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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Chepstow Plant International Ltd & Anor v Revenue & Customs [2011] UKFTT 166 (TC) (10 March 2011) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2011/TC01035.html Cite as: [2011] UKFTT 166 (TC) |
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[2011] UKFTT 166 (TC)
TC01035
Appeal numbers TC/2009/14190
TC/2010/02625
Class 1A NIC – Employment-related benefit – Racehorses owned by company but held in name of director – whether interest in horses and horseracing – No – Appeals allowed – s 10 Social Security Contributions and Benefits Act 1992 – s 203 Income Tax (Earnings and Pensions) Act
FIRST-TIER TRIBUNAL
TAX
(1) CHEPSTOW PLANT INTERNATIONAL LIMITED
(2) EDWARD HAYWARD Appellants
- and -
TRIBUNAL: JOHN BROOKS (TRIBUNAL JUDGE)
CHRIS PERRY (MEMBER)
Sitting in public at Eastgate House, Newport Road, Cardiff on 15 February 2011
David Whiscombe and David Evans of Guilfoyle Sage LLP Chartered Accountants for the Appellant
David Lewis of HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2011
DECISION
1. On 15 September 2009 Chepstow Plant International Limited (the “Company”) appealed against a decision made by an officer of HM Revenue and Customs (“HMRC”) on 14 August 2009, under s 8 of the Social Security (Transfer of Functions etc.) Act 1999, that the Company was “liable to pay Class 1A [National Insurance Contributions (“NIC”)] in respect of racehorses made available as a benefit to Mr E Hayward” in the following amounts:
Year ended £
5 April 2004 2,682.88
5 April 2005 3,069.95
5 April 2006 1,530.50
5 April 2007 2,121.47
5 April 2008 2,808.70
3. Both the Company’s and Mr Hayward’s appeals included the following grounds:
· the object of the racehorses is for business purposes ie to raise the profile of the company; and
· Mr Hayward receives no benefit as the racehorses are not placed at his personal disposal.
8. For the purposes of this case the cost of an employment-related benefit is determined under s 205 ITEPA if the benefit consists of the asset “being placed at the disposal of the employee” and there is “no transfer of property in the asset” as being the annual value of the asset together with the amount of any additional expense (s 205(3) ITEPA). If s 205 ITEPA does not apply s 204 ITEPA provides that the “cost of an employee-related expense is the expense incurred in or in connection with the provision of the benefit”
9. Section 201 ITEPA provides:
(1) This Chapter applies to employment-related benefits.
(2) In this Chapter–
“benefit” means a benefit or facility of any kind;
“employment-related benefit” means a benefit … which is provided in a tax year–
(a) for an employee, or
(b) for a member of an employee’s family or household,
by reason of his employment
(3) A benefit provided by an employer is to be regarded as provided by reason of the employment unless–
(a) the employer is an individual, and
(b) the provision is made in the normal course of the employer’s domestic, family or personal relationships.
10. Benefits are not excluded if they happen to benefit the employer in addition to the employee (see eg Rendell v Went (1964) 41 TC 641). Neither are they excluded if the director or employee did not wish to have the benefit conferred on him and did not consider himself to have been benefited in any way (McKie v Warner (1961) 40 TC 65).
11. Section 50(6) TMA provides that if, on an appeal, it appears to the Tribunal that an appellant is overcharged by an assessment the assessment shall be reduced accordingly but “otherwise the assessment … shall stand good.” In the High Court in Hurley v Taylor (HM Inspector of Taxes) (1998) 71 TC 268 Park J said at [286]:
“It is well settled by authority that [s 50(6) TMA] places the onus of discharging the assessment on the taxpayer. If the [Tribunal] having heard his case, are uncertain where the truth lies, [it] must dismiss the appeal and uphold the assessment.”
13. The Company, of which Mr Hayward and his wife are 90% shareholders, is engaged in the sale and hire of heavy plant to the construction industry both within the UK and abroad. In 2008 its turnover was £18,170,400. It has 67 employees including Mr Hayward and its managing director, Mr John Corcoran, who is also a shareholder. Details of the Company’s business activities and its latest news are shown on its website.
17. In 2008 HMRC commenced an Employer Compliance Review of the Company’s employers’ and contractors’ records and a meeting was held on 20 August 2008 which was attended by Mr Hayward and Mr David Evans of Guilfoyle Sage LLP, Chartered Accountants (“Guilfoyle Sage”) and Mr R L Pearce and Mrs Rossiter of HMRC.
18. The notes of the meeting prepared by Mr Pearce show that a range of issues was discussed including horseracing. These record that Mr Hayward explained that this was not a hobby of his and that the costs were met by the Company. The notes continue stating:
The horses would be purchased by J M Bradley, the trainer, who offered them to EAH [Mr Hayward] who may or may not decide to acquire them. Approximately 8 or 9 horses would be owned by the company at any time and EAH had owned one or two himself.
19. Following the meeting there was correspondence between the parties concerning the horses. On 3 April 2009 Guilfoyle Sage wrote to HMRC stating that “no benefit is received by Mr Hayward as the race horses are not placed at his disposal.”
20. In response Mrs Rossiter wrote, on 20 April 2009 that the horses were regarded by HMRC as a benefit as “Mr Hayward also owns other horses, privately, that are stabled together with the company owned horses indicating a private interest in horse racing.” The letter from Guilfoyle Sage in reply, dated 8 June 2009, concludes:
As noted in our letter dated 3 April 2009 Mr Hayward receives no benefit as the race horses are not placed at his disposal. He never rides them and rarely watches them, his main hobby being steam rallies, and if he wanted to get enjoyment from horse racing he could do that via his own horses rather than the company’s, which are not paid for or sponsored by the company.
21. In her oral evidence Mrs Rossiter (of HMRC) confirmed that notes of the meeting held on 20 August 2008, although not a verbatim record, were an accurate and true recollection of what had been said. She explained that the notes were prepared by Mr Pearce and although she would have expected him to have requested Mr Hayward and his representative to confirm that this was the case she was not in a position to say whether such a request had been made or if the notes had been agreed.
23. For HMRC, Mr Lewis contended that the racehorses were assets of the Company that were made available or “placed at the disposal” of its director, Mr Hayward, for his private use to enable him to pursue his hobby of horseracing.
25. In addition, Mr Lewis contended that Mr Hayward, as an owner, could attend the trainer’s yard to visit the horses and watch them and take a more active involvement in their training. He submitted that the evidence confirms that the horses were placed at Mr Hayward’s disposal and clearly represented a taxable benefit to him under ITEPA which also gave rise to a liability on the Company to pay Class 1A NIC and, as such, the appeals should be dismissed.
27. The issue for us to determine is whether as a result of the racehorses, which HMRC accept are owned by the Company, being registered in his name Mr Hayward has received a taxable employment-related benefit. If so, it would follow that, as a result of that benefit, the Company would be liable to pay Class 1A NIC. Although the definition of ‘benefit’ in the legislation as “a benefit or facility of any kind” is very wide we do not consider that this can include the ‘prestige’ of being a racehorse owner in the absence of any interest in horseracing but that the question of whether Mr Hayward has received a benefit turns on whether he has or had an interest in horses and horseracing. If he did have such an interest there is a clear benefit to him of having the horses registered in his name which would not be the case otherwise.
29. Against this is the evidence of Mr Hayward who told us that he had no personal interest in horses and horseracing and that he had never owned horses. Also there was no evidence before us that Mr Hayward had availed himself of any opportunity to visit the horses at their trainer’s yard and take a more active involvement in their training, neither was this put to Mr Hayward in cross examination. In addition there was no evidence that Mr Hayward had entertained customers of the Company in person at any racing event, or was present in any parade ring, or had been observed in any situation with racehorses.
32. Notwithstanding the Tribunal’s response to the postponement request on 22 October 2010 Guilfoyle Sage wrote again to the Tribunal requesting a “reconsideration” of the decision not to postpone the hearing raising, in addition to the previous reason for such a request ie hope of reaching a negotiated settlement with HMRC, an entirely new ground in that “this is the time of year when Mr Hayward, the director of the company, visits his overseas customers and unfortunately as his schedule is somewhat dictated by those customers has great difficulty re-arranging meetings in order to attend the hearing.” This request was also refused. In an email sent to Guilfoyle Sage on 25 October 2010 the clerk to the Tribunal explained that the matter had been referred to a Judge who had instructed him to reply as follows:
The date for the hearing was notified in mid August, and as such the parties knew they would need to be available. The Judge sees no reason to vary the decision to refuse the postponement. The appeal will remain in the list for 1 November 2010.
33. When the appeal came before us, on 1 November 2010, Mr David Evans, of Guilfoyle Sage, made an application for an adjournment on the grounds that Mr Hayward (who was not present) was unable to attend the hearing as he was in the Caribbean to meet with clients. Mr Evans explained that he had been told by Mr Hayward in August 2010, when the parties had been notified of the hearing date, that he would not be able to attend the hearing on 1 November 2010 but had forgotten to inform the Tribunal of this. As it appeared that it would be difficult for us to deal with the case fairly and justly in the absence of Mr Hayward’s evidence we reluctantly granted the further adjournment. We considered that Guilfoyle Sage had, through Mr Evans acted unreasonably in the conduct of the proceedings as he had been aware of Mr Hayward’s unavailability since the middle of August 2010 but had waited until the morning of the hearing to inform the Tribunal. In the circumstances we directed HMRC to provide a schedule of their costs of and incidental to the adjourned hearing by 29 November 2010. We also directed that Guilfoyle Sage be given an opportunity, in accordance with Rule 10(5) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009, to make representations “immediately prior to the re-listed hearing of these appeals” as to why we should not make a wasted costs order against the firm.
34. HMRC provided a costs schedule to the Tribunal on 26 November 2010 setting out its costs for the hearing listed on 1 November 2010. Before the commencement of hearing these appeals we invited the representatives from Guilfoyle Sage to make representations. However, Mr Evans explained that they accepted liability for HMRC’s wasted costs of the adjourned hearing and did not intend to make any representations. We therefore direct:
(1) The Respondents wasted costs of the adjourned hearing in these appeals which were listed for 1 November 2010 are summarily assessed in the sum of £1,327.70.
(2) Guilfoyle Sage shall, within 28 days of the release of this decision, pay the Respondents £1,327.70.