ASSESSMENT – car higher charges–50% only allowed - cars used for private purpose - assessment to best judgement – case dismissed

MANCHESTER TRIBUNAL CENTRE

	PROPERTY TECTONICS LIMITED	Appellants

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

				Tribunal:	MR D S PORTER  (Chairman)
						MISS C A ROBERTS					 	

Sitting in public in Manchester on 2nd October 2003

Mr K Stafford accountant appeared for the Appellants.

N Bird of Counsel for HM Customs and Excise for the Respondents

© CROWN COPYRIGHT 2003

DECISION

1.	By a Notice of Appeal received on the 22nd October 2002 Mr Stafford on behalf of Property Tectonics Limited (“ the Appellants”) appealed against an assessment dated 8th June 2002 in the sum of £2,611 plus interest of £148.37 representing VAT arrears for the period 1st June 2000 to 31st March 2002.
2.	Mr Stafford appeared for the Appellants and Mr N Bird of Counsel appeared for the Respondents and produced a bundle of copy documents and called Mr J Morgan the assessing officer. 
3.	The parties agreed the duplicated claim to input tax in the sum of £656.00 and that it was not now the subject of this appeal.
4.	The Appellants are construction and property consultants. They employed site engineers to oversee work undertaken on sites within driving distance of their principal office at Pendlebury, Manchester. Some of those engineers worked for agencies and were hired out to the Appellants on a contractual basis.
5.	Both the Appellants’ employees and those from the agencies objected to using their own cars because of the distance they were required to travel, and on occasions the cars got so dirty from the sites and from carrying building equipment that they became unsuitable for private use. The Appellants had therefore agreed to rent Peugeot 203s for each of those employees to use.
6.	The cars were hired for monthly intervals and were insured on the Fleet insurance, which also allowed private use. The cars were not to be used for private purpose, although the employees used then to get form their homes to the site in the early morning. They frequently returned late in the evening again to their homes. As a result the cars were not picked up nor left at Pendlebury at the beginning and end of each day. The cars were therefore available for use when at the employees’ homes.
7.	Mr Stafford was unable to confirm the basis on which the cars had been given to the employees but confirmed that a memorandum was now given to the employees that the cars were not to be used for private purposes.
8.	No record was kept of the mileage as each employee claimed the mileage directly, which could only be for the time they used the car to get to and from the sites. 
9.	We find as fact the matters set out in paragraphs 4 to 8 above.
10.	Article 7(1) of the VAT Input Tax Order (1992) states that .. The letting on hire to a taxable person…..of a motor car shall not be excluded from credit under section 25 of the Act…but the section shall not apply where:-
	7(2) (a) ...it is ….a qualifying motor car ;
	let…. on hire to….. a taxable person;
	and the relevant conditions are satisfied
Article 7(2)(E) states that:-
	…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 ……. 7(2)(G) states that 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 make it available …..for private use, whether or not for consideration. Where the motor car is used for private purposes on a letting on hire one half of the tax shall be charged.
11.	Mr Bird submitted that the provisions of the Order were not straight forward. He commented that the Tribunal had not been helped by the fact that none of the Directors had attended to give evidence and although he did not doubt what Mr Stafford had told the Tribunal, it would have been better to be able to cross-examine the Directors as to their intentions.
12.	Mr Bird referred to Gerald David George Jones T/A Jones & Son v The Commissioners of Customs and Excise  ( LON/96/357) a farmer purchased a Daihatsu 4 Track Vehicle that he intended to make available for private use. Although the farmer clearly intended to use the vehicle for business purposes it was available for private use, and it was not reasonable to suppose that the farmer would not so use it.
13.	Where a Company is concerned, as in this case, the intention must be that of the Directors.
14.	Mr Bird wanted the opportunity to comment on the cases which Mr Stafford wished to refer to. They are :-
•	Squibb & Davies (Demolition) Ltd decision number 17829 case reference (LON/01/653). In that case the Directors were able to demonstrate an intention not to make the cars available for private purposes. The Directors had taken all reasonable and physical steps to prevent private use by:-
Providing in the contracts that the cars were not to be used for private use; the mileage of every journey had to be recorded; the cars were locked up at night; and the Keys had to be obtained daily via security
•	Paterson & Anor [2001] BVC 4167. Mr Stafford had only produced the head note but it was clear from this case that the cars had been physically altered to allow them to be used as a van
15.	Mr Bird further submitted that no real attempt had been made in this case  to ensure that the cars were not used for private purposes. In fact it appeared that the agency workers had not been advised at all that the cars could not be used for private purposes. In those circumstances the assessment was correctly raised and the appeal should be dismissed.
16.	Mr Stafford submitted that the Appellants, through its directors, had wished to make hire cars available to their employees and the agency staff’ so that they would not have to use their own cars. It was abundantly clear to the Directors that if they had not made such an arrangements they would not have been able to employ any staff to carry out the work. The employees and the agency workers had to start early in the morning and frequently arrived home late at night. It was not practical for them to call in at Pendlebury to both collect and return the cars after use.  
17.	The fleet insurance covered private use. The Directors had decided on this cause of action as it was as cheap as paying the employees 40p per mile if they used their own car. In the circumstances the appeal should be allowed.
18.	We have considered the facts and the law and find that the assessment is to best judgement.
19.	The employees and agency staff used the cars to travel from their homes to the sites and to return in the evenings. The cars were also available at home for private use in the evenings when they returned home. They were therefore used for private purposes. Further the Directors have made no attempt to regulate the way in which the cars should be used only for business purposes.
20.	We therefore dismiss the appeal.
21.	The Commissioners made no application for costs and we award none.

D S PORTER
CHAIRMAN
RELEASED:
MAN/02/8098