18644

Misdeclaration of tax – Reasonable excuse – Mistake – Input tax claimed on wrong basis

BELFAST TRIBUNAL CENTRE

	SAMUEL EVANS (EPS PLANT & SAFETY SERVICES)	Appellant

-	and –

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	Respondents

			Tribunal:	HIS HONOUR JUDGE McKEE QC   (Chairman)
					MISS H GIBSON QC	 

Sitting in public in Belfast on 18 December 2003

Mrs E Evans appeared for the Appellant 

Mr B Haley appeared for the Respondents

© CROWN COPYRIGHT 2004

DECISION

1.	By a Notice of Appeal dated the 4th May 2003, the appellant entered an appeal against a misdeclaration penalty in the sum of £421.00 imposed by the Respondents under the provisions of the Value Added Tax (Input) Order 1992.

2.	The Appellant claimed an input tax in respect of the purchase of a vehicle on the grounds that at the time of purchase the Appellant had no intention of making the vehicle available for private use.

3.	At the outset this Tribunal wishes to make it clear that we find no grounds whatsoever for impugning the integrity of the Appellant.  Mrs Evans appeared at the hearing and impressed with her frank and honest approach to the case and the depth of her research.  It is therefore as a tribute to her and to her industry that this decision is prepared in detail to explain the legal principles which apply.

4.	The statutory provisions which apply are set out in Article 7(2G) of the Value Added Tax (Input Tax)(Amendment) (No.3) Order as follows:-

“A taxable person shall not be taken to intend to use a motor vehicle 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.”

It follows then that that the Appellant’s stated intention, however genuine, is not the sole test to be applied in determining whether the terms of the Order have been adhered to so as to enable the Appellant to recover input tax.  The Tribunal, in applying the relevant law, must also consider the question of “availability”, and in that context the question turns on the meaning of “make it available …” in Article 7 (2GO) quoted above.

5.	This Tribunal is not free to interpret these words for itself.  It must have regard to the decided cases in which the point has arisen and been considered by higher costs.  This Tribunal is bound by the decision of those higher courts and of the Court of Appeal in particular.  In deference to Mrs Evans’ industry, it has to be pointed out that the cases on which she relied, and which she cited to this Tribunal, were all decided by Tribunals.  She referred to:-

Nor-Clean v C& E Commissioners
Kennedy v C&E Commissioners
Scotia Homes Ltd v C&E  Commissioners and 
E P Mooney v C&E Commissioners

It also has to be noted that these cases were decided before the judgment of the Court of Appeal in Upton v Commissioners of Customs and Excise.  The Upton case came before a Tribunal sitting in London on the 19th June 2000 and was then decided in favour of the taxpayer/Appellant.  The appeal was heard on the 25th March 2002.  The effect of the judgment of the Court of Appeal was to over-rule and reverse the decision of the Tribunal and all previous decisions which did not accord with that ruling including the cases cited by Mrs Evans.  Moreover thereafter all Tribunals are bound to apply the law as the Court of Appeal stated it to be.  In short, that judgment of the Court of Appeal is deemed to be retrospective laying it down that any previous conflicting decisions have, in effect, misinterpreted Article 7 (2GO).  This will seem unfair to Mrs Evans and the Appellant for, as Mrs Evan pointed out, “how can she and her husband know the law until it is interpreted”?  That is a point which has troubled generations of lawyers.  The law is, however, as I have stated it.  The Court of Appeal in the Upton case is saying that all previous interpretations which do not accord with their interpretation of Article 7 (2GO) are misguided and anyone who relied on them was misled.

6.	The judgment of the Court of Appeal in the Upton case went against the taxpayer.  Lord Justice Peter Gibson, addressing the question of “availability” said:-

“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.”

Lord Justice Buxton agreed with Lord Justice Peter Gibson saying:-

“The question has to be decided as at the moment of acquisition of the car.  On the facts of the present case, I see no escape from the conclusion that the car was at that moment, as a matter of fact, available for Mr Upton’s use, however little he then had any intention of actually so using it.”

Finally Mr Justice Neuberger (as he then was) adding the weight of his judgment to that of Lord Justices Buxton and Peter Gibson acknowledged that:-

“… the consequence of this conclusion may be to render it very difficult for a sole trader, who acquires a motor car exclusively for his business, … to avoid falling foul of paragraph 7 (2G)(b).”

It might be added that the facts of the Upton case conveyed strongly that the taxpayer would not use the car for private purposes.

7.	As already explained this Tribunal is bound to accept and follow the judgment of the Court of Appeal and affirm the imposition of the misdeclaration penalty.  That is the law and this Tribunal is bound to uphold the law.

8.	This Tribunal wishes to state that it sees much merit in the complaint of the Appellant when, in the circumstances as they have appeared, he writes:-

“I feel a more informative/support role should have been taken by the relevant office as opposed to penalizing me in such a harsh manner.”

If this Tribunal had a jurisdiction on the question of interest (which it has not) then the Respondents would not have had the benefit of the interest they claim.  The Tribunal reminds the Respondents that the law is best applied when a kindly discretion is exercised in appropriate cases and this case would appear to such a one.

9.	The appeal is therefore dismissed but this Tribunal makes no order as to costs.

HIS HONOUR JUDGE McKEE QC
CHAIRMAN

RELEASED: 24/05/2004

LON/03/497