18979
VAT – Input Tax Credit – taxable person purchasing Range Rover for purposes of business – whether intended to be made available for private use – claims made for 75% business use – actual private use admitted – appeal dismissed.

EDINBURGH TRIBUNAL CENTRE

	WILLIAM BEATTIE	Appellant

	- and -

	THE COMMISSIONERS OF CUSTOMS AND EXCISE	       Respondents

			Tribunal:	 (Chairman):  T Gordon Coutts, QC

Sitting in Edinburgh on Monday 28 February 2005

for the Appellant		Ms E M Bell, Accountant

for the Respondents	Mr Andrew Scott, Shepherd & Wedderburn, WS

© CROWN COPYRIGHT 2005.

DECISION

Mr Beattie, who trades as Kilmartin Garage appealed against the disallowance of 75% of the VAT charged him on the acquisition of a Range Rover vehicle which he intended to use primarily for his business.

In the course of his evidence to the Tribunal Mr Beattie stated that he kept the vehicle at his house, 8 miles from his business, so that it was available for an emergency.  The vehicle, photographs of which were produced, is clearly painted Kilmartin Garage.  It has a distinctive registration number, MOT4, and is adapted to tow a trailer which is employed by Mr Beattie for the recovery of vehicles which have encountered some mishap.

He said that he acquired the vehicle as it was powerful and able to cope with the special demands of his business in his part of Scotland.  It was able to carry and did normally carry various spare parts and tools for the repair of vehicles, but it could also be restored to a vehicle carrying 4 passengers in the event of the occupants of a broken down vehicle requiring transport. 

He also said that his wife had used it for the transport of a television set to the parties house, that she could use it, with his permission, for such purposes and that the insurance which applied to the vehicle covered domestic social and pleasure purposes of himself, partner, spouses and any employee in the insured’s business.

In relation to the insurance he said that his insurance was a motor traders insurance and that that was the only form in which it was reasonably available to him.  The Tribunal is at a loss to understand why an insurer would not be able to exclude private use in a vehicle registered, as this one was, by a business albeit a business which was the sole property of Mr Beattie.

The claim which was made for refund of tax was restricted to 75% of the total in order, to quote the accountant Ms Bell, who gave evidence in writing, to allow for some private use.  This she said was because the vehicle was taken home.

The Tribunal had no hesitation in accepting Mr Beattie’s bona fides and honesty.  He conceded that there was in fact some private use albeit a very small proportion indeed and explained at some length the business rationale for having the vehicle, for its purchase and the circumstances whereby he had relied on a refund of VAT to finance the exercise.  Photographs of the vehicle were produced which shows a very smart kenspeckle vehicle which carries the name of the garage on it, which must be a business asset.

He said that his intention had been to acquire a business vehicle.  There can be no doubt about that.  However on the evidence this was not exclusively a business vehicle because it has not been so used.  Even however, had the evidence been that there had been no private use at all the appeal would still have failed.

The law applicable to the circumstances is found in the VAT (Input Tax) Order 1992 Article 7 the relevant parts which read as undernoted:

7-(1) Subject to paragraph (2) [to (2H)]² below tax charged on- 

(a)	the supply [(including a letting on hire)]² to a taxable person;
(b)	the acquisition by a taxable person from another member State; or
(c)	the importation by a taxable person,
of a motor car shall be excluded from any credit under section [25]¹ of the Act.

[(2}  Paragraph (1) above does not apply where- 

(a)	the motor car is-
(i)	a qualifying motor car;
(ii)	[supplied (including on a letting on hire) to]³, or acquired from another member State or imported by, a taxable person; and
(iii)	the relevant condition is 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-

(a)	let it on hire to any person either for no consideration or for a consideration which is less than that which would be payable in money if it were a commercial transaction conducted at arms length; or
(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.

This vehicle was a qualifying motor car.

Further the Tribunal is bound by the decision of the Inner House at the Court of Session in Customs and Excise Commissioners v Skellett 2004 STC 201.  In that case the taxpayer was accepted as having no intention of using the vehicle for social, domestic or private purposes; the Tribunal allowed the input tax credit but the Inner House ruled at para 13 of their decision 

[13]  It appears to us that, where a motor vehicle is acquired by a sole trader ‘who intends to use the motor car … (a) exclusively for the purposes of a business carried on by him …’, nevertheless that vehicle will indeed have been made available to that person for private use, unless effective steps are taken to render the vehicle incapable of such use by that person.  In other words, upon the view that a person must be taken to intend the natural consequences of their own actions, that person may properly be taken to intend to make the vehicle available for private use, unless such steps are taken by him.

The decision, following a similar one in England renders it virtually impossible in the Tribunal’s view for a sole trader to satisfy the exclusive test.  That might have been done had Kilmartin Garage been a limited company and suitable instructions been issued or it might perhaps have been done by so arranging insurance that to use the vehicle for private purposes would be the offence of driving while uninsured.  None of these matters arise however since on the facts in the present case there was private use and in terms of the insurance the vehicle was available for non-business use from the time of its purchase in any event.

The Tribunal is bound by Skellett and following it must dismiss this appeal.

T GORDON COUTTS, QC

CHAIRMAN

RELEASE:  1 MARCH 2005

EDN/04/129