Timothy Norton & Anor v The Commissioners for HMRC

A car remains available for the statutory car-benefit charge where a practical, legal or contractual restriction on its use is not an effective restraint in the circumstances. A SORN and the absence of vehicle excise duty did not make the cars unavailable where the employee could readily arrange payment of the duty before use.

A private-use restriction must be express and legally enforceable. A conditional requirement to ensure that a vehicle is taxed before driving it did not effectively prohibit private use where the condition could readily be met. Under Taxes Management Act 1970, a discovery assessment cannot validly be made during the enquiry period where the conditions in section 29(5) have not yet been met. A purported closure notice lacking a statement that the enquiry is complete and a concluded view is defective in substance and cannot be cured by section 114.

Timothy Norton and his company appealed the First-tier Tribunal’s decision of 14 December 2020. HMRC had charged income tax and NICs on the basis that two company cars, a Maserati and a Ford GT40, were made available to Mr Norton as benefits in kind.

The First-tier Tribunal held that the cars remained available during periods in which they were subject to SORN and no vehicle excise duty had been paid. It also upheld a discovery assessment for 2016/17 and held that HMRC’s letter of 20 March 2017 was not a closure notice for 2015/16.

The Upper Tribunal considered whether SORN and the company handbook constituted effective restraints on private use, whether a discovery assessment could be issued during an open enquiry window, and whether the letter was a closure notice capable of being validated by section 114.

1. The company’s appeal was dismissed. The First-tier Tribunal was entitled to find that the cars were made available to Mr Norton despite SORN declarations and the absence of vehicle excise duty. The statutory question under Income Tax (Earnings and Pensions) Act 2003 was availability, not a distinction between actual and potential availability. A restriction is ineffective where the user can readily remove it. Mr Norton could arrange payment of vehicle excise duty before using either car, and the SORN was therefore not an effective restraint: see Customs and Excise Commissioners v Elm Milk Ltd [2006] EWCA Civ 164.

2. The handbook did not prevent that conclusion. Although an express and legally enforceable prohibition is required to exclude private availability, as explained in Gilbert (HM Inspector of Taxes) v Hemsley (1981) 55 TC 419, the requirement to ensure that a car was taxed before use was only conditional. Mr Norton could comply by arranging payment. The Tribunal also upheld the factual finding that Mrs Norton generally consented to his private use.

3. Mr Norton’s appeal was allowed in respect of the 2016/17 discovery assessment. Section 29(3) of the Taxes Management Act 1970 prohibits an assessment unless a stated condition is met. Where section 29(4) did not apply, the temporal condition in section 29(5) could not be satisfied while the officer remained entitled to open an enquiry. A discovery assessment issued during the enquiry period was therefore invalid. The Tribunal agreed with the approach in Curtis v HMRC [2022] UKFTT 172 (TC).

4. The closure-notice ground was dismissed. A closure notice must state that the enquiry is complete, state HMRC’s conclusions, and make any required amendment. The March 2017 letter expressed only a provisional view and anticipated further contact after ongoing discussions. Its omissions were substantive, so section 114 could not cure them.

The appeals were otherwise dismissed. Any costs application was to be made within one month of release of the decision.

• Upper Tribunal (Tax and Chancery Chamber): allowed Mr Norton’s appeal only in relation to the 2016/17 discovery assessment; otherwise dismissed his appeal and dismissed the company’s appeal.
• First-tier Tribunal: decision issued on 14 December 2020. It dismissed the appeals from 2013/14 onwards, while allowing earlier appeals concerning one car. It held that the cars were made available despite SORN periods, upheld the discovery assessment, and held that the March 2017 letter was not a closure notice.