20890

Costs - disallowance of input tax - agreement between parties - appeal allowed - costs not agreed - argument heard - no schedule of costs available - no decision on quantum - Appellant allowed three quarter of costs from the appeal

MANCHESTER TRIBUNAL CENTRE

    6TH GEAR EXPERIENCE LTD              	      Appellant
                                                                   
                                                             and

                   COMMISSIONERS OF REVENUE AND CUSTOMS          Respondents

Tribunal:	Elsie Gilliland (Chairman)
                        Carole Roberts (Member)

Sitting in public in Manchester on 1 October 2008

John Fisher, VAT consultant for the Appellant

Richard Mansell, Senior Advocate of the Solicitors Office of HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2008

DECISION

1. The appeal by 6th Gear Experience Ltd. (the Appellant) is against the disallowance of input tax on its purchase on 21 August 2007 of a Lamborghini Murcielago two-seater sports car registration LP07 EVO (the vehicle). Agreement has been reached between the parties and the appeal is allowed. A direction to this effect of even date with this decision is issued. The matter of costs is not agreed between the parties and the tribunal has heard argument from the parties’ representatives and oral evidence from a director of the Appellant.

2. The costs at issue are those “ incidental to and consequent upon the appeal” (see The Value Added Tax Tribunals Rules 1986 r 29 (1) (a)) and in this case that is from the date of the appeal. There is no itemised bill or schedule of costs before the tribunal and accordingly our decision is not on quantum but on whether the whole or a proportion or none of the Appellant’s costs shall be paid when the same are quantified.

3. The submission of Customs is that in the circumstances of this matter they should not be liable for any of the Appellant’s costs and that each party should bear their own costs. The representative for the Appellant seeks costs and states that Customs should pay at least fifty per cent. of the Appellant’s costs.

4. The matter concerns the operation of Article 7 of the VAT (Input Tax) Order SI 1992/3222. The disputed decision was that of Customs on a review dated 7 February 2008 to uphold the decision to disallow the Appellant’s claim to input tax on the purchase by it of the vehicle. The legal issue is whether there were in place legal and physical impediments to insulate the vehicle from the possibility of private use. The Appellant’s Notice of Appeal was dated 26 February 2008.

5. The appeal of the Appellant has been successful and normally it would be entitled to its costs. The Respondents have disputed this and contended that there was no response to a letter from them dated 28 May 2008 in which they sought to explore certain aspects of the claim in more detail. That letter was explanatory in tone and sought further information from the Appellant as to the vehicle’s unsuitability for use on public roads. By that time the Statement of Case of Customs had been served. There was no reply to the letter until a letter dated 26 September 2008 addressed to the Appeals Unit of Customs from the Appellant’s representative with a faxed copy to Mr. Mansell at the Solicitor’s office on 29 September 2008.

6. In that letter of 26 September 2008 the Appellant’s representative at the hearing Mr. Fisher explained that the Appellant did not receive the letter of 28 May 2008 and was unaware of its contents until Mr. Fisher had received a copy as part of the Respondents bundle of documents the matter having been listed for hearing on 1 October 2008. Detailed information as to the work undertaken on purchase to adapt the vehicle for racing circuit use was given in Mr. Fisher’s letter and was also presented at the hearing together with a copy invoice from Oulton Fabrications dated 21/8/07 endorsed as paid on 23/10/07 for the work of this nature done. The appeal was allowed on Customs withdrawing the block against the allowance of input tax.

7. A further delay was identified in that there was in the papers before the tribunal a copy of a letter dated 19 September 2008 from Mr. Mansell the advocate for Customs to Mr. Fisher’s firm pointing out that there had been no reply to the letter of 28 May 2008 and that it should be examined and information provided as that might “ either avert a Tribunal hearing or aid in focusing the matters in dispute in order to save time and costs during the Tribunal hearing”. Mr. Fisher acknowledged that there had twice been problems in delivery of this with bundles to his firm via a courier service. 

8. The thrust of the Respondents’ submissions that they should not bear the Appellant’s costs is that there had been delay on the part of the Appellant in pursuing its appeal in that it  did not make a timely response to the letter of 28 May 2008 from Customs and that the evidence which satisfied Customs had only been produced at the last minute. Had it been provided earlier the matter might have been resolved earlier without recourse to a hearing.

9. The explanation given by Mr. Fisher for this delay was that the letter had been sent by Customs to the home of a former director of the Appellant and he had not passed it on. Accordingly the Appellant did nothing about it as it did not know about it. We note that the address to which the letter was sent was that on the Notice of Appeal and otherwise used in the correspondence. It has not been suggested that Customs were at fault in the address used. 

10. We have considered whether the hearing was brought about because the Appellant failed to supply information to Customs. In correspondence in December 2007 it was part of the Appellant’s case that the vehicle’s suspension was programmed solely for track use and was not suitable for use on public roads. It was in their letter of 28 May 2008 that Customs took up the reference to this work and sought further information so this possibility was known to them from January 2008.

11. The Appellant’s representative submitted that had a Customs officer inspected the vehicle he would have seen that it could not be used on public roads. We do not consider that it was a necessary obligation on the part of Customs to do so. 

12. We accept that the letter of 28 May 2008 for whatever reason went astray and did not reach the Appellant. In any event the Appellant does not appear to have notified Customs of a change in business address when that would seem to have been appropriate. We accept also the evidence of Mr. Fisher that there was a delay in receipt by him of the letter of 19 September 2008 from Mr. Mansell. That however was to our mind a short time scale and a reminder could more effectively have been sent by Customs a few weeks after there had been no response to the original letter; also the reference made to costs did not make clear that Customs would seek costs at the hearing as they have done.
 
13. There has been a series of delays in the advancement of the matter and it does seem likely that a settlement without a hearing could have occurred with more diligence on the part of both parties in the case of the Appellant by producing in December 2007 the invoice from Oulton Fabrications which it already had for the work it said was relevant and in the case of Customs by more speedily following up the information received in January 2008 rather than leaving it to the time when they had served their Statement of Case.

14.We direct that the Appellant shall receive from Customs seventy five per cent of its costs. If no agreement on the figures is reached by the parties within three months of the date of the release of this decision either party may apply on quantum only to a Chairman sitting alone

Elsie Gilliland
CHAIRMAN

Release date: 4 December 2008

MAN/2008/0234