Commissioners for Customs and Excise v Upton

For the purposes of the disqualification from VAT input-tax deduction, an intention to make a motor car available for private use is distinct from an intention actually to use it privately. The relevant intention is assessed when the car is acquired. An individual who acquires and controls a car, without legal or physical restrictions preventing private use, will ordinarily be taken to intend to make it available to himself for private use, even where he intends to use it only for business. The statutory conditions concerning exclusive business use and private availability are cumulative and serve different purposes.

Mr Upton, a sole trader, acquired a Lamborghini and claimed a deduction for the input VAT, asserting that it was acquired exclusively for business use. The VAT tribunal accepted his evidence that he had no intention of using the car privately and allowed his appeal.

The Commissioners appealed on a point of law. The Vice-Chancellor allowed the appeal, holding that the tribunal had misinterpreted article 7(2G)(b) of the Value Added Tax (Input Tax) Order 1992. The central issue before the Court of Appeal was the meaning and application of the requirement that the taxpayer intend to make the car available to himself for private use.

The appeal was dismissed. The Vice-Chancellor had reached the correct conclusion, although the Court of Appeal identified a limited inaccuracy in his description of the tribunal’s findings.

1. Construction of the statutory scheme. Article 7(2E)(a) required an intention to use the car exclusively for business purposes, subject to article 7(2G). Article 7(2G)(b) imposed a separate, cumulative disqualifying condition. An intention to use a car exclusively for business was not synonymous with, and did not exclude, an intention to make it available for private use.
2. Meaning of “make available”. The phrase concerned the provision of the car in circumstances where private use was factually, legally and physically possible. It did not require an intention that private use would actually occur. The question was the taxpayer’s intention at the time of acquisition. Subsequent availability could be relevant evidence of that intention, but was not itself determinative.
3. Individual ownership. In the case of a sole trader acquiring a car for his own use, ownership and control ordinarily made the car available to him for private use. Where he took no steps to impose a legal or physical restriction, he would ordinarily be taken to have intended that result, even if he had no intention of using the car privately. The same statutory meaning applied whether the intended recipient was the taxpayer himself or a third party, although the factual implications of acquisition differed.
4. Application. The tribunal had concentrated on whether Mr Upton intended to use the Lamborghini privately. It had not properly addressed whether he intended to make it available to himself for private use. That was an error of law. His ownership, control, access to the keys and insurance permitting private use supported the conclusion that the disqualifying condition was satisfied.

The Court declined to decide conclusively whether legal restrictions, such as insurance limited to business use, would suffice to prevent availability for private use. Appeal dismissed, with no order as to costs.

1. Court of Appeal (Civil Division): Appeal dismissed. The Court upheld the Vice-Chancellor’s decision allowing the Commissioners’ appeal from the VAT tribunal. The lower decision is reported at [2001] STC 912.
2. Value Added Tax and Duties Tribunal: Mr Upton’s appeal against disallowance of the input-tax deduction was allowed.