A builder who purchased a car for the sole purpose of using it for her business has won an appeal in the First Tier Tribunal (FTT) against HMRC, after it disallowed a claim for VAT on the purchase and charged a penalty for misdeclaration
In the case Borton t/a Contract Build [2016] TC 05224, the issue revolved around whether the purchased Land Rover Freelander, at the time of buying, was intended to be used exclusively for the purposes of the builder’s business or whether she intended, at that time, to ‘make it available’ to herself or any other person for private use.
The FTT, due to the evidence that was presented, found that the builder had no intention to make it available for personal use therefore, the appeal on the VAT of £4,913 was allowed. It also ruled that the related misdeclaration penalty should be set aside.
The builder has a business as sole trader in a specialised sector of the building trade. She bought the vehicle, intending to use it exclusively for the purposes of her business, to transport tools and materials to and from building sites.
She also had another car for personal use. The Freelander was so dirty from business use that it was unsuitable for private use. It was from the outset always intended to be (and actually always was) kept at the appellant’s business address (which also happened to be her home address) when it was being used for the purposes of the business.
It was registered with DVLA at that address and was insured solely for business use. It was available for use on emergency call outs, as well as for normal building work, and was used to tow business equipment, such as a portable office and mobile generators to and from site.
The taxpayer is able at any time to change her mind and extend the insurance cover to private use.
The difficulty which the Court of Appeal grappled with in particular was that, in the case of a sole trader, the very act of buying a motor car means that arguably the trader has made that car available for his or her own private use – even if the trader has a firm and settled intention never in fact to use the car in that way.
The case states: ‘The very fact of his deliberate acquisition of the car whereby he makes himself the owner of the car and controller of it means that at least ordinarily he must intend to make it available to himself for private use, even if he never intends to use it privately.’
However, it was argued that if the taxpayer has specifically arranged and maintained insurance cover which extends only to business use of the car (and has a settled intention to maintain that state of affairs throughout his or her period of ownership), then it is permissible for a tribunal to make a finding of fact that the taxpayer had no intention to make it available to any person for personal use.
The case Borton t/a Contract Build [2016] TC 05224 is here.
