VALUE ADDED TAX — input tax — car — available for private use — input tax blocked — VAT (Input Tax) Order 1992 reg 7 — appeal dismissed
	VALUE ADDED TAX — output tax — part exchange allowance not accounted for — appeal dismissed
	MISDECLARATION PENALTY — no excuse or mitigating circumstances advanced — appeal dismissed 

MANCHESTER TRIBUNAL CENTRE

 
 	
	RAYMOND LYTHGOE AND LILIAN JANE LYTHGOE
                                                                   t/a UTOPIA	Appellants

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	Colin Bishopp (Chairman)
						Marilyn Crompton	

Sitting in public in Manchester on 2 June 2003

The Appellants did not appear and were not represented

David Abberton of counsel instructed by the Solicitor for the Customs and Excise for the Respondents

	© CROWN COPYRIGHT 2003

DECISION

1.	This is an appeal against an assessment of £9,826 relating principally although not exclusively to the Appellant’s accounting period 11/97.  The assessment had been reduced from an original total of £11,911 before the appeal was brought and, we were told by David Abberton, counsel for the Respondents, it appeared that there were now only two elements remaining in dispute, to an aggregate value of £5,836.  His assertion was borne out by a letter, included in the bundle of documents made available to us, from the Appellants’ accountant to the Respondents, in which the remaining items are conceded.  There is in addition an outstanding misdeclaration penalty of £1,461 which, Mr Abberton assured us, was calculated by reference to the reduced total of the assessment.

2.	Although the Appellants had previously been represented by accountants, and subsequently by other advisors, they were neither present nor represented when the appeal was called on for hearing.  The notice of the hearing appeared to us to have been properly given, and we decided that it was appropriate for us to proceed in the Appellants’ absence.

3.	The two remaining items in dispute relate to a disallowed claim for the input tax incurred on the purchase of a Jaguar motor car, amounting to £5,764, and output tax for which the Respondents say the Appellants should have accounted and which is attributable to part-exchanges made by the Appellants.  Their business consists, or (we think) consisted, of the supply of hire cars to motorists whose own cars had been damaged in accidents upon terms that the hire charges would be met out of the damages recovered by those motorists from those whose negligence had caused the accident.  We were told that the hire cars were Vauxhall Corsas.  It was claimed, however, that the Jaguar car had been purchased as a replacement for another, similar car and was also to be used in the hire business.  The Appellants had been allowed to deduct the input tax incurred on the purchase of the first Jaguar and part of the assessment, now undisputed, related to the output tax for which they should have accounted on the disposal of that car. Whether or not an input tax deduction should have been permitted in respect of that car is no longer material.  

4.	The Respondents’ case is that so far as the replacement car is concerned, input tax deduction was blocked by the terms of the VAT (Input Tax) Order 1992 (SI 1992/3222),  regulation 7 of which excludes input tax credit in any case where the motor car concerned is available for private use.  It was contended by the accountants, in the letter to which we have already referred, that the second Jaguar was merely a replacement for the first, that it was to be used for the same purpose, that is in the Appellants’ business, and that there were two insurance policies covering all relevant risks.  However, the only insurance certificate produced – albeit for a period later than that in which the car had been acquired and for which the input tax credit has been refused – included social, domestic and pleasure use, but specifically excluded hiring or any purpose in connection with the motor trade, and limited the persons eligible to drive to the Appellants.  Even if – which we would find surprising – there were two policies covering the vehicle, such evidence as was produced indicates quite clearly that the vehicle was available for private use and in our view the Respondents’ contentions are unanswerable. 

5.	The accountants’ argument in relation to the output tax assessed by reference to the trade-in transactions is that the Appellants had never owned the cars which the Commissioners had thought gave rise to the trade-in allowances identified on five invoices, of which copies were in our bundle.  The five invoices are all for the supply of new Vauxhall Corsa cars, and are all dated 30 October 1996.  They show a part-exchange allowance of £98 in relation to each of the cars acquired.  It seems to us unlikely that a part-exchange allowance of as little of £98 would be made in respect of a car, though conceivably a single car has been divided equally over 5 invoices.  However, whatever the nature of the part exchange supply, it is plain from the invoices that some supply has been made  - as the accountants do not deny – that the supply was made in the course of the Appellants’ business and that they have not accounted for any output tax on it.  The amount assessed, £72, is the VAT fraction of the aggregate part-exchange allowance of £490.  No cogent challenge has been made to this element of the assessment, and again it seems to us that the Commissioners are right.

6.	The grounds of appeal set out on the notice of appeal merely make a complaint that the Appellants received a visit from bailiffs instructed by the Respondents at a time which (the Appellants maintain) was inappropriate.  Whether or not that is so, it is not a matter on which this tribunal can adjudicate.  

7.	Nothing has been put forward, either in the notice of appeal or by the accountants, in relation to the misdeclaration penalty.  There is thus no material before us on which we might find a reasonable excuse for the misdeclaration, or which might lead us to mitigate the penalty.

8.	In those circumstances we must dismiss the appeal, both against the assessment and against the penalty.

9.	As the Appellants did not attend the hearing, without advancing any excuse for their absence, Mr Abberton sought a direction for costs.  We consider that an appropriate application and we direct that the Appellants pay the Respondents’ costs, assessed at £350, within one calendar month after the release of this decision.

COLIN BISHOPP
CHAIRMAN
RELEASE DATE: