19591

VALUE ADDED TAX -- Over claimed input tax – recoverable by HMRC? – held yes 

LONDON TRIBUNAL CENTRE						   LON/2005/0061

	SPRINTERS TRANSPORT LIMITED	Appellant

	- and -

	      THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

			Tribunal:	ADRIAN SHIPWRIGHT (Chairman)
					TYM MARSH

Sitting in public in London on 4 May 2006

Miss V Bergonzi, Director and Mrs C Roketa, Accountant for the Appellant

Nicola Shaw, instructed by the Acting Solicitor for HM Revenue and Customs, for the Respondents 

© CROWN COPYRIGHT 2006

DECISION

1.	This is an appeal against a decision on review to uphold a Notice of Assessment in the sum of £3094.00 made against the Appellant (“the Company”) to recover over claimed input tax. This decision was set out in a letter from the Respondents (“HMRC”) dated 1 September 2004. It was appealed in time.
2.	We find that there was an over claim of input VAT.  The over claimed input tax arose in the following circumstances, which we find as facts.
(1)	The Company carries on business providing courier services.
(2)	The Company entered into a “Finance Lease – Unregulated” on 16 August 2001 (“the Lease”) with Network Vehicles Limited (“Network”).
(3)	 The Lease related to a vehicle to be used by the Company for its business ((“the Vehicle”). It was a Volkswagen Caravelle Variant.
(4)	The Lease was for a minimum period of 48 months. Advance rental of £1,702.19 (including VAT) was payable followed by rental payments of £567.40 per month (including VAT) for the next 47 months.
(5)	Clause 8 of the Lease made provision for Termination. Broadly this required a payment to be made. The amount of the payment was the total of “all the Rentals which would have been payable for the Minimum Period [i.e. 48 months] had the [Lease] not terminated less the net proceeds of sale of [the Vehicle”] less a discount of 5%”. The sums payable under Clause 8 of the Lease were to bear VAT where appropriate.
(6)	The Company made enquiries about terminating the Lease in October 2001.  
(7)	Network wrote on 23 October wrote saying that the “settlement figure” for the Lease was £27,682.69 including VAT. This was based on the rental payments that would have been due had the Lease continued. The amount of VAT on the “settlement figure” would have been £4,122.13.
(8)	The Vehicle was sold for 18,042.55 plus VAT of 3,157.45, a total of £21,200.00
(9)	The amount payable on termination was reduced by a refund of rentals of £17,681.70 on which VAT of £3,094.30 would have been payable. A credit note for £20,776.00 including £3,094.30 was issued by Network on 28 November 2001. This reflects a discount rate of 2%.
(10)	The payment due on termination was accordingly £6,906.69  (£27,682.69 less £20,776) of which some £1,027.83 was VAT. The Credit Note evidenced this.
(11)	The Company claimed £4,122.13 as input tax on the basis that this was the VAT due on the Settlement Figure referred to above.
(12)	 The Company made no adjustment to reflect the reduction of the amount due on termination to £6,906.69 (£27,682.69 less £20,776) of which some £1,027.83 was VAT.
(13)	The Company claimed £4,122.13 as input tax rather than the some £1,027.83, which was the VAT element on what it actually paid i.e. £6,906.69.
(14)	The Company did not pay £27,682.69 on the termination of the Lease.  It paid only £6,906.69 as 98% of the sale proceeds were allowed as deduction in computing the amount payable on termination.  The Company could only claim the VAT element of what it actually paid as input tax i.e. £1,027.83 (not £4,122.13 which would have been the amount of VAT on the original settlement figure). Accordingly, the Company had made a claim for £3,094.30 more than it was entitled to. We find this as a fact.
(15)	We record that HMRC’s handling of this case has not met the highest standards (we exclude their Counsel from this). We assume the lack of penalty and interest reflects this. The audit seems to have been confusing, as the Appellant was given incorrect advice and there were lengthy delays. Although we have sympathy with the Appellant in these circumstances that does not affect our task which is to determine whether or not there has been over claimed input VAT and if so how much.
3.	We have found that the Company could only claim the VAT element of what it actually paid (£6,906.69) as input tax i.e. £1,027.83 not £4,122.13. Accordingly, the Company had made a claim for £3,094.30 more than it was entitled to. Consequently, 
(1)	there has been an over claim of input VAT;
(2)	the amount of that over claim is £3,094.30.
4.	For the reasons set out above we find that the Notice of Assessment to recover £3,094 over claimed as input tax was properly made and the appeal is accordingly dismissed.

ADRIAN SHIPWRIGHT

CHAIRMAN
RELEASE DATE:

LON/2005/0061

££Sprinter Transport Ltd v  Revenue & Customs [2006] UKVAT V19591 (23 May 2006)