London Drying Ltd v Revenue and Customs [2023] UKFTT 9 (TC) (14 December 2022)

Parties

Procedural Posture

VAT Appeal and Penalty Challenge / First Tier Tribunal (tax Chamber) Judgment

Legal Issues

1. 1 Whether, at the time of purchase, the Appellant intended to make the Audi Q5 available for private use within the meaning of Art. 7(2G)(b) of the Value Added Tax (Input Tax) Order 1992
2. 2 Whether HMRC were correct to impose a penalty for careless inaccuracy under Schedule 24 of the Finance Act 2007
3. 3 Whether the penalty for careless inaccuracy should have been suspended on conditions

Ratio Decidendi

The Appellant did not discharge the burden of proving that, at the time of purchase, it did not intend to make the Audi Q5 available for private use. The absence of effective legal or practical restraints, the insurance policy permitting private use, and the lack of corrective action regarding the insurance documentation led to the conclusion that the car was available for private use. Therefore, the input tax was not recoverable. The penalty for careless inaccuracy was properly imposed as the inaccuracy was careless and there were no special circumstances for further reduction. However, the penalty should be suspended on agreed conditions.

Court Disposition

Appeal dismissed

Orders

• Assessment dated 25 June 2021 for £9,052.00 upheld; input tax not recoverable.
• Penalty for careless inaccuracy of £1,357.80 upheld but to be suspended for 12 months on agreed conditions: (1) maintain yearly business mileage records with corroborating evidence; (2) annually check and record insurance policy terms; (3) keep records of HMRC guidance checks and contacts.