangements. A later letter from Mr Fleming to Customs indicated that fuel consumption varied from 4mpg (on site) to 10mpg (on the road) [R/8]. That letter also contained a summary of work on which the Fastrac was engaged between 3 July and 3 September 2004.
21. In a further letter to Customs dated 18/2/05 [R/10] Mr Fleming stated inter alia that between July 2003 and September 2004 the Fastrac had been used solely for "agricultural land drainage work for Nacap Telecom". He also pointed out (incorrectly) that "In general terms, the work done consisted of re-routing existing drains away from the pipeline system prior to these companies installing the lines." In fact, the drainage work was carried out by the Appellants long after the duct lines, within which fibre optic cables were placed, were installed and was in the nature of remedial work to agricultural drainage caused by the installation of the duct lines or the gas pipeline or a combination of both.
22. A notice of assessment was issued to the Appellants on or about 21/2/05 under reference ED72/05 [R/3 & 11]. The assessment covered the period between 2/2/02 and 3/9/04 and amounted in total to £8,998. On the same date an assessment [ED73/05] was also issued in the sum of £28,298 in respect of the use of two other vehicles [A/4].
23. By letter dated 24/3/05 [R/13], Mr Fleming requested a departmental review of the two assessments. In that letter, he pointed out (correctly), inter alia, that the Fastrac was used on a site at Lancaster throughout the period between 5/4/03 to 24/8/03. It was transported to and from that site by a third party haulage contractor and accordingly was not used on public roads during that period. He also stated in the letter that when on a farm site the Fastrac "hauls stone and other material as necessary solely for repairing, moving and relaying land drains on fields."
24. By letter dated 1/8/05 [A/5] to Mr Fleming, the Reviewing Officer, Frances Manley reduced the assessment to £7,963.
25. Notices of Appeal were submitted to this Tribunal by letter dated 31/8/05 [A/6-8]. The grounds of appeal in relation to the Fastrac, as amplified at the outset of the Hearing, are "(1) The Fastrac vehicle was entitled to use rebated fuel on the journey when subjected to testing by the Road Fuel Testing Unit. (2) The vehicle was being used solely for agricultural purposes in terms of Schedule 1 to the Hydrocarbon Oils Duties Act 1979, and was therefore entitled to use rebated fuel. (3) The VERA taxation class is not demonstrative of the vehicle purposes for the purposes of determining entitlement to use rebated fuel."
26. By letter dated 28/9/05 to Customs [R/15], Mr Fleming pointed out that the Appellants only commenced trading on 1/4/03. By letter dated 16/11/05 to Freelands, solicitors, Wishaw [R16], who were by that stage also acting on behalf of the Appellants, Customs accepted inter alia that the Fastrac was operated by the Appellants with effect from 1/4/03, and further reduced the assessment [ED 72/05] to £4,488.48.
27. By letter dated 1 February 2006 [A/9], the assessment [ED 73/05] in the sum of £28,928, which related to two other vehicles, was withdrawn.

Statutory Background

The assessment was raised by Customs using their powers under section 12A of the Finance Act 1994, as amended by the Finance Act 1997. That section enables Customs to issue an assessment in respect of excise duty relief which has been given but which ought not to have been given. The amount of the relief is treated as excise duty due and recoverable. The assessment made by virtue of section 13(7) of the 1979 Act may be levied against the person in charge of the vehicle or the owner. It was not disputed that the Appellants owned the Fastrac. It was common ground that the fuel was gas oil within the meaning of section 1(5) of the 1979 Act and thus heavy oil within the meaning of section 1(4). Sections 12(2), 13(1A) of, and Schedule 1 paragraphs 2(1) & (2) to the 1979 Act provides as follows:-

12 Rebate not allowed on fuel for road vehicles

(2) No heavy oil on whose delivery for home use rebate has been allowed [(whether under [section 11] above or 13AA(1) below)] shall–

(a) be used as fuel for a road vehicle; or

(b) be taken into a road vehicle as fuel,

unless an amount equal to the amount for the time being allowable in respect of rebate on like oil as being paid to the Commissioners in accordance with regulations made under section 24(1) below for the purposes of this section.

13 Penalties for misuse of rebated heavy oil

[(1A) Where oil is used, or is taken into a road vehicle, in contravention of section 12(2) above, the Commissioners May-

(a) assess an amount equal to the rebate on like oil at the rate in force at the time of the contravention as being excise duty due from any person who used the oil or was liable for the oil being taken into the road vehicle, and

(b) notify him or his representative accordingly].

27 Interpretation

(1) In this Act-

"road vehicle" means a vehicle constructed or adapted for use on roads, but does not include any vehicle [which is an excepted vehicle within the meaning given by Schedule 1 to this Act".

Schedule 1 – Excepted Vehicles

Unlicensed vehicles not used on public roads

Tractors

2-(1) A vehicle is an excepted vehicle if it is-

(a) an agricultural tractor …

(b) …

(2) In sub-paragraph (1) above "agricultural tractor" means a tractor used on public roads solely for purposes relating to agriculture, horticulture, forestry or activities falling within sub-paragraph (3) below.

(3) The activities falling within this sub-paragraph are-

(a) cutting verges bordering public roads;

(b) cutting hedges or trees bordering public roads or bordering verges which border public roads.

Submissions

Mr Scott submitted that the Appellants were not carrying out any agricultural work in their contracts with Nacap. He referred to the Shorter Oxford English Dictionary definition of agriculture. Who the contract was with was relevant. There was a conflict in the evidence of Fleming and Bell as to the nature of the work. Fleming said it was preparatory work whereas Bell said it was repair work. Even if it was both, the question is what does the work have its closest connection with, agriculture or telecommunications. The answer was telecommunications because but for the telecommunications work (the laying of the ducts and cables) none of the land drainage work would have been required.

Mr Scott also submitted that there was sufficient evidence to show that the Fastrac was used for non-agricultural work. He relied on what he described as Mr Bell's concession in the interview to the effect that the Fastrac had been used on the public road to haul plant or machinery to and from the company's yard to local civil engineering sites. He considered the passage quoted in our findings of fact in detail submitting that the phrase in the past covered the period in question; and that if ambiguous and if it included the period when Mr Bell traded as an individual, it at least cast light on his business practice in corporate form after 1/4/03. He pointed out that the interview must have been a slow laborious process, and that Mr Bell had every opportunity to clarify or correct what he is recorded as having said. He signed the manuscript transcript. He also relied on passages in Mr Bell's evidence when being asked questions by the Tribunal and in re-examination to the effect that he did not exclude the use of the 7 tonne excavator being used for civil engineering work, and therefore the Fastrac being used to haul it to and from such work could not be excluded. Putting matters another way, the Tribunal cannot be satisfied, in the light of the conflicting evidence led by the Appellants that the Fastrac's sole use is for purposes relating to agriculture.

Even if the Appellants used the Fastrac only once on a civil engineering contract (as opposed to farm drainage work) then the use was not solely for purposes relating to agriculture. The expression of opinion to the contrary in Andrew Clark t/a Andrew Clark Plant Hire EDN/04/8009 15/6/05 (Chairman TG Coutts Q.C) was wrong and should not be followed.

Mr Scott also submitted that in order to qualify as an agricultural tractor under the 1979 Act, a vehicle must be licensed as an agricultural tractor and used only for that purpose. Here, the Fastrac was licensed as a Special Vehicle and not as an agricultural tractor. He referred to various passages in HM Customs & Excise Business Service and Taxes Consultation document entitled Hydrocarbon Oil Duty: Consultation on Changes to Excepted Vehicle Schedule 2 December 2004. He submitted that it was questionable whether the Fastrac was a tractor at all. It was not licensed as such. He referred to the Vehicle and Registration Act 1994 ("VERA") sections 5 and 29 and Schedule 2. It had all the capabilities of travelling on the road in relative comfort. It does everything a tractor does and more. Agricultural tractors on the other hand only use public roads incidentally. The rationale under VERA and the 1979 Act was that vehicles used off road or only incidentally on road are entitled to use rebated fuels and do not require to pay Vehicle Excise Duty. While the taxation class was not determinative (Viridor Waste Management Ltd EDN/02/8015-6, 25/9/03 (Chairman T G Coutts QC), it was an influential factor.

Finally, Mr Scott accepted that nothing turned on the fact that on 3 September 2004, the Fastrac was being used to transport the 7 tonne excavator from the Appellants' premises at Annan to their premises at Boreland. We therefore do not consider that matter further.

Mr Santoni, in inviting us to make a determination that the Fastrac came within the excepted category and that the Appellants were entitled to use rebated fuel, began by making some submissions on various aspects of the review letter dated 1/8/05 [A/5]. He then submitted, under reference to Viridor, that the taxation class of the Fastrac was, at best, evidential. He pointed out that Mr Bell stated in evidence that he did not know that the taxation class could be changed. Thus, he said, little weight should be attached to the taxation class, notwithstanding the terms of the Vehicle Registration Document [R/4].

On the question of the conflict of evidence between Mr Bell and Mr Fleming, Mr Santoni submitted that there was no conflict and referred us to the letter dated 24/3/05 [R/13] and to the letter dated 18/2/05 [R/10]. He submitted that there was, apart from the interview, no contrary evidence that the Fastrac was not being used for agricultural purposes. Mr Bell's evidence in relation to his use of the word normally was to the effect that while the Fastrac could have been used for non-agricultural purposes, it was in fact not so used throughout the period of the assessment.

Mr Santoni then addressed us on the meaning of agriculture and agricultural purposes. He made brief reference to paragraphs 12-15 and 38 of the Stair Memorial Encyclopaedia of the Laws of Scotland vol 1 on Agriculture in General (re-issue), the Scottish Contemporary Judicial Dictionary (Agricultural Lands), and Words and Phrases Legally Defined volume 1 (agricultural buildings and related definitions) and the Supplement dated 1986. He also referred to the argument rejected in Andrew Clark that the rebating of fuel was to assist farmers.

Discussion

This appeal was fought, and our decision turns largely, on the evidence. The essential question is whether throughout the period of the assessment, the Fastrac fell within the definition of agricultural tractor within the meaning of paragraph 2(2) of Schedule 1 to the Hydrocarbon Oil Duties Act 1979, as amended. If the Fastrac is an excepted vehicle the appeal succeeds. Among other vehicles, an agricultural tractor is an excepted vehicle. For present purposes there are three requirements which the Fastrac has to meet. The first is that it is a tractor. The second is that it is used on public roads. The third is that the use must be solely for purposes relating to agriculture.

These requirements all raise questions of fact. We therefore begin by assessing the witnesses and evidence generally and explaining the more important of our factual findings. It is not our function to rehearse or record here all the evidence. Our function is to record the facts we have found to be established having heard the evidence.

The evidence led by Mr Santoni was, in places, difficult to follow. In the course of the Hearing, the Tribunal sought to clarify various aspects of the evidence which at the time seemed to be relevant and possibly important. In particular, Mr Bell was quite unable at times to provide a clear, unambiguous answer. This is not a criticism of Mr Bell. Sometimes, the questions were unclear, lacked precision or logical sequence and were bound to lead to ambiguity in the answer. The leading of evidence is just as much a skill as cross-examination, particularly where the witness is not articulate but is genuinely trying to do his best, as we believe Mr Bell was, to tell the truth and explain his "facts". Moreover, Mr Bell is a drainage contractor. He was not used to the forum of a tax tribunal where precision is sought, and lawyers analyse and may draw inferences from every word uttered. He cannot be expected always to respond to questions in a clear, logical and precise manner. Tribunals must make allowances.

There are two aspects of his evidence which we have had to consider with particular care. The first relates to two passages in the evidence of Mr Bell. The first passage was in response to questions from the Tribunal after the conclusion of cross- examination. He stated that of all the Appellants' excavators, the Fastrac could only pull the 7 tonne excavator. He then said that he normally used the 7 tonne excavator for agricultural drainage. It was ideally suited for this type of work being compact, capable of working in a restricted area and did not make a mess of the ground.

The second passage was in re-examination; he said that he would not normally use the 7 tonne excavator on civil engineering work as it was not big enough, not having enough power or reach. From his use of the word normally it can reasonably be inferred that he would occasionally use the 7 tonne tractor for civil engineering work and use the Fastrac to haul it or even use the Fastrac on a civil engineering site. We were concerned whether in the light of that evidence it could be said that the Fastrac was during the period of the assessment used on public roads solely for purposes relating to agriculture. However, the evidence of actual use, as opposed to what might be done if the opportunity arises, discloses that, in fact, the only use of the Fastrac on public roads over the period in question was in relation to land drainage work on agriculture land. There is no evidence from which we can find that there were other contracts on which the Appellants were engaged in which they used the Fastrac otherwise than for purposes relating to agriculture.

The second aspect of the evidence is related. It is the evidence of what Mr Bell said in the course of the interview on 3 September 2004. Our findings of fact quote the relevant passages from the interview. It is not disputed that the transcription is an accurate record of what Mr Bell said. The question is does what he said in interview contradict the thrust of the rest of the evidence led before us, and if so, how does it affect our overall assessment of the evidence. Mr Bell's evidence was to the effect that he was having "one of those Fridays" and just wanted to get away. However, he was cautioned twice, the interview must have proceeded at a painfully slow pace and he was given every opportunity to change the manuscript transcription. He did not do so at least in relation to these passages. On the other hand, when closely analysed, there are some ambiguities in the questions and accordingly the answers which lead to the conclusion that what he said in the course of the interview is not inconsistent with the other evidence in the appeal.

His original answer to the question whether the Fastrac "is only ever used for hauling plant or machinery from the yard to Agricultural Drainage sites" was inconclusive. The second answer (see finding of fact 15 towards the end of the quoted passage) is conditional and does not amount to an admission. The last answer is in response to a question which begins "Have you, in the past". The Fastrac was purchased by Mr Bell in 2001. The Appellants did not begin trading until 1 April 2003. The answer is or could be consistent with use for civil engineering purposes during that period and use solely for purposes relating to agriculture throughout the period of the assessment.

The Appellants led evidence about the work carried out during the period of the assessment. The Respondents were unable to lead any contrary evidence and could only point to the terms of the interview. Although the documentary evidence was sparse, it and the evidence of Mr Bell and Mr Fleming satisfied us, but only just, that the Fastrac was used only in relation to farm drainage work except for the Lancaster contract mentioned above in our findings of fact. Mr Fleming inspected the books and records of the Appellants. He was satisfied that there was no evidence showing that the Fastrac was used on a civil engineering contract during the period of the assessment and that the Fastrac was used only in relation to farm drainage work during the relevant period. While it appears that many of the documents examined by Mr Fleming were not produced, nothing was made of this in the course of the evidence or in submissions in relation either to sufficiency of evidence or its reliability.

We were impressed by the evidence of Mr Fleming. We found him to be credible and reliable, straightforward and attempting to be objective, fair and balanced in the assessment of the material and information produced to him. He of course, to a material extent, had to rely upon information provided by Mr Bell. There was a conflict in the evidence of Mr Fleming and Mr Bell in relation to the nature of the drainage work carried out. The tenor of Mr Fleming's evidence on this aspect was that the drainage work was carried out before the duct lines were installed. The source of this evidence must have been Mr Bell. So far as the period with which the assessment is concerned, this is an impossibility unless Mr Bell was wrong when he said that all duct lines had been installed by about 2000. No one else gave evidence about the date.

Mr Bell's evidence was that the Appellants' farm drainage work took place long after the duct lines had been installed. On that point at least Mr Bell was relatively clear, and it is not an obvious matter on which he would be likely intentionally to mislead the Tribunal.

Whatever Mr Fleming may have thought or understood (and his correspondence does mention remedial drainage work too – letter dated 24/3/05 [R/13]), we conclude on the evidence before us that all the drainage work was carried out by the Appellants long after the duct lines were installed. Either way, it does not alter the character of the work or the use of the Fastrac in relation to it. Given Mr Bell's inability to express himself clearly and unambiguously it is perhaps not surprising that some confusion arose.

We also heard evidence from Lorraine Flockhart and Frances Manley. Their evidence, in the event, was not controversial. Ms Lockhart described what happened on 3 September 2004 and Frances Manley, who was not cross examined, spoke to her review letter dated 1/8/05 [A/5] and added nothing of significance.

It seems to us that finding of fact 17 is the most critical finding in this case. Notwithstanding the terms of the interview, we consider that we are entitled and indeed, on the largely uncontradicted evidence, bound to make that finding. It is based on the evidence of Mr Bell and Mr Fleming and the limited documentation produced. These documents were not considered in detail in the evidence. We were not addressed on them in submissions.

We return to the three requirements mentioned above and now consider each in turn:

28. Is the Fastrac a tractor

There was little evidence and we heard no submissions as to what a tractor was or what constituted a tractor or what were the essential components of such vehicle. The evidence of Mr Bell was that the Fastrac could do everything a tractor could do and more. It was more comfortable to drive, having suspension, it had better braking and four wheels of equal size; it was also much faster. He agreed with the suggestion from the Tribunal following that evidence that what he was describing was the BMW or Rolls Royce of tractors. On the basis of that evidence, and in the absence of any other evidence or submissions, it seems to us that we are entitled to conclude that the Fastrac is a type of tractor. The sketch in the JCB specifications brochure conveys the impression of a tractor.

We do not consider the taxation class to be conclusive. We agree with the similar comment made in Viridor. While it is a factor to be taken into account, we consider that what is more important is the evidence of actual use throughout the relevant period. Whatever the rationale for the statutory exceptions, and the presence or absence of any statutory link between the 1979 Act and VERA, if the statutory criteria, given their plain, ordinary meaning, are met, then the exception applies. The theme of the Consultation document on Changes to Excepted Vehicle Schedule appears to be that it may be necessary to review the statutory criteria in the light of advancing technology and the existence of a new generation of tractors (see paragraph 3.8) of which the Fastrac appears to be an example.

29. Use on public roads

There is no dispute about this. This "requirement" is therefore satisfied.

30. Solely for purposes relating to agriculture

A major part of Mr Scott's argument was that because of the involvement of NACAP or its successor company, the farm drainage work was not related to agriculture. We reject the submission more fully recorded above. In our view, the purpose of the drainage work related to agriculture. Farm drainage forms part of a farm's fixed equipment. Agricultural land is drained to enable it to be cultivated or grazed. Drainage improves the condition of the ground and eliminates or alleviates wet or marshy areas. It enables or assists in enabling agricultural land to be maintained in good heart. The drainage work has these purposes whoever carries out the work and whoever pays for it. The purpose is the same whether the landowner carries it out himself and seeks reimbursement from NACAP, or engages the Appellants and pays them and seeks reimbursement from NACAP or requires NACAP to return to the site of the duct lines and repair the drainage. The function of the Fastrac was to transport the 7 tonne excavator to a farm site and thereafter to carry out work on site hauling materials; and on conclusion of the work to transport it either to the next farm drainage work or back to the Appellants' premises.

We have already indicated that on the evidence we are satisfied that the Fastrac was only used throughout the period of assessment in connection with land drainage work on agricultural land. The use has therefore been solely for purposes relating to agriculture. We do not, therefore, need to consider whether one non-agricultural drainage contract out of say several hundred would mean that this requirement is not satisfied.

In these circumstances, we conclude that the statutory requirements are met and the appeal must succeed.

We should, finally, also record that nothing was made of the fact that the Appellants did not challenge the legality of the seizure by requiring the commencement of condemnation proceedings, although the point is noted in Frances Manley's review letter dated 1/8/05 [A/5].

Result

The appeal succeeds and no issue on quantum will now arise. The assessment falls to be discharged. We appoint parties to lodge and intimate submissions on expenses and in relation to the appeal against the other assessment, now withdrawn, all within twenty eight days of the date of release of this decision. Alternatively, parties may inform the Tribunal within the same period of any agreement reached in relation to expenses.

J GORDON REID, QC., F.C.I.Arb., CHAIRMAN
RELEASE: 6 JUNE 2006.

EDN/05/8008