Payne & Ors v Revenue And Customs

For the purposes of ITEPA 2003, vehicle classification depends on the statutory definition of a goods vehicle, not on ordinary descriptions such as car or van or on a private-use and trade-use distinction. Construction means the vehicle as finally assembled and modified at the date of assessment. Removable seating and other adaptable features may form part of that construction.

Primary suitability requires the vehicle to be first and foremost suited to conveying goods. A marginal advantage is insufficient. The assessment must consider the vehicle as a whole and in the round. A multi-purpose vehicle may have no primary suitability. Feature-by-feature typicality is not the statutory test.

Coca-Cola provided Vauxhall Vivaro and Volkswagen Transporter T5 Kombi vehicles to employees for work and private use. HMRC classified the vehicles as cars rather than vans for employment-benefit taxation and national insurance purposes.

The First-tier Tribunal decided that the Vivaro was a goods vehicle but that the Kombi 1 and Kombi 2 were not: [2017] UKFTT 0655 (TC). The Upper Tribunal upheld that decision: [2019] UKUT 90. The taxpayers appealed in relation to the Kombis, while HMRC appealed in relation to the Vivaro. The central issues were the meaning of construction and primarily suited in section 115 of ITEPA 2003, and their application to multi-purpose vehicles.

Disposition. Lady Justice Asplin delivered the judgment, with which Lord Justice David Richards and Lord Justice Patten agreed. The taxpayers’ appeal concerning the Kombis was dismissed. HMRC’s appeal concerning the Vivaro was allowed.

1. Statutory context. The terms car, van and goods vehicle in section 115 of ITEPA 2003 had to be applied as statutory definitions. Ordinary usage and a supposed distinction between private and trade vehicles could not control the construction of the provision. The statutory exclusions from car were disjunctive, and section 115(1)(d) could not colour the meaning of goods vehicle.
2. Construction. Construction meant the manner in which the vehicle had been put together, assembled or built in its final form at the date of assessment. The court had to consider the vehicle as a whole. It was unnecessary to identify fundamental alterations to an original design. Depending on the facts, removable seating and its fixings could form part of the vehicle’s construction.
3. Primary suitability. The question was whether the vehicle was first and foremost suited to conveying goods or burden. A marginal or percentage-point advantage was insufficient. Suitability had to be assessed in the round, rather than by a mechanical comparison of individual features or by asking whether features were typical of vans. A multi-purpose vehicle could have no primary suitability, although several purposes did not inevitably produce that result. Actual use was irrelevant, while appearance was only one factor.
4. Application. The Kombis’ flexible layouts, removable seating and passenger accommodation entitled the First-tier Tribunal to find no overall primary suitability for goods. The rear sections were for goods, but the mid-sections were equally suited to goods or passengers and the front passenger seating pointed against goods classification. The Vivaro had likewise to be assessed as a whole. The First-tier Tribunal and Upper Tribunal erred by treating a narrow balance and feature typicality as sufficient. The only reasonable conclusion was that the Vivaro was multi-purpose and lacked primary suitability for goods.

The First-tier Tribunal’s decision was varied so that Coca-Cola’s appeal concerning the Vivaro was dismissed. The taxpayers were ordered to pay HMRC’s costs in all three tribunals, and earlier costs orders were set aside.

1. Court of Appeal (Civil Division): In [2020] EWCA Civ 889, the taxpayers’ appeal concerning the Kombis was dismissed and HMRC’s appeal concerning the Vivaro was allowed. The First-tier Tribunal decision was varied in relation to the Vivaro.
2. Upper Tribunal (Tax and Chancery Chamber): In [2019] UKUT 90, the Upper Tribunal upheld the First-tier Tribunal’s classification of the Vivaro as a goods vehicle and the Kombis as not being goods vehicles.
3. First-tier Tribunal (Tax Chamber): In [2017] UKFTT 0655 (TC), the tribunal classified the Vivaro as a goods vehicle but classified the Kombi 1 and Kombi 2 as cars.