20429
INPUT TAX — motor car — purchase of vehicle to take business clients track car racing — whether intention to make available for private use — no restrictions on private use — appeal dismissed

MANCHESTER TRIBUNAL CENTRE

 
 	
					COLIN GRIFFITHS	Appellant

- and -

THE COMMISSIONERS FOR
				HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

Tribunal: Lady Mitting (Chairman)
					  Marilyn Crompton		
					
Sitting in public in Manchester on 2 October 2007

The Appellant appeared in person 
 
Richard Chapman, counsel, instructed by the Solicitor and General Counsel for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2007

DECISION

1.	The Appellant appeals against an assessment to VAT in the sum of £4,066 plus interest issued on 14 February 2006 for period 07/04.  The assessment was raised to recover input tax which the Commissioners maintain was wrongly claimed on the Appellant’s purchase of a Mitsubishi Lancer Evo 8.  
2.	We heard oral evidence from Mr Colin Griffiths.  The Commissioners called no oral evidence.  
The Evidence
3.	Mr Griffiths trades as the Taurus Group, which is a multi activity business trading in areas as diverse as technology, security, construction and corporate entertainment.  One division of the business is Taurus Action, described in the Group’s brochure as the “Corporate Entertainment and Activities Division”.  The Division provides a number of entertainments including “the experience of driving fast cars on different tracks around the country”.  In mid 2004, Mr Griffiths decided to purchase the Mitsubishi, the sole purpose of which was to enable business clients to be taken track car racing.  On 30 June 2004, Mr Griffiths telephoned the Commissioners’ Enquiry Centre.  He is recorded as asking: 
“We run a race track for corporate events and are purchasing a new car solely for this purpose.  Can we recover the input tax?”
4.	The recorded response is that Mr Griffiths was referred to Public Notice 700/64, paragraph 3.5 and 3.7 and was told that provided those conditions were met input tax could be recovered.  Paragraph 3.5 and 3.7 read as follows:
	“3.5	when is a car used exclusively for business purposes?
A car is used exclusively for a business purpose if you use it only for business journeys and it is not available for private use.  This means that you do not intend to make it available for the private use of employees or anyone else.
3.7	Can I recover the VAT incurred when I buy a pool car?
Yes as long as it is:
Normally kept at the principle place of business
Not allocated to an individual and
Not kept at an employee’s home.”

5.	Paragraph 3.6 to which he was apparently not specifically referred, qualifies paragraph 3.5 and reads as follows:
	“3.6	What does ‘making it available for private use’ mean?
A car is available for private use when there is nothing preventing you or your employee from using the car for private use.  The fact that you bought your car for the purpose of your business is not the only requirement.  You need to ensure that the car is not made available to anyone else.” 
6.	Knowing that the car was to be used exclusively for business purposes, Mr Griffiths, having made his purchase, reclaimed the input tax in his 07/04 return.  The vehicle had been first registered on 21 May 2004.  The invoice for the purchase was dated 29 June 2004 and Mr Griffiths took possession on 14 October 2004.  The car was already taxed to the end of November and Mr Griffiths’ secretary renewed the road fund licence for 12 months on expiry, something which she did, we were told, automatically.  
7.	Mr Griffiths told us that vehicles used in track car racing are not insured by their owners but are covered whilst on track by the event insurers.  The vehicles would be taken to and from events on a trailer and as they would, in the normal course of events, never be driven on the road, they would not normally need to be insured.  However, this car had to be driven on collection from the dealership to Mr Griffiths’ garage.  This journey, being undertaken on the road, necessitated insuring the car, which Mr Griffiths arranged with his business insurers.  The insurance certificate to which we were referred ran from 14 October 2004 to 26 August 2005.  The policy covered social, domestic and pleasure purposes and expressly excluded “racing, competitions, rallies, trials, track days and 4x4 off-road events”.  As Mr Griffiths pointed out, this did not matter to him in the least because he was not expecting this policy to cover the vehicle whilst track racing. 
8.	Apart from the journey undertaken on collection, this vehicle was only ever driven on the road on one other occasion and that was shortly after purchase when the trailer was unavailable and it was driven to the track.  On no other occasion was the vehicle driven on the road, although of course the insurance certificate did remain in force.  
9.	About a month after purchase, Mr Griffiths carried out various modifications to the vehicle including taking out the conventional seat belts and replacing them with racing belts and also installing a roll-cage.  The purpose of the modifications was to equip the vehicle for track racing.  Their effect, we were told by Mr Griffiths, would be two fold.  First, it would be illegal to drive the car on the road because its new seat belts did not meet the statutory on road requirements and secondly, the adaptations would have invalidated the insurance cover.
10.	On 1 June 2006, Mr Griffiths made a Statutory Off Road Notification.  He had not made one before because he had not thought to do so.
The Legislation
11.	Input tax may not be recovered on the purchase of a motorcar by virtue of Article 7(1) of the VAT (Input Tax) Order 1992 (“The Order”):
	“7(1)	Subject to paragraph (2) to (2H) below tax charged on —
(a)	the supply (including a letting on hire) 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] of the Act.

12.	However, this is subject to the exceptions in Article 7(2), in particular Article 7(2)(a), 7(2E) and 7(2G):

“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, or acquired from another member State or imported by, a taxable person; and
(iii)	the relevant condition is satisfied;

(2E)	For the purposes of paragraph (2)(a) above the relevant condition is that the letting on hire, supply, acquisition or importation (as the case may be) is to a taxable person who intends to use the motor car either—
(a)	exclusively for the purposes of a business carried on by him, but this is subject to paragraph (2G) below; or 
(b)	primarily for a relevant purpose.

(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.”

13.	We were referred by the parties to the following cases:
•	Commissioners of Customs and Excise v Upton (2002) EWCA Civ 520 
•	Commissioners of Revenue and Customs v Shaw (2006) EWHC 3699 (Ch)
•	Mitchells Agriculturals Ltd v Commissioners of Revenue and Customs, Decision No. 19913

Submissions
14.	Mr Griffith’s submission was that he had followed the advice given to him by Customs.  He had been told that if he used the vehicle for business purposes he could recover the input tax and it had at all times been used for business purposes.  
15.	Mr Chapman’s contention was that to enable input tax to be recovered, conditions 7(2E) and 7(2G) both had to be met and the crux of the case was whether or not the vehicle was available for private use.  In this case it was so available because there was no restriction on such use.
Conclusions
16.	The issue to be decided is whether the Appellant can show on a balance of probabilities that at the time the vehicle was purchased, he intended it to be used exclusively for business purposes with no intention of making it available for private use by any person.  Buxton LJ in Upton at paragraph 28 considered the meaning of  “make available for use” in the following terms:
“The first issue is, therefore, what the draftsman meant by ‘make available for use’.  That is an ordinary English expression, deliberately different from ‘use’ itself.  An object can be available for use without there being any present intention or actually using it.  Just as, for instance, a person can be available for, say, military service without there being any intention that he should serve or be asked to serve.”
Also in Upton, Neuberger J stated at paragraphs 41 and 44:
“41.	If an article is supplied by one person to another with no physical or legal restraint as to a particular use, then it appears to me that, as a matter of ordinary language, the article has been ‘made available’ for that use.  The fact that neither the supplier nor the recipient expects, or even intends, the article to be put to the particular use does not prevent the article being ‘available’ for that use, if there is no physical or legal restraint on such use by the recipient.  Further, it cannot be said, at any rate as a matter of ordinary language, that the supplier does not ‘make’ the article available for that use, simply because he does not expect or intend it to be put to that use.  If he supplies the article so that it is, as a matter of fact, available for a particular use, then he has, in normal parlance, made it available for that use.  On the other hand, if the supplier provides the article under a contract which bona fide precludes the recipient from putting it to a particular use, or if it is supplied only at such times that it cannot be put to a particular use, then there is clearly a powerful argument for saying that it has not been ‘made available’ for such use.”
17.	In Shaw, Lindsay J considered the application of the legislation to a sole trader, i.e. someone in Mr Griffiths’ position who is not incorporated.  He concluded that the legislation was so restrictive that it was difficult to see how a sole trader could ever pass the (2G) test.  
18.	We fully accept the evidence of Mr Griffiths.  There is no evidence before us that the vehicle was used privately and we find as a fact that it was used exclusively for business purposes.  However, that is not sufficient.  Mr Griffiths has to establish that the vehicle was not available for private use.  In practical terms, in order for him to succeed, he must show that there was an effective prohibition or restraint on private use.  The vehicle will be “made available” if it is available in fact and Mr Griffiths has done nothing to prevent its private use.  
19.	The position has to be examined at the time of purchase.  At the time of purchase, for reasons which we fully accept and understand, the Mitsubishi was covered by a certificate of motor insurance for use on the road for social, domestic and pleasure purposes.  It was covered by a valid road fund licence for use on the road.  There was nothing to prevent Mr Griffiths driving it on the road if he had so wished.  In the absence of any restraint on private use, we are obliged to find that the vehicle was in fact available for private use.  At the time of purchase, Mr Griffiths was legally and physically free to use the vehicle privately if he so wished.  Because of this, Mr Griffiths has not been able to meet the condition laid down in Article 7(2G) and the appeal must therefore be dismissed.  We would stress that Mr Griffiths came across as a truthful and straightforward witness. We do not doubt his evidence and we have every sympathy for him in the predicament in which he finds himself.
20.	The appeal is dismissed.  Mr Chapman made no application for costs and we make no order.

LADY MITTING
CHAIRMAN
Release Date: 22 October 2007
MAN/06/0144