[2012] UKFTT 113 (TC)
TC01809
Appeal
number: TC/2011/02153
VAT input tax – Vehicles purchased by unregistered sole trader
for use in his business – Business later incorporated and registered – Could
the company reclaim the input tax – No – Appeal dismissed.
FIRST-TIER TRIBUNAL
TAX
SF
EXPRESS COURIER LTD Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS Respondents
TRIBUNAL:
LADY MITTING (TRIBUNAL JUDGE) MR
M FAROOQ (MEMBER)
Sitting in public in Birmingham on 17 January 2012.
Sheldon Forbes, Director,
appeared for the company.
Mrs S A Knibbs, instructed by
the General Counsel and Solicitor to HM Revenue and Customs, for the
Respondents
© CROWN COPYRIGHT
2012
DECISION
1. The
Appellant company appeals against the Decision of the Commissioners notified by
letter dated 3 December 2010, to disallow a claim for input tax in respect of
the purchase of two vehicles.
2. The facts
were not in dispute and we find to be as follows: In 2007, having been made
redundant, Mr Sheldon Forbes set himself up as a self-employed sole proprietor
of a freelance courier service which he titled Alba Express. He did not
register for VAT. In August 2008 he took on a contract with Citylink,
remaining an unregistered self employed sole trader. The work with Citylink
required an upgraded vehicle and on 8 August 2008 he purchased a van, DX56 FNF
(VAT element £2,065). Citylink occasionally offered additional rounds if Mr
Forbes was able to provide a van and driver to carry them out. He therefore,
on 18 September 2008 purchased a second van, BD07 HWS (VAT element £2,292.50).
The invoices for both vehicles were made out to Alba Express.
3. In mid
2010, Mr Forbes was advised by his accountant that he should seek to
incorporate the business. In July 2010 Mr Forbes registered SF Express Courier
Ltd. with Companies House, he being and remaining the sole director. The
Company registered for VAT with effect from 9 July 2010 and the registration remains
extant. The change in trading entity brought about no change in the running
of the business. The contract with Citylink remained unchanged and to all
outer appearances the transition was seamless. Between October and December
2010, Mr Forbes telephoned the Commissioners’ National Advice Service. There
was before us a very garbled summary of one of the calls dated 9 December. It
is impossible from this to gain any coherent idea of what was said by either of
the parties but suffice it to say, Mr Forbes came away from his telephone
conversations understanding that he was entitled to reclaim the VAT which he
had paid on the purchase of the two vans. In the Company’s first Return for
period 10/10 the Company sought to reclaim as input tax the VAT element of the
two purchases plus the VAT paid on a third van purchased in September 2010
about which there is no dispute. The Commissioners refused repayment for the
two vans purchased by Alba Express.
The Law
4. Regulation
111(1) of the VAT Regulations 1995 provides as follows:
“(1)
Subject to paragraphs (2) and (4) below, on a claim made in accordance
with paragraph (3) below, the Commissioners may authorise a taxable person to
treat as if it were input tax –
(a)
VAT on the supply of goods or services to the taxable person before the date
with effect from which he was, or was required to be, registered, or paid by
him on the importation or acquisition of goods before that date, for the
purpose of a business which either was carried on or was to be carried on by
him at the time of such supply or payment, and
(b)
In the case of a body corporate, VAT on goods obtained for it before its
incorporation, or on the supply of services before that time for its benefit or
in connection with its incorporation, provided that the person to whom the
supply was made or who paid VAT on the importation or acquisition –
(i) became
a member, officer or employee of the body and was reimbursed, or has received
an undertaking to be reimbursed, by the body for the whole amount of the price
paid for the goods or services,
(ii) was
not at the time of the importation, acquisition or supply a taxable person, and
(iii) imported,
acquired or was supplied with the goods, or received the services, for the
purpose of a business to be carried on by the body and has not used them for
any purpose other than such a business,”
The Appellant’s Submissions
5. Mr
Forbes contended that he had been the sole owner of what was in effect a
continuing business and the vans had been purchased by him for the sole use of
that business and the VAT should therefore be repaid to him on registration.
Referring to regulation 111(1) Mr Forbes relied upon (1)(b) and (1)(c). The
goods had been purchased by him before incorporation. He became an officer of
the incorporated company and the goods were to be used for the purposes of the
incorporated company. Once he received back the VAT he would use it for
further investment in the company.
Conclusions
6. We
refer firstly to the telephone calls to the National Advice Service. As we
have said, we only saw a summary of one call and that was far from clear. Mr
Forbes said that he took from the calls that he was entitled to reclaim input
tax and we have no reason to doubt that his evidence on this is true and that he
genuinely believed he held that entitlement. However, this cannot avail him
before the Tribunal as we are concerned solely with the interpretation of the
legislation and an application of the facts to those provisions. The
Commissioners had originally raised a penalty and the content of the telephone
calls would have been highly relevant to that penalty. However, the penalty
had subsequently been withdrawn and was not therefore an issue before us. As
we say, we are concerned with establishing the facts and applying the statutory
provisions to them.
7. It
is clear from Regulation 111, that the Appellant Company has no entitlement to
recover the input tax. Regulation 111(1) authorises, in the discretion of the
Commissioners, a repayment to a taxable person of the VAT on a supply of
goods to that taxable person. In this case the taxable person is SF
Express Courier Ltd. but the goods were not supplied to SF Express Courier
Ltd., but to Alba Express, never a taxable person. Looking specifically at (b)
and following up Mr Forbes’ contention, this does not assist him either.
First, the goods were not obtained for it. They were purchased for Alba
Express. Secondly, (b)(iii) provides that the goods should not have been used
for “any purpose other than such a business”. In fact the goods were used for
almost two years in the running of Alba Express. Thirdly, (b)(i) provides that
the person to whom the supply had been made should be reimbursed. Mr Forbes
confirmed that that had not happened and no money had changed hands. Alba
Express/Mr Forbes were not reimbursed. In short, what has happened here is
that Mr Forbes purchased the vans for use in his sole proprietorship, Alba
Express, which continued to use them for some two years. A new trading entity,
SF Express Courier Ltd., was then formed and the vans continued to be used by
the Company. This does not however entitle the Company to reclaim as input tax
VAT which was paid by Alba Express on the purchase by Alba Express of the
vans. The Appeal therefore has to fail and is dismissed.
8. This
document contains full findings of fact and reasons for the decision. Any party
dissatisfied with this decision has a right to apply for permission to appeal
against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal)
(Tax Chamber) Rules 2009. The application must be received by this Tribunal
not later than 56 days after this decision is sent to that party. The parties
are referred to “Guidance to accompany a Decision from the First-tier Tribunal
(Tax Chamber)” which accompanies and forms part of this decision notice.
TRIBUNAL JUDGE
RELEASE DATE: 26 January 2012
