19369
INPUT TAX – car – used by sole trader exclusively for business – whether available for private use – yes – appeal dismissed

LONDON TRIBUNAL CENTRE

	WILLIAM BOWEN	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	DR JOHN F AVERY JONES CBE (Chairman)
					GEORGE MILES

Sitting in public in Bristol on 1 December 2005

The Appellant in person

Andrew O’Connor, counsel, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2005

DECISION

1.	Mr William Bowen appeals against a decision in a letter dated 9 June 2004 that he is not entitled to input tax credit on the purchase of a Ford Mondeo estate car.  The Appellant appeared in person; Customs were represented by Mr Andrew O’Connor.
2.	The Appellant gave evidence and we find the following facts:
(1)	The Appellant carries on business as a sole trader as a farmer and meat retailer under the name Hicksgate Farm Shop in Keynsham, Bristol.  The business requires him to make frequent trips purchasing and delivering meat and other goods.
(2)	He purchased the vehicle in early 2002 for use solely for business purposes.  It is registered in the business name.  The back seats are kept permanently folded down.  Because it is used to carry meat there is a smell inside the vehicle which makes it unsuitable for private use.  It is fitted with a tow bar which is used on occasions to tow a refrigerated trailer.  It has never been used for private use.  He tried to insure it only for business use but was told that this was not possible.  He has the only set of keys.  Nobody else is insured to drive it.  An employee in the business has his own car.
(3)	The Appellant’s partner and his son both have cars which are used for private use.
(4)	He has not used the vehicle otherwise than for business purposes.
(5)	When he purchased the vehicle the Appellant intended to use the vehicle exclusively for the purpose of his business.
3.	The issue turns solely on Article 7(2G) of the Value Added Tax (Input Tax) Order 1992.  It is common ground that other conditions for obtaining input tax credit are satisfied.
“(2G) A taxable person shall not be taken to intend to use a motor car exclusively 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.”
4.	The Appellant contends that the vehicle is used exclusively for business purposes and he does not intend to use it, and has not used it, for private purposes.  Mr O’Connor, for Customs, contends that paragraph (2G) is not satisfied because the Appellant, as a sole trader, has not taken any steps to demonstrate that the vehicle is not available for use by any person, including himself, for private use.  Since by owning the vehicle it is available to him for private use he must intend to make it available for such use.
5.	Paragraph (2G) was interpreted by the Court of Appeal in Customs and Excise Commissioners v Upton [2002] STC 640.  In the judgment appealed from, the Vice-Chancellor said: 
“Accordingly in my judgment the requirement of para (2G)(b) that the taxable person intends to make the car available for his own private use will be satisfied if, on the acquisition of the car, he intends not to take any step to exclude the necessary consequence of his ownership. In other words a car may be “made available” if it is available in fact and the owner does nothing to prevent its private use by himself.” 
This was approved by the Court of Appeal.  Peter Gibson LJ said at [22] 
“The very fact of his deliberate acquisition of the car whereby he makes himself the owner of the car and 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.”
Buxton LJ said at [30] and [31]:
“[30] Further, I see no escape from the conclusion that Mr Upton had made the car available to himself. He did that, tautologically enough, by providing himself with ownership and control of the car. And, as we have seen, the availability that was created was availability for private as well as for business use.
[31] Did Mr Upton at the moment of purchase intend to make the car available to himself for private use? The question is not whether he intended to use it, but whether he intended to make it available for use. That again seems to me to lead to a short answer. The first question, of whether what was done constituted a making available for private use, is answered, in the terms urged above, by analysis of what Mr Upton did in the context of the true construction of the statutory concept of making available for private use. Mr Upton unquestionably intended to do the acts that, on that true construction, constituted the making available of the car for private use. He therefore necessarily intended to make the car so available, by intending to do the acts that constituted making the car available for use. He cannot escape from that conclusion by saying, as he does, that he did not intend actual use; or that, for that reason, he did not regard the car as available for his use. If he intends to do the acts that are in law the state of affairs referred to in the statute, then he intends that state of affairs as statutorily defined.”
Neuberger J said at [41]:
“[41] If an article is supplied by one person to another with no physical or legal restraint as to a particular use, then it appears to me that, as a matter of ordinary language, the article has been ‘made available’ for that use. The fact that neither the supplier nor the recipient expects, or even intends, the article to be put to the particular use does not prevent the article being ‘available’ for that use, if there is no physical or legal restraint on such use by the recipient. Further, it cannot be said, at any rate as a matter of ordinary language, that the supplier does not ‘make’ the article available for that use, simply because he does not expect or intend it to be put to that use. If he supplies the article so that it is, as a matter of fact, available for a particular use, then he has, in normal parlance, made it available for that use. On the other hand, if the supplier provides the article under a contract which bona fide precludes the recipient from putting it to a particular use, or if it is supplied only at such times that it cannot be put to a particular use, then there is clearly a powerful argument for saying that it has not been ‘made available’ for such use.”
6.	Mr O’Connor referred us to the decision of Lloyd J in Customs and Excise Commissioners v Robbins [2005] STC 1103 as a case subsequent to Upton in which a sole trader was trying to obtain credit for input tax on a car.  Lloyd J said at [21]:
“…the correct test in law is that laid down by the Vice-Chancellor and approved by the Court of Appeal [in Upton], namely that the taxable person does intend to make the car available for his own private use unless, at the time of acquisition, he intends to take effective steps to exclude the necessary consequence of availability which would follow from his ownership of the car. As Neuberger J said, unless there is some physical or legal restriction which he intends to place on his ability to make private use of the car, he does intend the natural consequence of his actions and the provisions of (2G) will apply with the consequence that, despite his actual intention to use the motorcar exclusively for the purposes of his business, he will not be taken to have that intention as a result of (2G).”
7.	These decisions are binding on us and the same conclusion must follow in this appeal.  We have found as a fact that the Appellant intended to use the vehicle exclusively for he purposes of his business, but that is not enough; he must also satisfy paragraph (2E).  The cases show that it is a natural consequence of the Appellant’s ownership of the vehicle that it is available to him for private use unless he shows that at the time of acquisition he took effective steps to exclude such natural consequence.  The only step he took was to attempt, unsuccessfully, to insure the vehicle for business use only.  In our view, this does not go far enough.  He must actually do something to negative the natural consequences of the vehicle being available for private use, which he has not done.  He does not therefore satisfy paragraph (2G).  The law is very strict and it is extremely difficult, if not impossible, for a sole trader, as opposed to a company, to satisfy it.
8.	Accordingly we must dismiss the appeal.

JOHN F AVERY JONES

CHAIRMAN
RELEASE DATE: 8 December 2005

LON/04/1115
££William Bowen v Revenue and Customs [2005] UKVAT V19369 (08 December 2005)