19557
Value added tax – MOT test fees – grounds of appeal against assessment – alleged misdirection by the Commissioners – jurisdiction of tribunal – appeal cannot be entertained - appeal dismissed

LONDON TRIBUNAL CENTRE

	PAUL BENNING (trading as PB CARS)	Appellant

	- and -

	THE COMMISSIONERS OF 
	HER MAJESTY’S REVENUE AND CUSTOMS	Respondents

			Tribunal:	EDWARD SADLER (Chairman)
					Miss D M WILSON

Sitting in public in London on 24 April 2006

The Appellant in person

Robert Keller, counsel, instructed by the Acting Solicitor of H M Revenue and Customs,  for the Respondents

© CROWN COPYRIGHT 2006

DECISION

1.	This is an appeal by Mr Paul Benning (trading as PB Cars) (“the Appellant”) against a decision made by The Commissioners of Her Majesty’s Revenue and Customs (“the Commissioners”) that the Appellant was liable to charge value added tax on supplies made to customers in relation to MOT tests which he arranged, on behalf of his customers, to be carried out by an authorised garage.  In consequence of that decision the Appellant has been assessed to VAT in the sum of £2,753 plus interest of £278.31.
2.	In summary, the Appellant carries on a business which includes repairing and maintaining cars.  The Appellant is not authorised to carry out MOT tests, and therefore if a customer requires an MOT test certificate when he brings his car to the Appellant to be serviced or repaired, the Appellant takes the car to a garage which is authorised to carry out the test, and arranges for the test to be carried out on behalf of the customer.  The authorised garage invoices the Appellant for the test fee, and in turn the Appellant invoices the customer for the test fee (as part of the invoice for service or repair work, but with the MOT test fee separately itemised).  The Appellant, when invoicing his customer, adds a small mark-up to the test fee charged to him by the authorised garage.
3.	When the authorised garage invoices the Appellant no VAT is charged on the MOT test fee – it is treated as outside the scope of VAT.  The Appellant, in charging the (marked-up) MOT test fee to his customer, has likewise treated the supply as outside the scope of VAT.
4.	The Commissioners argue that if the Appellant were to treat the test fee paid to the authorised garage as a disbursement (incurred by the Appellant as agent acting on behalf of the customer), then when the Appellant invoices his customer he would be entitled to treat the MOT test fee as outside the scope of VAT.  However, since the Appellant charges a marked-up fee when invoicing his customer, the fee as charged to the customer cannot be such a disbursement, and in consequence that fee becomes fully chargeable to VAT.  This treatment is set out in VAT Notice 700 at para. 25.1, and, specifically in relation to MOT test fees, in Business Brief 21/96, which has been applied since October 1996.  They point out that there have been a number of VAT tribunal decisions confirming this treatment of MOT test fees where an intermediary garage is involved.
5.	In August 2005 the Appellant appealed to the tribunal against the VAT assessment made on him.  The grounds of appeal specified by the Appellant in the notice of appeal were that he was not aware of this VAT treatment of MOT fees charged in the circumstances outlined above, and that the Commissioners had carried out a full investigation of his business and VAT records in the year 2000, and had not pointed out to him at that time that he was not applying the correct VAT treatment when invoicing his customers for the MOT test fees.
6.	Quite separately from his appeal to the tribunal against the VAT assessment, the Appellant wrote in August 2005 to the Complaints Service of the Commissioners, claiming that he had been misdirected by the Commissioners in that the officer who had carried out the detailed investigation in 2000 had failed to point out that he was applying the incorrect treatment for VAT purposes to the MOT test fees.  On 7 September 2005 the Complaints Service wrote back to the Appellant explaining the scope of their remit for dealing with cases of misdirection and asking the Appellant to provide further details of his claim that he had been misdirected by the omission of the VAT officer concerned (the officer was at that time absent on a career break from the Commissioners).
7.	The matter then came before us.  At the hearing of the appeal we were told that there had been discussions between the parties.  The Appellant (who appeared in person) explained that he was not challenging the technical validity or correctness of the assessment, as he now understood the rules which are applied to MOT test fees in circumstances such as his, and he recognised that, by marking up the test fees when on-charging them to his customers, he was not treating them as disbursements.  He accepted that he should have charged VAT on the test fees he invoiced to his customers, and therefore had no quarrel with the assessments as made.  His complaint remained, however, that he had been misled by the failure of the VAT officer to point out the correct VAT treatment of test fees – he told us that the officer’s investigation had been extensive, over a period of about five months, and since his treatment of MOT fees was apparent on the face of his invoices the matter must have come to her attention (the VAT officer whose visit in July 2005 led to the actual assessment had identified the point almost immediately in his routine investigation).  The Appellant also told us that he had responded to the letter of 7 September 2005 from the Complaints Service by a telephone call shortly after he received that letter, but was told that since he had entered an appeal to the tribunal, the issue must be resolved by the tribunal, and no further action could be taken by the Complaints Service.
8.	The Appellant told us that prior to the hearing it had been explained to him by Mr Keller for the Commissioners that, contrary to anything which might have been said by the Complaints Service, the tribunal does not have the jurisdiction to hear any claim that there has been misdirection or other maladministration on the part of the Commissioners.  The Appellant also told us that since he is not challenging the assessment on the grounds that it is wrong in law he understood that his appeal to the tribunal could proceed no further.
9.	We confirm that our jurisdiction, which is precisely defined in the VAT legislation, does not extend to cases where the taxpayer is claiming that there has been misdirection or other administrative failure on the part of the Commissioners which has resulted in loss or other prejudice to the taxpayer.  Therefore, since the Appellant is not appealing against the assessment made on him on the grounds that it is wrong in law, and, indeed, now accepts that he should have charged VAT on the amounts he invoiced to his customers for MOT test fees, we dismiss the Appellant’s appeal under Rule 18(1)(b) of the Value Added Tax Tribunals Rules 1986 (as amended) as the appeal cannot be entertained by a tribunal.
10.	In so dismissing the Appellant’s appeal we wish, however, to repeat the point which we made at the hearing:  if, as the Appellant contends, he was informed in September 2005 by the Complaints Service that his complaint could not be dealt with, but must be brought before the tribunal, then he was wrongly informed.  Had the Complaints Service dealt properly with the matter – that is, investigated the Appellant’s complaint, notwithstanding the appeal entered by the Appellant against the assessment – the matter might have been resolved without the cost to the Appellant and to the public purse of proceeding to a tribunal hearing.  We asked Mr Keller to bring this point to the attention of his client.  In any event, we trust that the Appellant’s complaint will now be dealt with by the Complaints Service both fully and expeditiously.  We also add, as we mentioned to the Appellant at the hearing, that if there has been an administrative failure on the part of the Commissioners, and the matter is not resolved by the Complaints Service, then other legal remedies may be available to the Appellant, although he would be well-advised to seek legal advice before embarking on action to pursue such remedies.
11.	We therefore dismiss the appeal.  We make no order as to costs.

EDWARD SADLER

CHAIRMAN
RELEASE DATE: 26 April 2006

LON/05/0891