19697                                
VAT – ZERO-RATING  -  transport  -  Vauxhall Corsa supplied with automatic transmission, air conditioning and power steering but not otherwise modified for use by a disabled person  -  whether vehicle designed or substantially and permanently adapted for the carriage of a person in a wheelchair  -  whether supply should be zero-rated  -   no  -  appeal dismissed

	

MANCHESTER TRIBUNAL CENTRE

 
 	
	MR A M HORSTEAD	Appellant

	- and -

THE COMMISSIONERS FOR
	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

				Tribunal:	Michael Johnson (Chairman)
						Marjorie Kostick BA FCA CTA

Sitting in public in York on 27 July 2006

There was no appearance for the Appellant

Tariq Sadiq, counsel instructed by the Solicitor for H M Revenue and Customs for the Respondents

	© CROWN COPYRIGHT 2006

DECISION

1.	The Appellant Mr Horstead has invited the tribunal by letter to proceed to hear this appeal in his absence.  We are empowered to do that under rule 26(2) of the Value Added Tax Tribunals Rules 1986 (as amended).   No objection to our so doing was raised by Tariq Sadiq of counsel, who represented Her Majesty’s Revenue and Customs (“HMRC”) at the hearing.  We have therefore proceeded to hear the appeal.

2.	The issue for decision in this appeal is whether the supply of a motor car to the Appellant ought to have been zero-rated for value added tax pursuant to section 30 of the Value Added Tax Act 1994 (“the Act”).  Under Schedule 8, group 12, item 2 of the Act, the supply to a handicapped person, for domestic or his or her personal use, of motor vehicles –

“ …  designed or substantially and permanently adapted for the carriage of a person in a wheelchair or on a stretcher and no more than 11 other persons”

is a zero-rated supply by virtue of section 30(2) of the Act.  The Appellant’s case is that the supply of the car should have been zero-rated.  The case for HMRC is that the supply was properly standard-rated for VAT.

3.	Mr Sadiq has provided us with a bundle of relevant copy documents from which we have been able to discern the circumstances of the supply. 

4.	On 1 September 2005, the Appellant purchased a new Vauxhall Corsa 1-litre car with automatic transmission, air conditioning and power steering.  The vehicle was ordered from a car dealer in South Hykeham, Lincoln.  

5.	The Appellant bought the car on behalf of his disabled daughter, who suffers from DiGeorge Syndrome.  She has congenital heart disease (pulmonary atresia, ventricular septal defect with collaterals), and she also has scoliosis and has had spinal fusion treatment.  She is in receipt of disability living allowance at the higher rate.

6.	There is no dispute that the daughter is a handicapped person as mentioned in item 2 of group 12 of Schedule 8 of the Act.

7.	Although it appears that the Appellant and not his daughter bought the car, we will regard the car for the purposes of this appeal as supplied to the daughter for her domestic or personal use.  Family members of the disabled person who purchase the vehicle for the disabled person’s use are normally regarded by HMRC as entitled to the same zero-rating relief as if she had bought the vehicle herself.  

8.	As stipulated in H M Customs and Excise Notice 701/59 (March 2002) “Motor Vehicles for Disabled People”, the car dealer supplying the vehicle duly took responsibility for the VAT treatment of the supply.  In this case, the dealer was not prepared to complete a declaration in the form exemplified at page 27 of that Notice, certifying entitlement to zero-rating, and the dealer referred the Appellant to HMRC for advice.

9.	On 22 September 2005, HMRC advised the Appellant that in order for the supply to be zero-rated, the vehicle needed to have been permanently adapted.  The Appellant was told that the fitting of automatic transmission and air conditioning did not amount to such an adaptation.

10.	On 30 September 2005, the Appellant wrote to HMRC to say that he believed that the supply qualified for zero-rating as his daughter fell within the second paragraph of section 2.2 and section 3.6 of Notice 701/59.  Those paragraphs concern persons who do not need to use a wheelchair all the time, and who occupy a seat in the vehicle instead of remaining seated in their wheelchair whilst travelling in the vehicle.

11.	On 14 October 2005, Ms K M Hall, an officer of HMRC, wrote to the Appellant giving the decision of HMRC that as the car purchased had no adaptations, the supply was correctly standard-rated for VAT.  She stated that the purchase of the vehicle did not meet the conditions for zero-rating given at paragraph 2.1 of Notice 701/59.

12.	On 25 October 2005, the Appellant replied to that letter.  He said that he relied upon the second paragraph of section 2.2 of Notice 701/59, not paragraph 2.1.  He continued:

“In addition, with reference to automatic transmission and air conditioning, both of these are essential for my disabled daughter and were requested as additions to a basic Corsa.  We were advised by the dealer that it would be more economical to purchase a higher specification vehicle which already had these items fitted as standard.”

The Appellant sought a local reconsideration of Ms Hall’s decision.

13.	Also on 25 October 2005, the Appellant wrote a separate letter to HMRC setting out the details of the purchase of the car, the details of his daughter’s disabilities, and again stating that he believed that the supply qualified for zero-rating under the second paragraph of section 2.2 and section 3.6 of Notice 701/59.            

14.	On 8 November 2005, Mr S M Webster, a higher officer of HMRC, wrote to the Appellant confirming Ms Hall’s decision.  He wrote that, although the Appellant’s daughter might use a wheelchair occasionally, the vehicle itself had not been adapted in any of the ways mentioned in paragraph 2.1 of the Notice, and therefore did not qualify for zero-rating under Schedule 8, group 12, item 2 of the Act.  He informed the Appellant of his rights to appeal to this tribunal.

15.	The Appellant issued his appeal on 8 December 2005, treating the confirmatory decision in the letter dated 8 November 2005 as the decision appealed against.

16.	For HMRC, Mr Sadiq submitted that the vehicle was without modifications of a kind specifically directed to enabling a disabled person to drive it.  He submitted that automatic transmission, air conditioning and power steering were options commonly specified by able-bodied persons.  They were normal additions, he said, not adaptations of the sort that would make the vehicle particularly appropriate for a disabled person.  Consequently, he submitted, the supply was correctly standard-rated.  Zero-rating did not apply.  

17.	In arriving at our decision, we have taken account of the contents of the Appellant’s letter inviting us to proceed in his absence.  In that letter, the Appellant makes clear his very strong disagreement with the requirements of the Act for zero-rating in the case of motor vehicles purchased for the use of handicapped persons.  In effect, he invites us to express our disapproval of these requirements, in so far as they may prevent the zero-rating of the purchase of the car in this case.

18.	However we do not feel that we can properly do this.

19.	It is clear that this appeal is based upon the proposition that the addition of optional automatic transmission, air conditioning and power steering to the specification of a basically-equipped Vauxhall Corsa should zero-rate the supply of the vehicle, when those options are only specified because the user of the vehicle is handicapped and needs those additions to help her condition.  

20.	In our opinion, however, the rationale of the legislation is that vehicles that qualify for zero-rating are those that have characteristics that make them different, in a substantial way, from vehicles that might commonly be supplied to able-bodied persons.   Zero-rating relief is not intended to cover all supplies of goods and services to disabled persons.  Indeed, looking at item 2 of group 12 of Schedule 8 of the Act in a general way, and specifically the “catch-all” item 2(g), it is clear that whilst zero-rating applies to a wide range of equipment and appliances designed solely for use by a disabled person, nevertheless if a particular item is designed for general use, ie both by the able-bodied and the disabled, the supply of that item will not be zero-rated.

21.	We do not believe that the General Motors Corporation, manufacturers of the Vauxhall Corsa, would regard a Corsa with the specification that we are considering as having been designed or substantially and permanently adapted for the carriage of a disabled person.  Many such vehicles equipped with automatic transmission, air conditioning and power steering must be sold for use by the able-bodied.  Indeed, when the Corsa in the present case eventually comes to be sold, we believe that it will be as attractive to the general user as to the disabled user, because there is nothing about the vehicle that marks it out as designed or adapted for a disabled user.

22.	We are therefore in agreement with Mr Sadiq that this appeal ought not to succeed.  We indicated at the conclusion of the hearing that the appeal would be dismissed.  This decision records the outcome of the hearing and sets out our reasons for the dismissal.

23.	No application for costs was made and none are awarded.

Michael Johnson
CHAIRMAN
Release Date: 9 August 2006
MAN/05/858