20198

ASSESSMENT – FUEL SCALE CHARGE – Appellant reclaimed input tax on fuel purchases contending the fuel used exclusively for business purposes – input tax claimed for journeys from home to work – Appellant could not  guarantee that its engineers used company fuel exclusively for business purposes – input tax claim related to fuel used for business and private use – Appellant failed to account for output tax on private use in accordance with road fuel scale charge – assessment upheld – Appeal dismissed.

MANCHESTER TRIBUNAL CENTRE

	RAPIDE SECURITY AND SURVEILLANCE LIMITED  	Appellant

	- and -

	HER MAJESTY’S REVENUE and CUSTOMS	Respondents

			Tribunal: MICHAEL TILDESLEY OBE	 (Chairman)

Sitting in public in Birmingham on 10 May 2007

Raymond Barker for the Appellant 

Bernard Hayley, Advocate HM Revenue and Customs for the Respondents 

© CROWN COPYRIGHT 2007

DECISION
The Appeal
1.	The Appellant was appealing against an assessment dated 28 April 2006 in the sum of £1,808 plus interest for periods 06/03 to 12/05 inclusive.
The Dispute
2.	The Appellant supplied, installed and maintained fire alarms and security systems. The Appellant provided its engineers with vehicles to perform their employment duties. The Appellant reclaimed the VAT on the fuel purchased for the vehicles because the fuel was used exclusively for business purposes. The Respondents disagreed. They considered that the fuel was used for private and business purposes, in which case the Appellant should have accounted for output tax on the private element of the fuel used under the road fuel scale charge (hereinafter referred as RFSC). The assessment represented the RFSC for five vehicles with diesel engines between 1.4 litres and 2.0 litres for the disputed accounting periods.
3.	The dispute, therefore, was whether the fuel purchased by the Appellant for the engineers’ vehicles was used for private and business purposes.
The Evidence
4.	I heard evidence for the Appellant from Mr Barker, the managing director, and Mr Hatton, an engineer. Mr Wilkins, the officer who carried out the review of the assessment, gave evidence for the Respondents. The parties supplied a bundle of documents. 
The Facts
5.	The Appellant had been in business since 1986, employing 14 members of staff comprising two directors, five office staff and seven engineers. Its turnover was £1.1 million, of which 50 per cent was derived from maintenance contracts. The Appellant’s principal premises was located on Alum Rock Road, Ward End Birmingham which housed the office and stock room for the business. 
6.	The Appellant had 11,000 clients largely based within an 80 mile radius of Birmingham with clients also in other areas extending as far as Cornwall and Glasgow. The Appellant was NSI registered, and as a consequence obliged to provide a four hour response to an emergency call.  The Appellant required its engineers to participate in an on-call rota so that they could respond to emergency calls. The Appellant provided the engineers with a vehicle, either a Ford transit van or a Ford focus estate car, to perform their duties. The vehicles were used to transport ladders secured to roof bars, various power drills, recharging units, at least two tool boxes, consumable stock, and daily stock for the purposes of installation. The engineers could choose whether they had a van or an estate car, which had no markings on it to indicate that it belonged to the Appellant. Five of the engineers chose an estate car, the fuel for which was the subject of the dispute.
7.	The engineers kept the company vehicles at their home addresses in order for them to respond promptly to call-outs. They used the company vehicles to travel from their home to the Appellant’s premises on Alum Rock Road about three times a week spending no more than fifteen to thirty minutes on each visit replenishing stock and collecting or returning paperwork. Mr Barker considered that the engineers treated their homes as their place of employment. However, the engineers’ contracts of employment specified the Appellant’s premises at Alum Rock Road as their normal place of work.
8.	The Appellant supplied the engineers with a credit card to purchase fuel.  The Appellant told the engineers on their appointment that the fuel purchased with the card was to be used for business use only. If the engineers used the vehicles for private use they were required to pay for their own fuel. The Appellant issued the engineers with written reminders of its policy regarding the use of company fuel which since June 2005 had been incorporated in the engineers’ contracts of employment. 
9.	The engineers possessed their own cars for private journeys. Mr Hatton, however, accepted that he occasionally used the company car for private use but always reimbursed the Appellant for the fuel used. Mr Barker acknowledged that he had no means of checking whether the engineers paid for the fuel when they used the company vehicles for private use. However, he was adamant that he constantly reminded the engineers about using company fuel exclusively for the Appellant’s business, which Mr Hatton confirmed.
Reasons for the Decision
10.	 The Respondents Notice 7004/64 outlines the options for businesses which have incurred VAT on their purchases of road fuel:
(1)	reclaim the VAT as input tax where the fuel has been exclusively used for business purposes;
(2)	reclaim the VAT as input tax and apply the RFSC where the fuel has been used for private and business purposes;
(3)	restrict the reclaim for VAT as input tax to that part of  the fuel used for  business purposes as evidenced by detailed mileage records where the fuel has been used for private and business purposes.
(4)	reclaim no VAT as input tax which would avoid applying the RFSC.
11.	The RFSC is a simplification measure which enables businesses to recover the VAT on fuel purchases used for private and business use without the need to keep detailed mileage records. Under RFSC businesses are required to account for a fixed amount of output tax based on the cubic capacity of the vehicle for the supply of fuel for private purposes.
12.	  The Appellant contended that it was entitled to reclaim in full the VAT incurred on its fuel purchases for the five estate cars allocated to its engineers because the fuel had been used exclusively for business purposes. The Appellant required the engineers to pay for their own fuel for private use of the estate cars. The Appellant considered that their engineers worked from home, and that their journey from home to the Appellant’s premises on Alum Rock Road was for business purposes.
13.	The Respondents were of the view that the engineers’ journeys from their homes to the Appellant’s business premises constituted private motoring rather than business use. They referred to the decision in Magor Products Engineering Ltd [1991] VTD 6532 where the Tribunal held that trips between home and place of work were for private use. Further the Respondents considered that there was an element of private use when the engineers were called out from their homes where the journey followed the same route to the Appellant’s business premises. The Respondents also relied on Mr Barker’s evidence that he could give no absolute guarantee that the engineers paid for the fuel when their estate cars were used for private journeys.
14.	 The burden is upon the Appellant to satisfy the Tribunal on the balance of probabilities that the assessment was incorrect. The Appellant contended that their engineers worked from home with the implication that their home address was their place of work. The engineers’ contract of employment, however, stated differently naming the Appellant’s premises on Alum Rock Road as the place of employment. Also the engineers were required to attend the Appellant’s premises to pick up and return work sheets, as well as replenishing stock. 
15.	I am satisfied that the engineers’ visits to the Appellant’s premises were not just a routine stopover as part of a business journey but a discrete trip for the purpose of enabling the Appellant to allocate work to its engineers and check on jobs done. The Appellant managed its engineers at its premises not at their homes. Further the contract of employment named the Appellant’s premises as the engineers’ place of work. I find that the engineers’ place of employment was the Appellant’s premises on Alum Rock Road not their home addresses. 
16.	The Appellant recovered the VAT on the fuel used by the engineers on the journeys from their homes to their place of employment. The Tribunal stated in Magor Products Engineering Ltd [1991] VTD 6532 that
“It is well established on Income Tax law that travel between home and place of work is not treated as business mileage. This has been adopted for VAT and is referred to in the tribunal decision McLean Homes (Midland) Limited v the Commissioners of Customs and Excise MAN/89/363) unreported”.

17.	 I agree with the statement of law as expressed by the Tribunal in Magor Products. I find that the engineers’ trips from their homes to the Appellant’s premises were for private purposes. Thus the Appellant has recovered VAT on fuel used by their engineers for private journeys. Also Mr Barker’s evidence did not convince me that the engineers purchased their own fuel for other private journeys in the company estate cars during the accounting periods covered by the Respondents’ investigation. Mr Barker fairly stated that he could give no guarantee that the engineers followed the Appellant’s instructions on the use of company fuel. Also I consider it significant that the restrictions on the use of company fuel were not incorporated as a term in the engineers’ contracts of employment until June 2005. 
Decision
18.	I, therefore, hold that the Appellant has reclaimed VAT on purchases of fuel used for business and private use during the accounting periods 06/03 to 12/05 inclusive. In those circumstances the Appellant was required to account for output tax under the RFSC. I uphold the assessment in the sum of £1,808 plus interest for periods 06/03 to 12/05 inclusive.
19.	I dismiss the Appeal and make no order for costs.

                                 MICHAEL TILDESLEY OBE
CHAIRMAN
Release Date: 13 June 2007

MAN/06/0667