20624

INPUT TAX - Fiat Scuba purchased by business of cleaning contractors - input tax disallowed by Customs as a motor car not a van -  held a “motor car” - “exclusivity” of business use if a car not argued - appeal dismissed 

MANCHESTER TRIBUNAL CENTRE

                                    TWIN CLEANING CONTRACTORS LTD.              Appellant

                                                                     - and - 

                                                 THE COMMISSIONERS OF                       
                               HER MAJESTY’S REVENUE AND CUSTOMS      Respondents                                

Tribunal:  Elsie Gilliland (Chairman)
       Marilyn Crompton (Member)                                                                                                     

Sitting in public in Manchester on 11 January 2008

No attendance by or on behalf of the Appellant

Richard Mansell, Advocate, of the Solicitor’s Office of HM Revenue and Customs for the Respondents

DECISION

1. The appeal before the tribunal was that of Twin Cleaning Contractors Ltd. (the Appellant) against a decision of Customs set out in a letter from them dated 3 October 2005 to disallow a claim for input tax on the purchase by the Appellant of a Fiat Scuba vehicle (the Fiat Scuba). The subsequent assessment dated 31 October 2005 in respect of the period 1 March 2003 to 31 May 2003 in the sum of £1391 was disputed and resulted in the appeal.

2. There was no attendance by or on behalf of the Appellant but the tribunal determined to proceed with the hearing under the provisions of s26(2) of the Value Added Tax Tribunals Rules 1986 (as amended). To assist the tribunal the advocate for Customs outlined the background to the matter and the statement of case produced by Customs before calling his witness.
   
3. The issue for decision by the tribunal is whether the Fiat Scuba falls within the definition of “a motor car”  within the terms of the Value Added Tax (Input Tax) Order 1992 (SI 1992 No.3222), Article 2 (the Order) as submitted by Customs rather than being a van  as claimed by the Appellant.  The significance of this is that as a general rule the VAT charged on the purchase of a car cannot be recovered.

4.There is an explanatory Notice 700/64 (the Notice) in which in Section 2.1 under the heading “What is a car?” it is stated: 

“ A car for VAT purposes is any motor vehicle of a kind normally used on public roads which has three or more wheels and either:
                       *is constructed or adapted mainly for carrying passengers or
           *has to the rear of driver’s seat roofed accommodation which is fitted with  side windows or which is constructed or adapted for the fitting of side windows.”

Various exceptions are set out in 2.2 including (inter alia):  

“*vehicles capable of accommodating only one person or suitable for carrying twelve or more people including the driver
                     …*vehicles of not less than three tonnes unladen weight”. 
    
5. Evidence was given to the tribunal by John Antony McNicholl a Customs officer working in Vat assurance. We were informed that no objection had been taken by the Appellant to his witness statement of 21 August 2007 which was in the bundle before us and to which various copy documents were attached. Mr. McNicholl with a colleague had attended  at the Appellant’s premises on 23 August 2005 on a routine visit. Advance notice had been given and the Appellant had been requested to make certain records available. The information Mr. McNicholl had then obtained as recorded in his notebook and a follow- up electronic report were amongst the attachments to his statement. Included in the bundle of papers produced to us by Customs was a copy of a letter from the Appellant dated 4 November 2005. Mr. McNicholl referred also in his witness statement and in his evidence to a telephone call he had had with a director of the Appellant Colin Rennie on 31 August 2005. 

6.The Appellant gave notice of appeal signed by Mr. Rennie on 30 March 2006 and set out its grounds of appeal as follows:              

“ The Customs & Excise are trying to say that my van is a car and as you can clearly see it is a van and it is [registered] as a van with the DVLA. (See photo attached).”

In our papers the photo was a photocopy. We did not see any DVLA documentation; nor we understand had the witness, Mr. McNicholl, seen any.

7. The business of the Appellant is that of cleaning contractors. The interview was conducted with  Linda Murray a director and also company secretary who was involved in the day-to-day running of the business. Mr. Rennie was not present. Mr. McNicholl told the tribunal that he asked as he did on all visits if there was any vehicle run through the business and had been told about the Fiat Scuba. It was acknowledged by the witness that he did not see the Fiat Scuba on that day and indeed had never seen it. He had relied on the description  and information given by Ms Murray that at the time of purchase it had already been modified  for carrying passengers and had been used as a taxi by a previous owner. She had said that it could carry up to eight persons. He confirmed to the tribunal that he had seen the purchase invoice . The Fiat Scuba had been purchased from a dealership and the Vat was separately shown. This amount was subsequently claimed as input by the Appellant. The witness could not recall any detailed description on the invoice other than he believed the make, model and registration plate. When he left the premises he made a note to himself to check out the VAT position which he could not then confirm.       

8. In the later telephone call Mr. Rennie had expressed considerable annoyance that the Fiat Scuba was being described as a car. He also told Mr. McNicholl that he had put a plastic film covering the rear windows . This Mr. McNicholl referred to in his letter to the Appellant dated 3 October 2005 but went on that this did “…not negate the fact this criteria (sic)[ ie. in Article 2 of the Order] remains to be met as the windows continue to remain in existence”. 

9. We look again at the definition of a “car” for VAT purposes ( Section 2.1 of the Notice)  as it applies to the Fiat Scuba described to us in the evidence before us. At this stage we would refer also to Section 2.4 of the Notice which deals with the query; “Can a commercial vehicle be converted into a car?”  Examples are given of some ways in which that might be done including:

               “ * fitting a side window or windows in a van to the rear of the driver’s seat
                  * fitting a rear seat or seats to a van - even without side windows and
                  * removing seats from a twelve-seater vehicle.”

10. We accept the evidence of Mr. McNicholl that he had been informed that when the Appellant purchased the Fiat Scuba it had been adapted to carry passengers, that the number referred to was eight and that he had been told that it had been used as a taxi. We accept also that he was later informed in a telephone conversation with Mr. Rennie that plastic film had since been put on each of the rear windows. The copy photograph of the Fiat Scuba in the bundle before us shows an offside sideways-on view. It is clear that two side windows are in place behind the driver’s seat and that the vehicle is wholly roofed. It is also possible to see that the rear of the two windows behind the  driver’s seat has been covered. It is not possible to identify this covering as plastic film. Further there does seem on this covering to be marking or printing, possibly advertising the business.

11. Another point  on which we heard submissions from the advocate for Customs was as to the relevant time for Vat purposes at which we should consider the nature of the Fiat Scuba, that is whether it was a car in which case input tax was blocked  or whether it was a van. We were referred to a series of cases including two Court of Appeal decisions. In Customs and Excise Commissioners v Upton (trading as Fagomatic) [2002] EWCA Civ520 where the issue was the availability for use of a car for private  purposes, it was stated by Buxton LJ  that the question as to availability for use had to be decided as at the time of acquisition of the car. It is our view that on the facts in the instant case it is similarly correct to look at what was being purchased at the time it was so purchased  and consider the entitlement to claim input tax on that basis.  

12. We are satisfied and find that the Fiat Scuba as described and as shown to us in the copy photograph falls within the definition of “a motor car” for VAT purposes.  We do not know, as no documentation was provided, how this is categorised for vehicle licensing purposes, but the applicable law is in the Order in this matter. A vehicle suitable for carrying twelve or more people would be an exception, but the passenger  number was put to Mr. McNicholl as eight and from the size of the Fiat Scuba as shown on the copy photograph  there would not appear to be room for twelve or more persons plus the driver.  The advocate submitted also that Customs did not believe that the payload of the Fiat Scuba was more than one tonne and this we accept. We referred above to Section 2.4 of the Notice and it is clear to us that whatever nature of vehicle the Appellant may have thought it was acquiring it was in fact purchasing one which had been converted by the fitting of side windows to the rear of the driver’s seat and the fitting 
of rear seating and thus was a motor car.

13. The appeal is dismissed.

14.There has been contact between the parties as to interest accruing on the assessment. Customs did not  waive interest and the appeal against the assessment has failed.  We do not have power to vary the amount assessed by way of interest except in so far as it is necessary to reduce it to the amount which is appropriate in accordance with the legislation. We are satisfied that there are no such circumstances in the matter before us and an appeal against interest assessed can not succeed.      

15.Customs have not sought costs and we give no direction on costs.

16. Our decision is that the Fiat Scuba is a motor car. There is however a further legislative provision which did not form part of the appeal of the Appellant and was not argued before us. This is on the issue of whether or not in the case of a car it can be established in law that the car is used exclusively for business purposes in which circumstances a claim to input tax could succeed. This is a matter that the Appellant may wish to consider. We have been informed by the advocate for Customs that an out- of- time appeal for a hearing before a tribunal in this instance would not be likely to be opposed.

MAN/06/0833   

Elsie Gilliland
CHAIRMAN

Release Date: 18 March 2008