Private Usage and Input VAT

The First-Tier Tribunal heard the case of Ram Narroya vs HMRC where the Appellant disputed the decision that inaccuracies on his VAT return were as a result of deliberate behaviour. Ram Narroya dealt mainly in property but sought to expand his business and purchased 3 cars to be put to use providing chauffer service. Input tax incurred on these three cars was fully recovered via a VAT return submitted to HMRC.

 

These three cars were used by the Appellant and his family for private use and were stored at his home. HMRC requested supporting documentation to show that steps had been taken to set up a business based around the provision of chauffer services but this could not be provided. There was also no documentary evidence that the correct insurance necessary for a chauffeur business had been obtained in relation to the three cars.

 

It was therefore concluded that when the Appellant recovered the VAT incurred on the cars in question he was aware that the cars were not being put to a business use and that the appropriate insurance had not been taken out to allow him to make the supplies as he intended. The Tribunals decision stated that this constituted deliberate behaviour without concealment, dismissing the appeal.

 

Penalties for errors on a VAT return that are deliberate but not concealed can carry a penalty of up to 70% of the VAT in question as well as the original amount due.

 

If a business asset has been used for a private purpose, a business/non-business apportionment may be necessary to calculate how much of the input VAT can be recovered in accordance with UK VAT legislation. To avoid the risk of penalties, or if you have already been assessed for unpaid tax and wish to see if the assessments/penalties can be reduced please call our helpline for free advice.

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