General Motors Acceptance Corporation (U.K.) Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 01 April 1985 |
| Date | 01 April 1985 |
| Court | Chancery Division |
Chancery Division.
Mr. D. Potter Q.C. and Mr. K. Prosser (instructed by Messrs. Slaughter & May) for the taxpayer.
Mr. R. Carnwath (instructed by the Solicitor of Inland Revenue) for the Crown.
Before: Walton J.
Corporation tax - Trading stock - Stock relief - Cars purchased by finance company for dealers pursuant to an agreement - Dealers stored or displayed cars prior to sale - Whether cars trading stock of finance company - Whether transaction one of hire or hire-purchase resulting in prevention of stock relief claim - Finance Act 1976 schedule 5 subsec-or-para 29Finance Act 1976, Sch. 5, para. 29(1).
This was an appeal by the taxpayer company against a decision of the Special Commissioners that the taxpayer was not entitled to claim stock relief pursuant to Finance Act 1976 schedule 5 subsec-or-para 29Sch. 5, para. 29(1) of the Finance Act 1976.
The taxpayer company was a wholly-owned subsidiary of a wholly-owned subsidiary of General Motors Corporation of Detroit. It carried on the business of a finance company. Vauxhall Motors was a directly owned subsidiary of General Motors. Both companies were English. By an agreement, dated 1979 but in fact in operation since 1978, between Vauxhall and the taxpayer it was provided that if a car dealer ordered a car from Vauxhall and indicated that he wished to take advantage of a financial package on offer from the taxpayer, the taxpayer would purchase the vehicle from Vauxhall on the same terms as if the dealer had ordered it direct from Vauxhall without requiring any financial assistance. The taxpayer further agreed to resell the vehicle to the dealer unless he instructed it to the contrary. In that event the vehicle would go to another Vauxhall franchised dealer. The dealer would either store the cars purchased by the taxpayer or would polish a small number for display in the showroom. The dealer paid the taxpayer a handling charge calculated by reference to the interest the taxpayer had to pay to obtain the finance necessary for it to purchase the cars from Vauxhall and to make a profit. The taxpayer claimed stock relief in respect of the cars but the Revenue refused the claim.
The issues between the parties were first, whether the cars comprised in the agreement (those purchased by the taxpayer from Vauxhall) were the "trading stock" of the taxpayer within Finance Act 1976 schedule 5 subsec-or-para 29para. 29(1); and secondly, even if the cars did so qualify, whether Finance Act 1976 schedule 5 subsec-or-para 29para. 29(1) was inapplicable because the vehicles were "let on hire" which would negate a claim for stock relief. To qualify for stock relief, Finance Act 1976 schedule 5 subsec-or-para 29para. 29(1) provided that the property must be such as was sold in the ordinary course of the trade. After an unsuccessful appeal to the Special Commissioners, the taxpayer appealed to the High Court.
The taxpayer contended that although cars were definitely not what the taxpayer was trading in, in the ordinary course of selling its financial package it would, inevitably, be involved in the sale of cars. So, it was submitted, in the ordinary course of its trade as a financial dealer, it sold the cars, even though it was not out of the cars that it made its profits.
The Crown contended that the cars were let on hire by the taxpayer because the handling charge was in the nature of a rental and, therefore, the taxpayer was not entitled to relief.
Held, allowing the taxpayer company's appeal:
1. The cars did qualify for stock relief within the Finance Act 1976 schedule 5 subsec-or-para 29para. 29(1) definition. Items in which a company did not trade might be part of its trading stock. The cars were part of the taxpayer's trading stock because, although not trading in cars, it was involved in their sale in the ordinary course of its trade as a financial dealer.
2. The element of hire involved in the implementation of the financial package, although not a negligible part of the scheme, was only an incidental element. That small element of hire when subjected to strict legal analysis was insufficient to enable it to be maintained that the taxpayer acquired the vehicles for hire, or having acquired them for the purpose of re-sale, it hired them out.
1. At a meeting of the Commissioners for the special purposes of the Income Tax Acts held on 28, 29 and 30 November 1983 General Motors Acceptance Corporation (UK) Limited (hereinafter called "the Company") appealed against the following assessments:
Accounting period ended |
Amount of assessment |
31 December 1978 |
£3,000,000 |
31 December 1979 |
£2,000,000 |
31 December 1980 |
£1,000,000 |
2. The questions for our determination, our findings of fact on the evidence adduced, the respective contentions of Mr. D.C. Potter Q.C. on behalf of the Company and Mrs. E.K. Picard on behalf of the Crown together with our determination in principle are set out in our Decision which was issued on 30 January 1984 and a copy of which is annexed as part of this Case.
3. The names and descriptions of the witnesses who gave evidence before us are set out in para. 3 of our Decision.
4. The following documents were proved or admitted before us:
(2) Agreed Statement of Facts and List of Documents.
(3) Bundle of Documents - marked "A".
(4) GMAC Financing - "So What's New." - marked "B".
(5) Dealer Wholesale Finance Plan - marked "C".
(6) Analysis of Wholesale handling charges in respect of the SOR supply £3,505.25, for Vauxhall Cavalier 9UL69 K7149843 - marked "D".
Also written contentions and submissions of the parties.
5. The following cases were cited to us in argument:
Poole v. Smith's Car Sales (Balham) Ltd. WLR[1962] 1 W.L.R. 744
Darngavil Coal Company Ltd. v. Francis TAX7 T.C. 1
I.R. Commrs. v. Church Commissioners for England TAX50 T.C. 516
Aberdeen Construction Group Ltd. v. I.R. Commrs. TAX52 T.C. 281
Lumsden v. I.R. Commrs. ELR[1914] A.C. 877
Corporation of Birmingham v. Barnes TAX19 T.C. 195.
6. Following our Decision in principle, figures were agreed between the parties on 27 March 1984 and on 4 April 1984 we adjusted the assessments accordingly.
7. The Company immediately after the determination of the appeals declared to us its dissatisfaction therewith as being erroneous in point of law and on 26 April 1984 required us to state a case for the opinion of the High Court pursuant to the Taxes Management Act 1970 section 56Taxes Management Act 1970, sec. 56 which Case we have stated and do sign accordingly.
8. The question of law for the opinion of the court is whether upon the facts found by us our decision was erroneous in point of law.
1 General Motors Acceptance Corporation (UK) Limited ("the Company") appeals against the following estimated assessments to corporation tax upon its trading profits within Case I of Sch. D:
Accounting period ended |
Amount of assessment |
31 December 1978 |
£3,000,000 |
31 December 1979 |
£2,000,000 |
31 December 1980 |
£1,000,000 |
Each of the points in issue between the parties concerns the question as to whether the Company is entitled during the years under assessment to relief for the increase in value of trading stock under the provisions of Finance Act 1976 schedule 5Sch. 5Finance Act 1976 ("FA 76").
Although each of the parties to this appeal was invited by this tribunal to clarify the issues of fact and law on which they could not agree in advance of the date of the hearing, it was apparent both at the commencement of the hearing and during its course that the questions for our determination had not been agreed between the parties.
After some discussion and argument the following issues emerged for our determination:
(a) Whether motor vehicles which the Company made available to certain of its customers under the terms of a particular form of agreement constituted "goods … let on hire" within the provisions ofFinance Act 1976 schedule 5 subsec-or-para 29FA 1976, Sch. 5, para. 29(2)(c). For the sake of completeness we record that at the outset the Crown's contention extended to "goods … let on hire or hire purchase" but that the Crown abandoned its position with regard to hire purchase during the course of the hearing.
(b) Whether the motor vehicles referred to in para. (a) above constituted trading stock of the Company within the provisions ofFinance Act 1976 schedule 5 subsec-or-para 29FA 1976, Sch. 5, para. 29(1)(a).
(c) The application to the Company's activities of Finance Act 1976 schedule 5 subsec-or-para 22FA 1976, Sch. 5, para. 22 and in particular Finance Act 1976 schedule 5 subsec-or-para 22sub-para. 22(1)(a) of that Schedule. It having been agreed between the parties that the onus of proof in the case of this particular issue lay upon the Crown and in view of the very short notice given by the Crown to the Company of its intention to take this point at the hearing both parties agreed that a hearing on this particular issue should be adjourned sine die to await our decision relative to the issues in Finance Act 1976 schedule 5 subsec-or-para 29 schedule 5 subsec-or-para 29para. (a) and (b) above. It was conceded on behalf of the Company that in the event of our deciding either issue (a) or issue (b) in the Crown's favour, no further hearing before this tribunal would be required.
(d) For the sake of completeness we record that at one stage it appeared that the Crown also wished to take a point on Finance Act 1976 schedule 5 subsec-or-para 23FA 1976, Sch. 5, para. 23 but that such intention was abandoned during the course of the hearing.
2 The Law
The relevant part of Finance Act 1976 schedule 5 subsec-or-para 29FA 1976, Sch. 5, para. 29 states:
-
29(1) Subject to the provisions of this paragraph, in this Schedule "trading stock" means property of any description, whether real or personal, being either -
(a) property such as is sold in the ordinary course of the trade, profession or...
To continue reading
Request your trial
-
General Motors Acceptance Corporation (U.K.) Ltd v Commissioners of Inland Revenue
...9 subsec-or-para 28Finance Act 1981, Sch. 9, para. 28(1), (2), (5)). This was the appeal of the Crown against a decision of Walton J. ([1985] BTC 328) that a finance company was entitled to stock relief under the Finance Act 1976 schedule 5Finance Act 1976, Sch. 5, in respect of cars which ......
-
Britax International GmbH v Commissioners of Inland Revenue
... ... Following UDT's acceptance in principle of the proposed purchase and lease Autolease ... given by section 784(6) of [the Income and Corporation Taxes Act 1988]. 36 Definition of "motor car", ... on MacNiven v Westmoreland [2001] 2 WLR 377 ; General Motors Acceptance Corporation v IRC [1987] STC 122 and ... of Appeal in General Motors Acceptance Corporation (UK) Ltd does not assist Mr Walters. The issue in that case ... ...
-
HM Revenue and Customs v Micro Fusion 2004-1 LLP; HM Revenue and Customs v Halcyon Films LLP
... ... Between The Commissioners For HM Revenue & Customs Appellant ... Mr Jolyon Maugham (instructed by DLA Piper UK LLP ) for the Respondents ... 1 Hearing dates: ... of section 100(2) of the Income and Corporation Taxes Act 1988, so that relief otherwise ... and distributed for presentation to the general public …” ... 37 22 ... General Motors Acceptance Corporation Ltd v IRC [1987] STC ... ...
-
Kl”ckner Ina Industrial Plants Ltd v Bryan (HM Inspector of Taxes)
...to hang the entitlement to stock relief on the bare peg of ownership. In General Motors Acceptance Corporation (UK) Ltd v IR CommrsTAXTAX[1985] BTC 328 and [1987] BTC 71 the taxpayer company, a subsidiary of Vauxhall Motors Ltd ("Vauxhall"), traded as a finance company. It took part in an a......