GR Solutions Ltd v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 01 July 2013 |
| Neutral Citation | [2013] UKUT 278 (TCC) |
| Date | 01 July 2013 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2013] UKUT 278 (TCC).
Judge Roger Berner, Judge Nicholas Aleksander.
Mark Ablitt and Marios Lourides, Sears Morgan, Chartered Certified Accountants, appeared for the Appellant
James Rivett, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents
NICs - Income Tax (Earnings and Pensions) Act 2003 ("ITEPA 2003"), Income Tax (Earnings and Pensions) Act 2003 section 114s. 114 - whether car purchased outright by employee who then sold interest in it to employer was during the co-ownership period "made available" to the employee - held yes - Christensen (HMIT) v Vasili[2004] BTC 318 applied - appeal dismissed.
[1]The Appellant, GR Solutions Limited, appeals against the decision of the First-tier Tribunal ("FTT") (Judge Staker and Mrs Bridge) released on 2 April 2012, dismissing an appeal by the Appellant against a notice of decision issued by the Respondents, HMRC, on 15 September 2010 (as varied by a decision dated 18 November 2010), under Social Security Contributions (Transfer of Functions, etc) Act 1999 section 8s 8 of the Social Security Contributions (Transfer of Functions etc.) Act 1999 that the Appellant company is liable to pay Class 1A national insurance contributions in respect of a car benefit made available to its director and employee Mr Ray Hall.
[2]In essence, this appeal is solely concerned with whether, in circumstances applicable in this case, where an employee purchases a car and then sells an interest in it to his employer but continues to have private use of the car following that transfer, that car is "made available" to the employee within Income Tax (Earnings and Pensions) Act 2003 section 114s 114 of the Income Tax (Earnings and Pensions) Act 2003 ("ITEPA"). If it is, then Class 1A national insurance contributions are due on the car benefit and the car fuel benefit, the cash equivalent of which is determined under ITEPA.
[3]For the purposes of this appeal, that general description of the circumstances is all that is required. We can however shortly state the material facts of the Appellant's case; these have never been in dispute.
[4]Mr Hall is a director and employee, and shareholder, of the Appellant company. On 17 April 2004 he purchased a BMW X5 motor vehicle with an invoice cost of £53,645. At some time during the company's accounting year ended 31 December 2004, Mr Hall sold a 90% share of the car to the Appellant for £48,636. To use a neutral expression, the car continued to be used by Mr Hall for business and private use. Mr Hall did not keep records of his business and private mileage. He made a 10% contribution towards the running costs of the car and paid to the Appellant 10% of the total fuel costs of the car.
[5]No car or fuel benefit charge was reported to HMRC by the Appellant for the period 5 April 2003 to 5 April 2009. By the 15 September 2010 decision (as varied by the 19 November 2010 decision) the Respondents determined that the Appellant was liable to pay Class 1A national insurance contributions in respect of the car benefit and car fuel benefit in the sum of £19,726.42.
[6]As the matter was not in issue, the FTT made no finding whether or not there was any tax avoidance purpose in the arrangements. In the course of argument before us it was said on behalf of the Appellant, in the context of an argument distinguishing this case from earlier judicial decisions to which we shall come, that there was no tax avoidance purpose. No such purpose was alleged by HMRC in this case, and we accept that there was none.
[7]In its decision the FTT set out the relevant provisions of the legislation applicable to the national insurance contributions. As there is no dispute on those provisions, we need not repeat them here. It is common ground that if the conditions in Income Tax (Earnings and Pensions) Act 2003 section 114s 114 ITEPA are satisfied in this case, then the national insurance contributions consequences will follow.
[8]Income Tax (Earnings and Pensions) Act 2003 section 114 subsec-or-para 1 section 114 subsec-or-para 2Section 114(1) and (2) provides relevantly:
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(1)This Chapter applies to a car or a van in relation to a particular tax year if in that year the car or van-
(a) is made available (without any transfer of the property in it) to an employee or a member of the employee's family or household,
(b) is so made available by reason of the employment (see Income Tax (Earnings and Pensions) Act 2003 section 117section 117), and
(c) is available for the employee's or member's private use (see Income Tax (Earnings and Pensions) Act 2003 section 118section 118).
(2)Where this Chapter applies to a car or van-
(a) Income Tax (Earnings and Pensions) Act 2003 section 120sections 120 to 148 provide for the cash equivalent of the benefit of the car to be treated as earnings,
(b) Income Tax (Earnings and Pensions) Act 2003 section 149sections 149 to 153 provide for the cash equivalent of the benefit of any fuel provided for the car to be treated as earnings,
(c) Income Tax (Earnings and Pensions) Act 2003 section 154sections 154 to 159 provide for the cash equivalent of the benefit of the van to be treated as earnings; and
(d) Income Tax (Earnings and Pensions) Act 2003 section 160sections 160 to 164 provide for the cash equivalent of the benefit of any fuel provided for the van to be treated as earnings in certain circumstances.
[9]As indicated by Income Tax (Earnings and Pensions) Act 2003 section 114 subsec-or-para 2 section 120s 114(2), s 120 ITEPA provides for the cash equivalent of the benefit of the car to be treated as earnings. Likewise, under Income Tax (Earnings and Pensions) Act 2003 section 149s 149, if fuel is provided by reason of an employee's employment and that person is chargeable to tax in respect of the car by virtue of Income Tax (Earnings and Pensions) Act 2003 section 120s 120, the cash equivalent of the benefit of the fuel is treated as earnings from the employment.
[10]Although not referred to by the FTT, we should also mention that the cash equivalent of the car is calculated in accordance with the method of calculation set out in Income Tax (Earnings and Pensions) Act 2003 section 121s 121 ITEPA. That method allows a deduction in respect of capital contributions made by the employee to the costs of the car or accessories in accordance with Income Tax (Earnings and Pensions) Act 2003 section 132s 132, which provides:
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(1)This section applies if the employee contributes a capital sum to expenditure on the provision of-
(a) the car, or
(b) any qualifying accessory which is taken into account in calculating the cash equivalent of the benefit of the car.
(2)A deduction is to be made from the amount carried forward from step 2 of Income Tax (Earnings and Pensions) Act 2003 section 121 subsec-or-para 1section 121(1)-
(a) for the tax year in which the contribution is made, and
(b) for all subsequent...
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