Commissioners of Customs and Excise v Upton (t/a Fagomatic)

JurisdictionEngland & Wales
JudgeLord Justice Buxton
Judgment Date18 April 2002
Neutral Citation[2002] EWCA Civ 520
Docket NumberCase No: CHRVF/2001/1104/A3
CourtCourt of Appeal (Civil Division)
Date18 April 2002

[2002] EWCA Civ 520





The Vice-Chancellor

Royal Courts of Justice


London, WC2A 2LL


Lord Justice Peter Gibson

Lord Justice Buxton and

Mr. Justice Neuberger

Case No: CHRVF/2001/1104/A3

Commissioners for Customs and Excise

Nicholas Paines Q.C. and Mr. Raymond Hill (instructed by The Solicitor for Customs and Excise of London) for the Respondents

Mrs. Penny Hamilton (instructed by Messrs Dechert of London) for the Appellant

Peter Gibson L.J.:


This appeal gives rise to a short question of construction of a statutory instrument relating to Value Added Tax ("VAT") and in particular the allowance of input tax as a deduction in respect of the supply to a taxable person of a motor car for business purposes. The Appellant is the taxpayer, Christopher Upton. He claimed a deduction of £19,571 input tax paid by him as the purchaser of a Lamborghini Diablo, which, he said, he acquired solely for business use. The Respondents, the Commissioners of Customs and Excise, disallowed his claim. Mr. Upton appealed and his appeal was allowed by the Value Added Tax and Duties Tribunal (Mr. de Voil and Mr. Clark) on 9 April 2000. The Commissioners appealed to the High Court and their appeal was allowed by the Vice-Chancellor, Sir Andrew Morritt, who refused Mr. Upton permission to appeal. The Vice-Chancellor's judgment is now reported ( [2001] STC 912). The appeal by Mr. Upton to this court is brought with the permission of Robert Walker L.J.


The provisions of the Value Added Tax Act 1994 ("the 1994 Act") and the subordinate legislation made thereunder implement the provisions of the Sixth VAT Directive (77/388/EEC). The system of input tax deduction under Art. 17 of the Directive is intended to ensure that all economic activities are taxed in a wholly neutral way so that a taxable person is relieved entirely of the burden of VAT incurred in the course of his trading activities. But that principle is subject to certain derogations provided for in the Directive. In particular Art. 17(6) permits Member States to retain existing exclusions from the right to deduct input tax on cars acquired exclusively for business use.


Provision has been made by the United Kingdom for such exclusions by a series of statutory instruments known as Car Orders made under s. 25(7) of the 1994 Act and its statutory predecessors. We are concerned with the Value Added Tax (Input Tax) Order 1992 ("the 1992 Order"). The most relevant provisions are those introduced by amendment to the 1992 Order by the Value Added Tax (Input Tax) (Amendment) (No. 3) Order 1995 ("the 1995 Order"). Art. 7(1) of the 1992 Order as amended provides for exclusions from the general right of a taxable person under s. 25 to deduct input tax in respect of a supply to him of a motor car. But by Art. 7 (2)(a), Art. 7(1) is not to apply if (i) the car is a qualifying motor car, (ii) the car is supplied to a taxable person, and (iii) "the relevant condition" is satisfied. Thus the effect of the satisfaction of the three conditions is that the taxable person can avail himself of the right to deduct input tax.


By Art. 7(2E) the relevant condition is, so far as material, that the supply is "to a taxable person who intends to use the motor car … (a) exclusively for the purposes of a business carried on by him, but this is subject to paragraph (2G) below …"


Art. 7(2G), so far as material, provides:

"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—


(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."

It is the meaning to be attached to the words "make it available" which is the crucial issue in this case.


I now turn to the facts. Mr. Upton is a taxable person. He carries on business under the name Fagomatic. His business is the supply and servicing of cigarette vending machines in clubs in the London area. He bought the Lamborghini in 1998. It is a qualifying motor car. He claimed a deduction for the input tax paid on the purchase of his car in his VAT return for the period ended July 1998.


At the hearing of Mr. Upton's appeal from the Commissioners' disallowance of his claim he gave evidence. The Tribunal found him to be a witness of truth and had no hesitation in accepting his evidence. They said that his case displayed certain features which set it apart from the general run of cases and that it was very much a one-off. They explained why in paras. 3, 4 and 5 of their decision:

"3. In the first place [Mr. Upton's] business, the supply and servicing of cigarettes vending machines in clubs, appears to be an affair of cut-throat rivalry where image is everything. If you turn up in a plain white van, you are treated accordingly; if you turn up in a car costing more than £100,000 you are treated as a person of consequence. [Mr. Upton] has reached the top of his particular slippery pole—his representative referred to him as the king of the cigarette vending machines—and he intends to stay there. For three years before buying the Lamborghini he had had an Aston Martin; when the rivals who are constantly at his heels trying to poach his business also acquired Aston Martins [Mr. Upton] decided to go one better. The purchase of the Aston Martin had increased his turnover by 100%; the Lamborghini increased it by a further 50%.

4. In the second place, [Mr. Upton] appears to have no visible private life worth mentioning. He works seven days a week from 8.00am until midnight or later; the clubs which are his main business stay open until about 3.00am. He has not had a holiday for five years. In response to a light-hearted comment from the Tribunal about the pulling power of a Lamborghini, he observed that he was 61 years of age. He has no wife or family; he lives in central London, where all the shops he needs are within walking distance.

5. Thirdly, [Mr. Upton] has convictions for driving under the influence of alcohol and other substances, even though he is not at the moment disqualified from driving. On the occasions when he does find a little time for socialising, he cannot imagine doing so without alcohol, and it would be quite unthinkable for him to drive on those occasions—he uses taxis. We have no difficulty in visualising the effect which a further disqualification from driving would have on his business."


The Tribunal found in para. 6 that Mr. Upton during the day used special security vans for delivering cigarettes to machines and collecting cash from them, and that daytime parking for delivery was possible because the clubs normally had single yellow lines outside, but that after 6.30pm this was not possible because the club doormen coned off the available space for use by more favoured clients. The Tribunal said: "No doorman worth his salt would allow a white van into such a space; a Lamborghini is a different matter."


In para. 7 the Tribunal found that Mr. Upton ran his business from home and that the Lamborghini was parked in a car park some 300 yards away. In para. 9 they found that before he bought the car he enquired whether it would be possible to insure it for business use only, but that his agent told him that all insurance policies cover private use without extra charge. It appears that Mr. Upton acquiesced in the car being insured for both private and business use.


In para. 13 the Tribunal referred to the presumption that one intends the natural and foreseeable consequences of one's actions, but said that they felt Mr. Upton had succeeded in rebutting it. They continued:

"He bought the Lamborghini for one reason and one reason only—to impress customers and so stay ahead of the competition; he clearly did not intend to use it privately and has not done so; he has convinced us that it is unthinkable that he could do so. It is garaged near his home address, but that is also his business address; he has access to the keys, as it would be absurd that he should not; he has no other car for private use, but does not need one."


The Tribunal in para. 14 referred to the evidence about the car being insured for private use, and said that they could not regard his failure to insist more vigorously on a policy for business purposes only as evidence that he had any intention of using the car privately. In para. 15 they said that they did not find it easy to discern the legislative purpose behind Art. 7 (2G), and saw some force in a suggestion by Mr. Upton's representative that the words were mere surplusage reflecting an excess of caution. They rejected the Commissioners' argument that the words of para. 2 (G) imply that in order to qualify one must put the car wholly outside one's control so that it is impossible to use it privately. They said:

"With respect, we cannot see that the words of the statutory instrument can be forced into that meaning. We prefer the approach of the Tribunal in Aldam [ John Charles Associates v Commissioners of Customs and Excise [1998] V & DR. 425], who felt that "make available" must mean more than "be available"; even if there is a presumption that [Mr. Upton] intended that the car should be available, there is no evidence whatever to suggest that he intended to make it so."


Finally the Tribunal rejected an argument of the Commissioners that the statutory instrument should be construed purposively...

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