ASSESSMENT — whether vehicle made available for private use — company owner — Upton considered — appeal dismissed
MANCHESTER TRIBUNAL CENTRE
FINS WATERSPORTS LTD Appellant
- and -
THE COMMISSIONERS OF CUSTOMS AND EXCISE Respondents
Tribunal: Mr R L Barlow(Chairman)
Mrs R Dean
Sitting in public in Manchester on the 23rd June 2003
The appellant did not appear and was not represented
Mr J Cannan of counsel instructed by the Solicitor for the Customs and Excise for the Respondents
© CROWN COPYRIGHT 2003
DECISION
- In this appeal the appellant challenges assessments of value added tax totalling £910 issued on 22 January 2002. The assessments are for £91 in each of the tax periods 03/99 to 06/01.
- The tribunal's decision is unanimous and it is that the appeal is dismissed.
- The Commissioners of Customs and Excise were represented at the hearing by Mr J Cannan of counsel and the appellant did not appear and was not represented at the hearing. The matter having been called on and there being no communication from the appellant requesting an adjournment or stating any reason why it was not attending, we decided to proceed in the absence of the appellant under rule 26(2) of the Value Added Tax Tribunal Rules 1986.
- We considered the notice of appeal, the Commissioners bundle of documents, a skeleton opening from Mr Cannan, a certificate of motor insurance for the relevant vehicle produced by Customs and Excise but provided to them by the appellant, and the authority mentioned below.
- The assessment was raised to reclaim input tax claimed in respect of payments made by the appellant for the leasing of an Isuzu Trooper vehicle. The assessment was made on the basis that the input tax was 'excluded from credit' by article 7(1) of the Value Added Tax (Input Tax) Order 1992 (SI 1992/3222), although because the supply to the appellant was a letting on hire the exclusion was only as to half the input tax by reason of paragraph (2H) of that article.
- Article 7(1), in principle, excludes credit for any supply of a motor car to a taxable person but article 7(2)(a) provides an exception for a qualifying motor car supplied to a taxable person (including a supply by way of hire) if the condition provided by paragraph (2E) is complied with. It was not in dispute that the vehicle was a qualifying motor car supplied to the appellant but the assessment was made on the basis that the condition was not complied with.
- The condition is provided for by paragraphs (2E) and (2G) as follows (quoting only the relevant wording):
'(2E) For the purposes of paragraph (2)(a) above the relevant condition is that the letting on hire, … is to a taxable person who intends to use the motor car …
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 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 scope and meaning of those provisions was considered in the case of Customs and Excise Commissioners –v- Upton [2002] STC 640. In that case the Court of Appeal held that where an individual owns a car it is available for private use even if he uses exclusively for business purposes and that he has intended to made it available for private use even if he has no intention of using it for his private motoring unless he has taken positive steps to exclude his private use. At first sight that reading of the provision appears to be unnecessarily restricted as it might be argued that a person who has a positive intention not to use a car for private purposes cannot be said to have the intention to make it available to himself for private use. Admittedly there might be difficulties of proof but that was not the basis of the Court's judgments. However, Peter Gibson LJ explained the reasoning in the following way in paragraph 22 of his judgment.
'The very fact of his deliberate acquisition of the car whereby he makes himself the owner of the car and the controller of it means that at least ordinarily he must intend to make it available to himself for private use, even if he never intends to use it privately'
The reasoning is that as the owner could at any point give himself permission to use the car for private use it will always be available for that use. Therefore, even if he had no actual intention to use it privately at the time of acquisition, he intended to make it available for private use because it would always be available for that type of use should the need arise.
- The Court did contemplate that there might be steps an individual could take that would prevent him from using the car for private use so as to negate the fact that it would ordinarily be available and therefore consequently had been made available for that use.
- Peter Gibson LJ referred to an individual and could be taken to have confined his conclusion to the situation of an individual who owns a car. Neuberger J referred also to a company owning a car and in paragraph 44 he said
'The fact that the company may not intend, and may not even want, the motor car to be put to [the director's private] use is not in point. By intending to provide it for use by a director who will be legally and physically free to put it to private use, the company is intending to make the motor car available to him for private use.'[Emphasis added].
Clearly Neuberger J contemplated that where a company had prevented the director, either by legal or physical restraints, from using the car for private use it would not have made it available for such use.
- How far an individual could achieve the same result is in doubt but this case concerns a company and we will examine the evidence on the basis that it may be possible for a company to place a legal restriction on private use of the motor car by instructing its staff not to use it for that purpose. We make no holding that that is in fact the state of the law as the Court of Appeal was not dealing with the case of a company and only one of the three judges said anything about that issue.
- In fact the evidence falls well short of proving that any such legal impediment on private use has been put in place. That being so, we do not need to consider the correct legal position for a company owner as opposed to a private owner and there is no doubt that the Upton reasoning is applicable.
- The insurance certificate produced to Customs and Excise by the appellant provides, under the heading 'permitted drivers' that the cover extends to any person who is driving on the policyholder's order or with their permission and under 'limitations of use' it includes cover for social and domestic pleasure purposes as well as for the purposes of the appellant's business.
- In correspondence, the appellant asserts that there is no actual private use but on the reasoning of the Upton case that would be insufficient to displace the assessment for the reasons explained above.
- We make no finding that there is no private use. The burden of proof lies upon the appellant and we have heard no evidence to prove that point but a finding one way or the other is not necessary for our decision.
- Mr Cannan asked for £250 costs in light of the fact that the appellants did not appear. The tribunal has an absolute discretion about the award of costs which must be exercised judicially. Although the stated policy of the Commissioners, that they will not normally seek costs against unsuccessful appellants, does not circumscribe that discretion as a matter of law, it must be a highly relevant factor in the judicial exercise of the tribunal's discretion. However one of the stated exceptions to that policy is where the appellant does not appear. In this case the appellant's representative had originally agreed in correspondence that the assessed input tax was not recoverable and later when the assessment was challenged no real argument was put forward. The appeal is close to being frivolous (which we do not intend as a criticism of the appellant's representative) and is one in which there was no appearance by the appellant.
- We dismiss the appeal and award the Commissioners £250 in costs.
R L BARLOW
CHAIRMAN
RELEASE DATE:
MAN/02/166
