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Disposal of taxicab licences—whether a separate supply from disposal of taxi.
Until 31 March 1983, the Commissioners treated the sale of taxicab licences as outside the scope of VAT. After that date the Commissioners treated them as part of the sale of the taxicabs. The change in treatment was notified to the National Federation of Taxicab Associations and subsequently published in Notice 700/25/84. A company which disposed of one taxicab in 1986 and another in 1987 did not account for VAT on the sale of the licences. The Commissioners issued an assessment to recover the tax and the tribunal dismissed the company's appeal. Associated Cab Co Ltd, MAN/88/97 (VTD 3394).
A partnership sold two cars, to which it had transferred hackney carriage licences permitting them to be used as taxis in Cambridge. It contended that in computing the margin, there should be deducted not only the original cost of the cars but also an amount in respect of the licences. The tribunal rejected this contention and dismissed the appeal, holding that there was a single supply and the fact that the company had improved the value of the vehicles by attaching the licences to them was not relevant for the purposes of the margin scheme. GT Collins & Son, LON/88/3134 (VTD 3738).
The decisions in Associated Cab Co, 43.84 above, and GT Collins & Son, 43.85 above, were followed in a similar subsequent case in which an appeal against an assessment charging tax on the sale of a taxicab was dismissed. SS Natt, MAN/91/9 (VTD 6999).
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3394: ASSOCIATED CAB CO LTD
TRIBUNAL CENTRE: MANCHESTER
DECISION NUMBER: 3394
APPELLANT: ASSOCIATED CAB CO LTD
CASE REFERENCE NUMBER: (MAN/88/97)
RESPONDENTS: THE COMMISSIONERS OF CUSTOMS AND EXCISE
TRIBUNAL CHAIRMAN: A SIMPSON
OTHER MEMBERS: MR R L HUTCHISON
LOCATION: SITTING IN PUBLIC AT
WARWICKGATE HOUSE WARWICK ROAD OLD TRAFFORD MANCHESTER M16 0GP
DATE: MONDAY THE 15 AUGUST 1988
FOR THE APPELLANT: MR J THORLEY, ACCOUNTS DIRECTOR OF THE APPELLANT
FOR THE COMMISSIONERS: MR M ZEFFMAN OF THE SOLICITOR'S OFFICE OF H M CUSTOMS AND EXCISE
RESULT OF APPEAL: DISMISSED
Decision
This is an appeal by Associated Cab Co Ltd against the Commissioners' confirmation by letter dated 4th February 1988 of an assessment of value added tax in the sum of £2, 512.33, notice of which was issued on 17th September 1987. The Appellant accepts that part of the sum assessed, namely £34.07, is correctly assessed; the dispute concerns the remainder, namely £2, 478.26.
The Appellant was represented by its accounts director, Mr J Thorley, and the Commissioners by Mr M Zeffman of their Solicitor's office. The facts were not in dispute and no formal evidence was given.
At all material times the Appellant has been registered for value added tax. It owns and operates taxicabs in the Manchester area. At all material times, the owner of a taxicab needed a licence issued by the local authority in order to entitle him to ply for hire. The licence had a licence number and it specified the registration number of the taxicab for which the owner was licensed.
The licence lasted for a period. There was incorporated in it a certificate of approval for the taxicab. The local authority issued a limited number of such licences. Thus a limited number of persons only were entitled to operate taxicabs in the area of the local authority. If a licensed taxicab owner wished to sell his taxicab, the price varied according as the purchaser was or was not to become licensed in his place. If the owner was merely selling the vehicle, the price was the value of the vehicle, but if he was also selling the licence, the price was very much higher.
Until 31st March 1983 the Commissioners treated the sale of taxicab licences as being outside the scope of value added tax. In the early part of 1983 the Commissioners decided that with effect from 1st April 1983 sales of licensed taxicabs were to be treated as taxable supplies, so that when a licence was sold with a taxicab the sale was taxable as a single supply.
The change was announced in a letter dated 23rd February 1983 from the Commissioners to the National Federation of Taxicab Associations and in the Commissioners' Press Notice no. 807 dated 10th March 1983; it was explained in the Commissioners' Leaflet 700/25/84, entitled 'Taxis and Hire Cars', which was issued on 1st July 1984, and the issue of the Leaflet was announced to traders in the Commissioners' VAT Notes (No. 2) 1984/85, which was issued in November 1984.
In 1986 it was announced that taxicab licences were to be deregulated, with the consequence that when the change came into operation many more licences would be granted and licences would cease to be valuable assets. At the time of the announcement the Appellant had six licensed taxicabs.
It disposed of one towards the end of 1986; the purchase price was £15, 000, consisting of £3, 500 for the taxicab with its accessories and £11, 500 for the licence. In March 1987 the Appellant disposed of a second taxicab; the purchase price was £11, 000, consisting of £3, 500 for the taxicab and accessories and £7, 500 for the licence. The Appellant accounted for value added tax on the sums paid for the vehicles and accessories, but not on the sums paid for the licences. The disputed part of the assessment represents the value added tax on the sums paid for the licences.
In each case the purchaser neither was registered for value added tax nor became so registrable as a result of the transfer. Thus, even if the sales had constituted the transfer of part of the Appellant's business as a going concern, they would not have been taken outside the scope of value added tax by Article 12 of the Value Added Tax (Special Provisions) Order 1981*.
Since the taxicabs were of the London type (that is to say, vehicles of a type approved by the Assistant Commissioner of Police of the Metropolis as conforming to the conditions of fitness for the time being laid down by him for the purposes of the London Cab order 1934), they were excluded from the second-hand car scheme laid down in Article 12 of the Value Added Tax (Cars) Order 1980**. There being no other provision which took the supplies of the taxicabs with their licences outside the general rules, it follows that tax at the standard rate was chargeable on the full selling price and that the assessment is correct.
#FootnoteB
* SI No 1741.
** Sl No 442.
Mr Thorley made two points, however; first, that the Appellant's business was owning and operating taxicabs and not trading in them, and secondly, that he and his co-directors were unaware of the changed treatment of the supply of taxicabs with their licences for the purposes of value added tax. With regard to the first point, the exact nature of the business is immaterial; the question is whether the supply was in the course or furtherance of that business: section 2(1) of the Value Added Tax Act 1983. In the instant case, beyond argument the answer to that question is 'yes'; whether or not the supplies were in the course of the Appellant's business, they were certainly in the furtherance of it. It seems that the ultimate purpose of the sales of the taxicabs was to reduce the liability of the Appellant's directors for the indebtedness of the Appellant, which they had guaranteed.
That may be so, but so far as the Appellant was concerned the purpose and the effect of the sales were to reduce its own indebtedness, and in our judgment that is more than sufficient to establish that the sales were effected in the course or furtherance of the Appellant's business. With regard to Mr Thorley's second point, we consider that the Commissioners gave adequate publicity to the change and that they cannot fairly be criticised for not having done more in that respect.
We therefore dismiss the appeal. Mr Zeffman declined to ask for costs or interest, and we make no direction in these respects.
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