Commissioners of Inland Revenue v QUIGLEY
| Jurisdiction | Scotland |
| Judgment Date | 16 June 1995 |
| Date | 16 June 1995 |
| Court | Court of Session |
Court of Session (Inner House).
Lord President Hope, Lord Allanbridge and Lord Clyde.
PS Hodge (instructed by the Solicitor of Inland Revenue) for the Crown.
Colin Tyre (instructed by W & J Burness WS) for the taxpayer.
The following cases were referred to in the opinion:
Cape Brandy Syndicate v IR Commrs TAX(1920) 12 TC 358
Kliman (HMIT) v Winckworth TAX(1933) 17 TC 569
Tennant v Smith (Surveyor of Taxes) TAX(1892) 3 TC 158
Income tax - Income and Corporation Taxes Act 1988 schedule ESchedule E - Taxable benefit - Car available for private use - Taxpayer paid for insurance for both private and business use - Whether amount paid by taxpayer for insurance to be deducted from cash equivalent of the benefit - Income and Corporation Taxes Act 1988 section 157 subsec-or-para (1) schedule 6 subsec-or-para 4Income and Corporation Taxes Act 1988, s. 157(1), Sch. 6, para. 4.
This was an appeal by the Revenue against a determination by the general commissioners for Edinburgh North that where a car was made available for business and private use by the taxpayer's employer, the cost of insurance which the employee was required to pay as a condition of private use was deductible from the cash equivalent of the benefit chargeable to income tax under the Income and Corporation Taxes Act 1988 section 157 subsec-or-para (1)Income and Corporation Taxes Act 1988, s. 157(1).
The taxpayer's employer, the Forestry Commission, made a car available to him both for official and private purposes. Under an agreement the taxpayer paid an amount to the Forestry Commission towards his private use of the car as a condition of private use ("contract user payments"). He was also responsible for arranging and financing the insurance of the car for both private and official use, subject to a contribution made by the Forestry Commission towards the cost of insurance in respect of each mile travelled on official business.
The question was whether the net cost to the taxpayer of insuring the car fell to be deducted in arriving at the benefit chargeable to tax in respect of the car under the Income and Corporation Taxes Act 1988 section 157 subsec-or-para (1)Income and Corporation Taxes Act 1988, s. 157(1).
The taxpayer claimed that in addition to the contract user payments, which it was accepted were deductible from the cash equivalent of the benefit under Income and Corporation Taxes Act 1988 section 157 subsec-or-para (5)s. 157(5) of the 1988 Act, the cost of insurance was an amount he was also required to pay as a condition of the car being available to him for private use. He claimed that the cost of insurance fell within Income and Corporation Taxes Act 1988 schedule 6 subsec-or-para 4Sch. 6, para. 4.
The general commissioners allowed the appeal on the ground that the insurance was a necessary prerequisite for the use of the car. It was a condition of the car being available for private use which the taxpayer was required to pay under the agreement.
The Revenue contended that the effect of Income and Corporation Taxes Act 1988 schedule 6para. 4 of Sch. 6 to the 1988 Act was to confine the reduction to amounts required by the employer to be paid by the employee, which were also paid in return for the use of the car. The fact that the amount was paid as a condition of the car being available for his private use was not enough. Both tests required to be satisfied.
The taxpayer contended that there was a single test: whether the payment was made as a condition of the car being available for the employee's private use. The words "for that use" did not limit the amount to money paid by him for the use of the car. So long as the money was paid as a condition of the car being available for the taxpayer's private use, it was an amount which was paid "for" that use. The obligation on the taxpayer to arrange and finance the insurance of the vehicle was set out in the agreement, and that was enough to bring the payments into account by way of reduction.
Held, allowing the Revenue's appeal:
1. There were two tests to be satisfied. The payments had to be payments which the employee was required to make (1) as a condition of the car being available; and (2) "for" his private use. The taxpayer was required to pay for the insurance by his agreement with the Forestry Commission, so the payments did not fall out of account as having been made voluntarily. But they were made "for" the insurance of the vehicle, not "for" the use of it. Thus, the insurance payments were made for a different purpose than for the private use of the vehicle.
2. Per Lord Clyde: since the insurance payments were made both for business and private use, they could not be regarded as payments for the taxpayer's private use within the meaning of Income and Corporation Taxes Act 1988 schedule 6 subsec-or-para 4Sch. 6, para. 4 of the 1988 Act.
1. At a meeting of the commissioners for the general purposes of the income tax for the division of Edinburgh North ("the commissioners") held at Edinburgh on 18 October 1993 for the purpose of hearing appeals, Stephen Eugene Quigley ("the taxpayer") appealed against an additional assessment to income tax under Income and Corporation Taxes Act 1988 schedule ESch. E for the year 1989-90 in the sum of £1,178 and an assessment to income tax under Income and Corporation Taxes Act 1988 schedule ESch. E for the year 1990-91 in the sum of £39,159.
2. The assessments included a taxable benefit assessable underIncome and Corporation Taxes Act 1988 section 157s. 157 of the Income and Corporation Taxes Act 1988 in respect that a motor car was made available to the taxpayer by his employers which was available for his private use. The question for the commissioners to determine was whether particular types of payment said to have been made by the taxpayer in respect of the said motor car came within Income and Corporation Taxes Act 1988 part II schedule 6 subsec-or-para 4Sch. 6, Pt. II, para. 4 of the 1988 Act and thereby reduced the taxable benefit assessable under Income and Corporation Taxes Act 1988 section 157s. 157.
3. At the hearing, the taxpayer appeared in person and the Revenue were represented by Mr W McLean, HM Inspector of Taxes, Public Department (2), Cardiff. A statement of agreed facts was lodged with the commissioners. There was no oral evidence.
4. [Paragraph 4 listed the documents admitted before the commissioners.]
5. The following facts were admitted between the parties.
(2) The taxpayer is employed by the Forestry Commission at 231 Corstorphine Road, Edinburgh.
(3) On 13 June 1989 the Forestry Commission and the taxpayer signed an agreement under the Forestry Commission Joint User Car Scheme.
(4) Under cl. 2 of the agreement, the Forestry Commission agreed to make a car available to the taxpayer. A car had in fact already been delivered to him on 7 June 1989.
(5) Under cl. 5 of the agreement the taxpayer agreed that "contract user payments" of £112.43 be deducted from his salary each month, the date of the first payment being 30 June 1989. These payments were subsequently increased to £114.87 following an increase in the rate of VAT.
(6) In terms of cl. 7 of the agreement, the taxpayer was liable "for the cost of any repairs to the vehicle necessitated by damage occasioned by or arising from fault or negligence on the part of the User".
(7) When the vehicle was not required for the taxpayer's official duties cl. 12 of the agreement allowed him and his immediate family to use it privately.
(8) Clause 20 of the agreement required the taxpayer to arrange and finance the insurance of the vehicle for private and business use. He did this at a cost of £187 for the period from June 1989 to 31 March 1990 and £225 for the year ended 31 March 1991.
(9) Under the provisions of cl. 16 the taxpayer received contributions from the Forestry Commission towards the cost of insurance totalling £91 in the tax year 1989-90 and £62 in the year 1990-91.
(10) In terms of cl. 3 of schedule 2 to the agreement the Forestry Commission was entitled to charge the taxpayer 4.83p for each private mile travelled over the agreed private mileage allowance of 10,000 miles per annum.
(11) Clause 4 of schedule 2 to the agreement provided for the user's payments to be increased pro rata as the forecast official mileage decreased.
(12) A memorandum issued by the Forestry Commission in February 1989 stated that "Employees will pay a weekly/monthly charge for the private use of the leased car which will be deducted at source from their wage or salary" and "In addition to the hire charge for private use employees will be responsible for insuring the vehicle."
(13) Subject to any allowable deductions the benefit of the car which was chargeable to tax on the taxpayer was £1,387 for 1989-90 and £2,200 for 1990-91. These sums fell to be reduced by the contract user payments made by the taxpayer, totalling £1,034 for 1989-90 and £1,379 for 1990-91 since these payments come within the terms of theIncome and Corporation Taxes Act 1988 part II schedule 6 subsec-or-para 4Income and Corporation Taxes Act 1988, Sch. 6, Pt. II, para. 4.
6. The taxpayer contended that in addition to the direct payment to the Forestry Commission he had to pay the following:
(a) cost of insuring the car,
(b) any cost to repairing damage or loss not covered by insurance,
(c) cost of cleaning the car, and
(d) cost of minor outlays associated with maintenance of the car, e.g. oil.
He submitted that the foregoing represented amounts of money which he was required to pay as a condition of the car being available for private use and that these payments came within Income and Corporation Taxes Act 1988 part II schedule 6 subsec-or-para 4Sch. 6, Pt. II, para. 4 of the 1988 Act and that the taxable benefit chargeable under Income and Corporation Taxes Act 1988 section 157s. 157 fell to be reduced accordingly.
7. It was contended on...
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