[2010] UKFTT 142 (TC)

TC00448

	Appeal number:  TC/09/10376

Input Tax – VAT – Section 24 VATA 92 – Whether assets owned by Limited Liability Partnership to enable claim for input tax - Evidence of ownership or transfer of ownership – VAT (Input Tax) Order 1992, Article 7 – Personal use – Value of rental not commercially at arms length.

FIRST-TIER TRIBUNAL

TAX 

	MOTO SELF DRIVE (UK) LLP	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS (VAT)	Respondents

				TRIBUNAL JUDGE: W Ruthven Gemmell, WS
							   Ian Condie, CA

Sitting in public in Edinburgh on 26 November 2009 and 15 February 2010

Mr Christopher O’Brien for the Appellant

Mr Andrew Scott, Shepherd and Wedderburn, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Commissioners

© CROWN COPYRIGHT 2010

DECISION
The Appeal
1.	This is an Appeal by Moto Self Drive (UK) LLP (“Moto”) against a decision to refuse credit for input tax for an amount totalling £24,264.45 relating to the tax period commencing 4 November 2008 to 28 February 2009 issued by the Commissioners of H M Revenue and Customs (“the Commissioners”) on 29 April 2009.
2.	The claim for the credit related to the purchase of an Aston Martin Vantage Roadster bearing the registration MX58 FNV, subsequently changed on 1 April 2009 to registration number COB 748, and a Range Rover Vogue bearing the registration YF08 RFO.  The respective amounts of input tax were £15,742.70 and £8,521.75.
3.	The hearing took place on 26 November 2009 but was not completed on that date and, accordingly, the hearing was adjourned to 15 February 2009.  At the November hearing, Mr Christopher O’Brien, and Thomas Mackie, represented Moto.  No documentation was received between 27 November 2009 and 15 February 2010.  
4.	For the 15 February hearing date, the Tribunal Centre had been advised that, once again, Mr O’Brien and Mr Mackie would be representing Moto and they had been asked to attend the Tribunal Centre at 9.30am, 30 minutes before the hearing was due to commence, at 10am.  At 10am no appearance had been made by either Mr O’Brien or Mr Mackie.  Telephone calls were made to the offices of TOC Accountants, a business owned by Mr O’Brien which employed Mr Mackie, who advised that “they were on their way and had left first thing”.  This office is situated in Kirkcaldy which is less than one hour by road or by rail from Edinburgh.  
5.	In view of their non-appearance, the Tribunal decided to exercise their powers under Rule 33 of the Tribunal Rules and continued the Hearing.
6.	At approximately 11.45am a note was passed to the Tribunal Judge advising that Mr Mackie’s car had broken down and that he would be unable to attend.  No reasons were given for Mr O’Brien’s non-appearance.
7.	The Hearing, therefore, on 15 February 2010 proceeded in the absence of either Mr O’Brien or Mr Mackie or anyone else representing Moto.
8.	The issues before the Tribunal were:
a)	Whether a taxable supply had been made to Moto which in 	turn would allow them to make a claim for credit of input tax (“the Supply Appeal”).
b)	If, and only if, Moto was entitled to make a claim for input tax whether such a claim would be disqualified in terms of the blocking orders set at Article 7 of the Value Added Tax (Input Tax) Order 1992 (SI992/3222) principally in relation to the personal use of the vehicles and/or the let at a rental which was not a commercial rental on an arms length basis and/or it was to be provided for self drive hire “primarily for a relevant purpose”, (“the Blocking Order Appeal”).
9.	In the event of the Tribunal finding against Moto on the Supply Appeal, the Blocking Order Appeal would fall.
The Legislation
Article 168 of the Council Directive 2006/112/EC –
 “in so far as the goods and services are used for the purposes of tax transactions of a taxable person, the taxable person shall be entitled in the member state in which he carries out these transactions to deduct the following from VAT which he is liable to pay:
The VAT due or paid in the member state in respect of supplies to him of goods or services carried out or to be carried out by another person”.

Section 24 of the Value Added Tax Act (VATA) 1994 –
Input tax and output tax
(1) Subject to the following provisions of this section, “input tax”, in relation to a taxable person, means the following tax, that is to say— 
(a) VAT on the supply to him of any goods or services; 
(b) VAT on the acquisition by him from another member State of any goods; and 
(c) VAT paid or payable by him on the importation of any goods from a place outside the member States, ….
(6) Regulations may provide — 
(a) for VAT on the supply of goods or services to a taxable person, VAT on the acquisition of goods by a taxable person from other member States and VAT paid or payable by a taxable person on the importation of goods from places outside the member States to be treated as his input tax only if and to the extent that the charge to VAT is evidenced and quantified by reference to such documents or other informatuion as may be specified in the regulations or the Commissioners may direct either generally or in particular cases or classes of cases;
Section 26 of the Value Added Tax Act (VATA) 1994 –
1)	The amount of input tax for which a taxable person is entitled to credit at the end of any period shall be so much of the input tax for the period (that is input tax on supplies, acquisitions and importations in the period) as is allowable by or under regulations as being attributable to supplies within subsection (2) below.
VAT Regulations 1995 (S1 1995/2518) –
Obligation to provide a VAT invoice
Regulation 13
(1)  Save as otherwise provided in these Regulations, where a registered person—
(a)   makes a taxable supply in the United Kingdom to a taxable person, or
(b)  makes a supply of goods or services . . . to a person in another member State [for the purpose of any business activity carried out by that person], or
(c)  receives a payment on account in respect of a supply he has made or intends to make from a person in another member State,
he shall provide such persons as are mentioned above with a VAT invoice [(unless, in the case of that supply, he is entitled to issue and issues a VAT invoice pursuant to section 18C(1)(e) of the Act and regulation 145D(1) below in relation to the supply by him of specified services performed on or in relation to goods while those goods are subject to a fiscal or other warehousing regime)].
Exceptional claims for VAT relief
Regulation 111
(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
Limited Liability Partnerships Act 2000 –
Section 1
(1)There shall be a new form of legal entity to be known as a limited liability partnership.
(2)A limited liability partnership is a body corporate (with legal personality separate from that of its members) which is formed by being incorporated under this Act; and ….
(5)Accordingly, except as far as otherwise provided by this Act or any other enactment, the law relating to partnerships does not apply to a limited liability partnership.
Section 5 - Relationship of members etc
(1)Except as far as otherwise provided by this Act or any other enactment, the mutual rights and duties of the members of a limited liability partnership, and the mutual rights and duties of a limited liability partnership and its members, shall be governed—
(a)by agreement between the members, or between the limited liability partnership and its members, or
(b)in the absence of agreement as to any matter, by any provision made in relation to that matter by regulations under section 15(c).
Partnership Act 1890 
Section 20 - Partnership property
(1)All property and rights and interests in property originally brought into the partnership stock or acquired, whether by purchase or otherwise, on account of the firm, or for the purposes and in the course of the partnership business, are called in this Act partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership and in accordance with the partnership agreement.
Value Added Tax (Input Tax) Order 1992 (SI 1992/3222) –
Article 7.
(1)     Subject to paragraph (2) [to (2H)] below tax charged on—
(a)     the supply [(including a letting on hire)] to a taxable person;
(b)     the acquisition by a taxable person from another member State; or
(c)     the importation by a taxable person,
of a motor car shall be excluded from any credit under section [25] of the Act.
[(2)     Paragraph (1) above does not apply where—
(a)     the motor car is—
(i)     a qualifying motor car;
(ii)     [supplied (including on a letting on hire) to], or acquired from another member State or imported by, a taxable person; and
(iii)     the relevant condition is satisfied;
[(aa)     the motor car forms part of the stock in trade of a motor manufacturer or a motor dealer;]
 [(2A)     Subject to paragraph (2B) and (2C) below, for the purposes of paragraph (2)(a) [and (b)] above a motor car is a qualifying motor car if—
(a)     it has never been supplied, acquired from another member State, or imported in circumstances in which the VAT on that supply, acquisition or importation was wholly excluded from credit as input tax by virtue of paragraph (1) above; or
(b)     a taxable person has elected for it to be treated as such.
(2B)     A taxable person may only elect for a motor car to be treated as a qualifying motor car if it—
(a)     is first registered on or after 1st August 1995;
(b)     was supplied to, or acquired from another member State or imported by, him prior to that date in circumstances in which the VAT on that supply, acquisition or importation was wholly excluded from credit as input tax by virtue of paragraph (1) above; and
(c)     had not been supplied on a letting on hire by him prior to 1st August 1995.
(2C)     A motor car that is supplied, acquired from another member State or imported on or after 1st August 1995 and which would, apart from this paragraph, be a qualifying motor car by virtue of sub-paragraph (a) of paragraph (2A) above shall not be such a car if it was supplied on a letting on hire prior to that date by the person to whom it is supplied or by whom it is acquired or imported (as the case may be).
(2D)     References in this article to registration of a motor car mean registration in accordance with section 21 of the Vehicle Excise and Registration Act 1994.
(2E)     For the purposes of paragraph (2)(a) above the relevant condition is that the letting on hire, supply, acquisition or importation (as the case may be) is to a taxable person who intends to use the motor car either—
(a)     exclusively for the purposes of a business carried on by him, but this is subject to paragraph (2G) below; or
(b)     primarily for a relevant purpose.
(2F)     For the purposes of paragraph (2E) above a relevant purpose, in relation to a motor car which is let on hire or supplied to, or acquired or imported by, a taxable person (as the case may be), is any of the following purposes—
(a)     to provide it on hire with the services of a driver for the purpose of carrying passengers;
(b)     to provide it for self-drive hire; or
(c)     to use it as a vehicle in which instruction in the driving of a motor car is to be given by him.
(2G)     A taxable person shall not be taken to intend to use a motor car exclusively for the purposes of a business carried on by him if he intends to—
(a)     let it on hire to any person either for no consideration or for a consideration which is less than that which would be payable in money if it were a commercial transaction conducted at arms length; or
(b)     make it available (otherwise than by letting it on hire) to any person (including, where the taxable person is an individual, himself, or where the taxable person is a partnership, a partner) for private use, whether or not for a consideration.
(2H)     Where paragraph (1) above applies to a supply of a motor car on a letting on hire it shall apply to the tax charged on that supply as if for the word “tax” there were substituted “one half of the tax”.]
(3)     In this article—
(a)     . . .
(b)     “self-drive hire” means hire where the hirer is the person normally expected to drive the motor car and the period of hire to each hirer, together with the period of hire of any other motor car expected to be hired to him by the taxable person—
(i)     will normally be less than 30 consecutive days; and
(ii)     will normally be less than 90 days in any period of 12 months.
The Facts
10.	Evidence was given to the Tribunal by Mrs Margaret Paton, an officer of the Commissioners, who had carried out a visit to Moto’s accountants on 10 April 2009 and by Elizabeth MacIntyre, a Review Officer of the Commissioners, who had reviewed the Decision to refuse to give credit for input tax.  Both these witnesses were credible.
11.	Mr Christopher O’Brien and, to a lesser extent, Mr Thomas Mackie, gave evidence for Moto.  The credibility of Mr O’Brien’s evidence was unsatisfactory and consisted of a great number of lapses of memory including an inability to remember from where a £40,000 deposit was paid and where the continuing payments to the finance company in respect of the Aston Martin and Range Rover were paid.
12.	Moto has its registered office at 92 Nicol Street, Kirkcaldy, which is also the offices of TOC Accountants, a business owned by Mr O’Brien and employing Mr Mackie, and places of business in Edinburgh and Glasgow.
13.	Moto became a Limited Liability Partnership on 17 October 2008 and applied for a VAT Registration on 10 November 2008 with an effective date of registration of 4 November 2008.
14.	The initial partners in Moto were Mr Christopher O’Brien whose date of birth is 17 August 1969 and his mother, Mrs Helen O’Brien, whose date of birth is 19 October 1935.
15.	Moto’s first Value Added Tax return (reference 0209) was submitted showing a repayment which provoked enquiries to be made by the Commissioners and a visit was made to Moto’s accountants (TOC accountants) on 10 April 2009.  During that visit it was established that the bulk of the input tax related to the purchase of the Aston Martin and Range Rover vehicles.  
16.	The Commissioners were not satisfied that the two vehicles belonged to the business and, if they were, that they were not being made available for hire at commercial rates.  Throughout the Commissioners’ inspections and subsequent correspondence and at the Tribunal hearing, there was a lack of documentary evidence to support the claim that the Aston Martin and the Range Rover belonged to Moto.
17.	The Range Rover vehicle had been purchased in June 2008 which was in advance of the incorporation of the Limited Liability Partnership on 17 October 2008.  Moto claimed that the vehicle had been bought as it was expected that at or around June 2008 an already existing car hire/self drive company would be purchased but that had not happened.
18.	The Aston Martin was purchased at the end of November 2008 by which time the Limited Liability Partnership had been incorporated and the business had obtained VAT registration.
19.	The Range Rover had been purchased, according to the documents before the Tribunal, by means of an invoice number 158198, dated 17 June 2008, showing the customer’s details as Mr Christopher O’Brien, Simply Construct Limited, at an address in Paisley.  It emerged in evidence that Simply Construct Limited was a business which was incorporated on 15 May 2003.  The secretaries of the Company were TOC Accountants, the business in Kirkcaldy belonging to Mr O’Brien, and who were appointed on 29 March 2008.  Mr O’Brien confirmed that TOC Accountants were also the auditors of the Company.
20.	The share capital of the Company as at 30 April 2009 was owned by Mr Gary Sharp, a director of the Company, whose date of birth is 22 June 1984.
21.	Mr O’Brien confirmed that he had known Mr Sharp prior to the business involvement of TOC Accountants with Simply Construct Limited.
22.	At 31 July 2009, a search of the Police National Computer showed that the Range Rover’s registered keeper was Gary Sharp, care of Simply Construct in Glasgow.  It was claimed that this vehicle was let on a self drive hire basis for £373.75 per month.  
23.	During the VAT period in question the only evidence of any income from all sources received by Moto was a bank statement that showed monthly payments of £373.75.  In addition, three invoices were produced in relation to Simply Construct Limited which contained no VAT amount.
24.	No rental agreement was produced in relation to the hire of the Range Rover to Simply Construct Limited.
25.	On a request by the Commissioners, the registration certificate for the Range Rover was sent by fax and came from Simply Construct’s fax machine.  It showed the registered keeper, as at 3 June 2008, as Christopher O’Brien, care of the O’Brien Corporation, 92 Nicol Street, Kirkcaldy.
26.	A number of insurance documents were submitted to the Tribunal which included tyre and gap insurance as well as a letter from AON Insurance Brokers relating to fleet car insurance.  These policies appeared to exclude insurance for cars which were commercially let for hire where they were in excess of £30,000 and in relation to the Range Rover, it was claimed that Simply Construct were covered by their own insurance.
27.	Evidence was led by the Commissioners in relation to the amount of rental being charged by Moto to Simply Construct at £373.75 per month.  The Commissioners had interrogated the ‘What Car’ information system and the Landrover/Range Rover website and had ascertained that an average commercial rental/leasing cost would be in the region of at least £1,000 per calendar month for a similar Range Rover.  Mr O’Brien for Moto stated that his firm’s rentals were lower because he was able to take advantage of discounts which were available to his firm which allowed him to undercut his competitors. 
28.	In evidence, Mr O’Brien stated that he had private use of both cars, being the Aston Martin and the Range Rover, but not to any great extent.  On further questioning, Mr O’Brien confirmed that his use of the Range Rover amounted to approximately one per cent of its mileage and ten to fifteen per cent of the Aston Martin’s mileage, the latter being approximately 1,000 miles out of approximately 8.500 miles driven.
29.	It was claimed there had been approximately eight hires of the Aston Martin but no documentary evidence was provided to confirm this or any payments received.
30.	Mr O’Brien gave evidence on behalf of Moto about the process of buying vehicles and the discounts that could be available, in particular, through the use of the United Rental Group systems including up front discounts and dealer discounts, all of which substantially reduced the price of the car from the normal list price.
31.	A copy of Moto’s Limited Liability Partnership agreement was submitted to the Tribunal.
32.	The claim for a refund of VAT was based on the value of the Range Rover at £57,672.50.  In a letter to the Commissioners dated 8 May 2009, explaining why the rate of £373.75 was at a commercial rate, TOC Accountants claimed that the cost of the vehicle to the business was £47,000.  Moto’s justification for setting the monthly hire charge was based on the expected residual value of the vehicle which they claimed held its value making it possible to offer clients hires at a much reduced rate.  Mr O’Brien, in evidence, confirmed that the same advantages would apply to any other hirer who, based on the evidence before the Tribunal, charge considerably higher rates.
33.	The only certificate of motor insurance submitted to the Tribunal covered the period from 2 May 2009 to 1 May 2010.  An explanatory letter from Moto’s insurance broker, AON, stated that this covered vehicles with a maximum value of any one vehicle of up to £30,000 in value, excluding VAT.  The letter from AON stated that the renewal terms were based on “your existing cover levels of comprehensive full cover with a £1,000 basic excess”.  No certificate of motor insurance was exhibited for the period to 1 May 2009.
34.	Mr O’Brien, in evidence, confirmed that finance had been obtained for the purchase of the motor vehicles.
35.	The Aston Martin motor car was referred to in an invoice from Stratstone dated 18 November 2008 for a total price including gap and tyre insurance of £107,725.  This document was invoiced to Duncton Number 1 Limited with instructions to deliver the vehicle to Mr Christopher O’Brien at an address in Fife.
The registration certificate showed the registered keeper as “care of Duncton Number 1 Limited, Christopher O’Brien”, at an address in Petersfield which is understood to be the address of Duncton Number 1 Limited.
36.	A document was produced to the Tribunal from Duncton Number 1 Limited headed up “pre contract information” as was a conditional sales agreement signed by Mr O’Brien on 17 October 2008.
37.	The Commissioners argued that the invoice and the conditional sale agreement as evidence that the purchase of the vehicle had been arranged between Aston Martin and Duncton Number 1 Limited and in the nature of the agreement concluded that the motor car would be the property of Duncton Number 1 Limited until the final payment was made under the loan agreement.  The Commissioners claimed that, accordingly, any input tax reclaimable on the purchase of the vehicle would belong to Duncton Number 1 Limited.  
38.	In Mrs Paton’s evidence, who has considerable experience in relation to motor vehicle claims, she stated the loan agreement was of an appropriate type of a private individual buying a motor vehicle rather than a business as it showed no VAT.
39.	Mr O’Brien claimed that he had purchased the Aston Martin in his capacity as a partner in the partnership of Moto Self Drive (UK) LLP.
40.	Moto’s accountants wrote to the Commissioners on 20 April 2009 enclosing a copy of the invoice which they claimed Moto should have received showing the partnership purchase of the vehicle.  This was a pro forma invoice addressed to Mr Christopher O’Brien at an address in Cupar, Fife.  The same letter enclosed two copies of gap insurance and tyre damage insurance for the Aston Martin car.  The insurance conditions excluded any cover for the commercial business use of hire and reward.
41.	The invoice which was made out to Mr O’Brien and was not a full VAT invoice.
42.	A subsequent copy purchase invoice from Duncton Number 1 Limited indicated that VAT was charged to Mr O’Brien on the sale but made no mention of Moto.  The insurances were also not in the name of Moto.  In addition, no payments for the vehicles had been noted in Moto’s bank account.
43.	Moto claimed that the original documentation provided by Duncton Number 1 Limited was incorrect and had been rectified.  Moto explained that the payments for the Aston Martin car had been made by Mr O’Brien personally until the partnership’s financial position allowed it to take over these payments.
44.	Immediately after the visit by the Commissioners, the website of Moto was interrogated to see if the Aston Martin and Range Rove vehicles appeared as available for hire.  They did not.  At some time subsequent to the visit by the Commissioners, a picture of those type of cars appeared on the website.
45.	Mr O’Brien, when asked if the motor vehicles were on the website, at the time of the visit, replied that he did not know.  Mr O’Brien also did not know why Mr Gary Sharp was the registered keeper of the Range Rover nor did he know who initiated the rental price for the Range Rover.
Reasons for the Decision
46.	Moto acknowledged that the documentation showed that Mr O’Brien had purchased the vehicles either directly or with the finance from Duncton Number 1 Limited.  The reasoning for this was that the partnership was unable to finance the purchases because of insufficient capital or revenue and that the Range Rover had been purchased several months before the incorporation of Moto’s Limited Liability Partnership, that no agreement existed to transfer the vehicles to Moto but that Mr O’Brien’s ownership of the vehicles were in the normal way of a partner buying assets for a partnership.  
47.	Mr O’Brien admitted that he had personal use of both the Aston Martin and the Range Rover.  Accordingly, the vehicles had been used for a purpose other than the purpose of a business.  Mr O’Brien argued that the rental value of the Range Rover to Simply Construct Limited was at a commercial arms length rate based on the discounts they had been able to obtain in purchasing the car and after taking into account a number of factors including the expected hire residual value of the Range Rover.
48.	On the basis of the evidence before of the Tribunal it was clear that Mr O’Brien and/or Duncton Number 1 Limited were the owners of the vehicles.  There was no evidence showing the vehicles had been transferred to Moto.  The registered keeper, but not necessarily the owner, of the Range Rover was Gary Sharp, care of Simply Construct Limited and the Aston Martin’s registered keeper, but not necessarily the owner, was Mr O’Brien.
49.	The next issue related to the insurance where Moto claimed that the insurance for the Range Rover would be a matter for Simply Construct Limited as this was a term of the hire agreement between Moto and Simply Construct Limited.  No hire agreement was submitted either to the Commissioners or to the Tribunal.  The insurance for the Aston Martin appeared not to be covered by the AON arranged policy as with a value of more than £30,000 was excluded.
50.	In relation to Mr O’Brien’s personal use of the Aston Martin, he confirmed this was covered by his personal motor insurance policy which covered him for driving any car.
51.	The Commissioners’ view that the hire purchase agreement with Duncton Number 1 Limited was of a type of hire purchase which would be appropriate to an individual, was accepted.  The “correcting copy” purchase invoices made no mention of Moto.
52.	The invoices for the rental of the Range Rover were issued without charging VAT. 
53.	The number plate of the Aston Martin had been changed from a “58 plate” to a personalised number plate of Mr O’Brien.  Moto claimed that the use of Mr O’Brien’s personal number plate on this vehicle was to hide its age.  The personalised number plate did not belong to Moto but to Mr O’Brien.
54.	No hire documentation for any vehicle, including the Aston Martin, was produced nor was any rental agreement between Moto and Simply Construct Limited submitted.
55.	The Commissioners’ submission was that they had been given insufficient evidence that Moto owned the vehicles.  
56.	Reference was made to Section 24 (1)(a) of VATA which states –
Subject to the following provisions of this section, “input tax”, in relation to a taxable person, means the following tax, that is to say— 
		(a) VAT on the supply to him of any goods or services; 
57.	Section 26 of VATA provides that an amount of input tax for which a taxable person is entitled to credit at the end of any period should be so much of the input tax for the period as allowable by or under the regulations as being attributable to supplies within subsection (2) below.
58.	The material words in Section 24 and Article 168 are those which require the “supply to the taxable person” – here Moto- of goods and services.
59.	Moto’s contention that the vehicles had been brought into the partnership as partnership property required to be looked at in terms of Moto being a Limited Liability Partnership which states that a limited liability partnership is a body corporate and except as far as otherwise provided by the Act or any other enactment, the law relating to partnership does not apply to a limited liability partnership.  Furthermore, except as far as otherwise provided by the Act or any other enactment, the mutual rights and duties of a limited liability partnership and its members are to be governed by an agreement between the limited liability partnership and its members.
60.	Accordingly, the provisions in Section 20 of the Partnership Act 1890 which permit property “brought into the partnership to be partnership property and which must be used exclusively for the purposes of the partnership” do not apply.
61.	There was no evidence submitted to the Tribunal which proved that the Aston Martin and Range Rover belonged to Moto.  In evidence, Mr O’Brien for Moto claimed that it was not be possible to transfer the assets to Moto because there were insufficient funds.  There was no evidence in terms of Moto’s partnership agreement or in any other documentation which provided for the vehicles to be treated as Moto’s property.
62.	Reference was made to Regulation 111 of the Value Added Tax Regulations 1995 (SI 1995/2518) which allows exceptional claims for VAT relief and where the Commissioners may authorise a taxable person to treat supplies of goods or services as if they were input tax.
63.	The Tribunal’s view was that Moto, as a body corporate, did not meet the condition at Regulation 111(1)(b)(i) as there was no evidence of reimbursement or an undertaking to reimburse by Moto the whole amount of the price paid for the goods or services and, in any event, the goods had been used for a purpose other than such a business, being Mr O’Brien’s personal use.
64.	The Tribunal held that the Aston Martin and the Range Rover had not been supplied to Moto in terms of Section 24 of the Act and Article 126 of the EU Directive, and accordingly, there was no supply to Moto of any goods or services. Consequently, no claim could be made for input tax and, accordingly, the tribunal refused the Supply Appeal.
Blocking Order Appeal
65.	As the Tribunal refused the supply appeal it is not relevant to consider the Blocking Order Appeal.
66.	Having heard the evidence, the Tribunal held the following view on the blocking order/appeal.
67.	The blocking orders prevent the personal use of vehicles if a claim is to be made for input tax.  Mr O’Brien, a partner in Moto, admitted in evidence that he had the personal use of approximately one per cent of the Range Rover’s mileage and 10 to 15 per cent of the Aston Martin’s mileage.
68.	The blocking orders also prevent the rental of a hire vehicle at a commercial rent which is less than on an arm’s length basis.  
69.	Taking all the evidence together, the Tribunal were of a view that a rental of £373.75 per month for the Range Rover was not a commercial rent at arms length.  The Tribunal did not accept that this rental was low because Moto obtained discounts in relation to the purchase of their vehicles and their belief that these vehicles retained high resale values.  The Tribunal took the view that these same factors were available to other hire car companies and, indeed, may be even greater for larger companies which charged on average much higher levels of rent.
70.	In relation to the Range Rover, the blocking order prevents a claim for input tax being made where the rental period is more than 30 consecutive days and 90 days in a one year period which excludes the claim on the Range Rover which was let out in terms of the evidence submitted to the Tribunal for more than a three month period.

W RUTHVEN GEMMELL
TRIBUNAL JUDGE

RELEASE DATE:  31st   MARCH 2010