[2010] UKFTT 503 (TC)
	
TC00758

    	Appeal numbers: TC/2009/13729
                    	TC/2009/13714
	TC/2009/13715

Income tax-Employment Income- cars with finance agreements in the name of a limited company- all finance payments entered in directors loan accounts –were cars made available within meaning of s114 ITEPA –yes, car benefit charges apply. Fuel allowances paid then excluded from approved payments s120 ITEPA–subsequent transfer of car to a director is subject to tax under s206 ITEPA. Cost of hire of executive box at football club – was there a benefit in kind to directors-no. Appeals allowed in part

FIRST-TIER TRIBUNAL

TAX 
	FRANK HUDSON TRANSPORT LTD	Appellant

-	and –
-	
	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

TRIBUNAL: 	Barbara J King (Judge)									Roland Presho   (member)

Sitting in public in Newcastle on 9 September 2010

Nick Vassilounis and Chris Wright, of Mitchell Gordon, accountants, agents for the Appellant.  

Aidan Boal and David Weissand for the Respondents 

© CROWN COPYRIGHT 2010

DECISION

1.	There are 3 appeals being heard together following a direction made on 29 October 2009. TC/2009/13729 is by Frank Hudson Transport Ltd (the Company), TC/2009/13714 and TC/2009/13715 by Frank Hudson and Anne Hudson (directors of the company), respectively.
The Issues in Dispute
2.	There are four areas of dispute involved in these appeals. 
(1)	The first concerns cars which were financed through hire purchase in the name of the Company. The issue is whether these cars come within the charge to tax under s114 ITEPA 2003. 
(2)	If the cars are within s 114 then any mileage allowances which have been paid by the Company to Frank Hudson and Anne Hudson, will be not be “Approved Mileage Allowance Payments” (AMAPS). The monies claimed as AMAPS will be subject to tax as earnings.
(3)	If a Lexus SC 430, one of the cars involved in (1) above, is caught by s 114 then it is a company car, the value of which is treated as earnings of Frank Hudson, subject to tax, at the point when it was transferred by the Company to Frank Hudson.
(4)	 The fourth issue concerns a box at Huddersfield Football Club. Was this a benefit in kind provided by the Company to Frank and Anne Hudson within s.203 ITEPA?

The law re the first issue
3.	Section 114  Income Tax ( Earnings and Pensions) Act 2003 (‘ITEPA’) provides, inter alia :
(1)	This chapter applies to a car or a van in relation to a particular tax year if in that year the car or van-
(a)	Is made available (without any transfer of the property in it) to an employee or a member of the employee’s family or household, 
(b)	Is so made  available by reason of the employment (see section 117) and
(c)	Is available for the employee’s or member’s private use ( see section 118)
(2)	Where this chapter applies to a car or van –
(a)	Sections 120 to 148 provide for the cash equivalent of the benefit  of the car to be treated as earnings,
(b)	Sections 149 to 153 provide for the cash equivalent of any fuel provided for the car to be treated as earnings

Evidence re the cars
4.	 HMRC had provided a bundle of documents which included several finance agreements relating to cars. There were also notes of meetings at which Frank Hudson, Chris Wright and Mrs Tracy Sanderson, an Employer Compliance officer with HMRC, had been present.  Chris Wright attended the hearing with Frank Hudson and Mrs Tracy Sanderson also attended and gave evidence in accordance with her statement.
5.	Mr Hudson gave evidence to this Tribunal that Frank Hudson Transport Ltd was incorporated 	on 1 June 2000 with Frank Hudson and Anne Hudson as the only directors. Prior to that Mr and Mrs Hudson had been in partnership trading as Frank Hudson Transport. Mr Hudson could remember that he was advised to form a limited company because it would reduce his personal liability in various ways but he could not remember being advised about anything called ‘benefits in kind’. 
6.	Mr Frank Hudson liked cars and after incorporation, if he wanted to buy a car for himself, his wife or one of his children he would just tell Mr David Williams, his office manager, who had previously been employed by the partnership and who continued to be employed by the company, to arrange all the paper work for him as Mr Hudson preferred not to do paperwork himself. Mr Hudson knew that Mr Williams would then approach finance companies with whom the Company did business, to see who would give the best deal on finance. 
7.	Each of the cars which are the subject of dispute in these appeals has a finance agreement which is in the name of the Company. Documentation for the registered user of each car was not available in every case. Frank Hudson was the registered user for many, Anne Hudson for at least two and the Company for one. 
8.	Mr Hudson told Mr Williams that the cars were for private use and that although all payments in respect of the hire purchase agreements would be paid initially by the Company bank account, Mr or Mrs Hudson would then ask for the amounts to be entered in their director’s loan accounts. Mr Hudson could not recall how other expenses such as insurance and road fund tax were to be paid ie whether these were paid by the Company first or not. In the case of a Ssangyong car, bought for his daughter Danielle, he thought he might have expected her to pay the insurance but he could not recall verifying this situation.
9.	The agents on behalf of the Appellants argue that the only reason that the finance agreements were put in the name of the company was due to an administration error by Mr Williams. Mr Williams had made a statement for the Tribunal hearing but was unable to attend due to ill health. He stated that if he had realised HMRC would use the fact that the Company name was on the finance agreements as a factor in deciding whether the cars were company or personal cars he would have made sure that the finance agreements were issued in the name of the individual director or user of the vehicle.
10.	Both parties agreed that the cars in dispute did have a private use element. There was dispute as to whether it could be interpreted that the cars were ‘made available’ by the company to the directors or his family and whether there was any benefit –in view of the fact that the directors intended to, and did, pay all the instalments from their directors loan accounts.
Findings re the cars
11.	 On balance the Tribunal finds that it was not just a simple administrative error which led to the finance agreements being drawn up as they were. There was a benefit to Mr Hudson in having the agreements in the Company name as he could get a better finance deal because of the volume of work the Company put with the finance companies. Mr Frank Hudson did not take any advice on any possible tax implications when he wished to buy a car and he did not know that there was a possibility of being caught by the ‘benefit in kind’ legislation if he allowed the Company name to be used in any of the documentation.  We find on balance that when instructing Mr Williams it is likely that Mr Hudson used the wording –which he used at the hearing –“The Company is going to buy a car for Danielle but I’ll make the payments”. 
12.	On balance the Tribunal find that the cars were made available by the Company. An employee of the Company was used to negotiate the finance. The Company name was placed on the finance agreements. In effect the cars were obtained through the facilities of the Company.
13.	Was a benefit obtained?  On balance we find that a benefit was obtained by the director or employee in that a better financial deal was achieved by using the Company name. On balance we find that there is no provision that benefit means ‘special bounty’ under the wording of this legislation.
14.	The Tribunal finds that section 114 ITEPA applies to the cars in dispute and decisions issued by HMRC on 21 May 2009 are confirmed. The appeals in relation to the issue in paragraph 2 (1) above are therefore disallowed. The decisions in respect of the issues in paragraph 2(2) and 2(3) follow from this decision ie the cars are company cars and any fuel payments in respect of them paid by the Company to a director are treated as earnings of the director. The value of the Lexus is treated a earnings of Frank Hudson, and therefore subject to tax, at the point it was transferred to him, by he Company. The appeals in respect of these matters are therefore disallowed.
15.	The Tribunal has noted that HMRC have accepted, on a concessional basis, that the costs reimbursed by the directors of Frank Hudson Transport Ltd can be treated as if made under Section 144 and have reduced the car benefit charges accordingly
16.	There has been some mention as to whether the Tribunal should give an indication that HMRC will achieve a windfall based on what might be judged a ‘minor action committed without deliberate intent’ and that therefore HMRC should not collect the tax. The Tribunal gives no such indication. It was not evident that the Company paid scrupulous attention to paperwork and only made a minor slip on one occasion. 
 Evidence re the box at Huddersfield Football Club 
17.	Mr Hudson gave oral evidence at the hearing that when one of his sons started playing football for the first team at Huddersfield, the Company hired an Executive Box. Mr Hudson recalled telephoning customers of the Company to invite them to the box to watch home games and he named several customers who had attended. Mr Hudson has a number of children and grandchildren of different ages but he did not recall any of these going to watch matches at Huddersfield. Mr Hudson had never had any paperwork in connection with these occasions and he had made no attempt to get any confirmation from customers since he had a meeting with Mrs Tracy Sanderson of HMRC in January 2007.  Mr Hudson recalled that his son would have had a number of complimentary tickets available whilst he was playing for the first team and if Mr Hudson and his wife had merely wanted to go and watch their son playing, for their own benefit, they could have made use of the complimentary tickets. The decision to take a box was in order to make use of it for business purposes. 
Findings re the box at Huddersfield Football Club
18.	Despite the lack of written corroboratory evidence the Tribunal found that the evidence given by Mr Frank Hudson, in relation to this, was credible. We are satisfied that, in spite of the absence of records, this box was hired wholly and exclusively for business purposes. The cost of hire was not therefore a ‘benefit in kind’ which fell to be assessed as earnings of the directors. 
19.	The appeal in relation to the issue at paragraph 2 (4) above is allowed.
20.	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.

Barbara J King

TRIBUNAL JUDGE
RELEASE DATE: 19 October 2010