MC and LJ Ive Ltd & M Ive (TC3529)

**northernladuk** · 19 June 2014, 13:54

Any chance you can copy the article or is that naughty? I bet not many of us have a taxation account to read the rest

**Clare@InTouch** · 19 June 2014, 13:57

Interesting decision, and a warning to be careful to get things in your own name if they are personal rather than trying to use the company name to get a commercial discount.

From the actual case (I don't subscribe to Taxation so can't read your link Jessica, apologies if I'm repeating it):

Benefit in kind charges relating to the vehicles
38. We have devoted considerable thought to whether the Company could be said
never to have provided the cars to Mr Ive, on the basis that the Company acted as
merely some form of nominee for Mr Ive and that Mr Ive was the true lessee all
along. Although not expressly stated in those terms, that seems to be the drift of some
of the representations made to HMRC in correspondence by Mr Ive’s accountant. In
that connection we have reviewed the analysis in the recent decision of the Supreme
Court in Prest v Petrodel Resources Ltd [2013] UKSC 34, concerning (in very
different circumstances from the current case) the distinction between piercing the
corporate veil and attributing beneficial ownership of assets to a controller of a
company. However, the Supreme Court was concentrating on the special case of a
matrimonial home and deliberate evasion (see Lord Sumption at [52]) and we feel that
it would not be appropriate to try to read that case as offering guidance in the
straightforward commercial circumstances of the current case. Here it was open to
Mr Ive to lease the cars in his own name but – for doubtless legitimate commercial
reasons – he decided that the Company should lease the vehicles and then provide the
use of them to him. The requirements of s 114 are met and the best that Mr Ive can
argue for is relief for his expenditure (for example, for servicing) against the cash
equivalent car benefit.

The Finance & Tax Tribunal

**Jessica@WhiteFieldTax** · 19 June 2014, 14:00

I think you can read an article or two for free if you create a login, but anyway:

MC and LJ Ive Ltd & M Ive (TC3529)

Michael Ive ran a restaurant that he incorporated in 2001. The company leased two vehicles: a Land Rover in 2002 and a Range Rover in 2005.

Both leases were in the company’s name. The rental payments were made by the business but charged to Ive’s director’s loan account. He paid all fuel and maintenance bills privately, and claimed a mileage allowance for business journeys.

HMRC paid a routine compliance visit in 2007. The officer noted that the cars were provided for Ive and asked for information, which Ive’s adviser provided, denying that the vehicles gave rise to a benefit in kind charge.

The Revenue issued discovery assessments in May 2010 for the years 2004/05 to 2006/07, on the basis car and car fuel benefits were omitted from the returns. Ive and his company, the taxpayers, appealed.

The First-tier Tribunal found HMRC knew about the Range Rover as a result of their 2007 visit to the company. A letter from the department dated 11 November 2009 showed tax officials were aware of the Land Rover.

The taxman had been aware of the potential tax loss when the enquiry windows for 2005/06 and 2006/07 closed, meaning the conditions in TMA 1970, s 29(3) were not satisfied.

The 2004/05 discovery assessment was also invalid because it was issued more than four years from the end of the relevant tax year (TMA 1970, s 34). Section 36 allowed the time limit to be extended to six years if the loss of tax had been caused by the taxpayer’s careless behaviour, which had not happened in this case.

All the discovery assessments were ruled to be invalid.

Turning to the issue of benefit in kind charges due on the vehicles, the tribunal said Ive was liable. The cars could have been leased in his name but, for “doubtless legitimate commercial reasons”, the company leased them and then provided the use of them to him.

The conditions of ITEPA 2003, s 114 were met. The taxpayer could claim relief for his personal expenditure, but it was not allowed because there was no formal agreement between the company and Ive concerning payments as a condition of private use.

The taxpayers’ appeal against the discovery assessments was allowed.

The company had also appealed against assessments in respect of class 1A National Insurance on accommodation expenses. It claimed an informal arrangement existed where the employees did not charge the company for the business use of their private car in exchange for the company paying their utility bills and suchlike.

The tribunal said there was insufficient evidence of such an agreement. The company’s appeal on the matter was dismissed.

**TheCyclingProgrammer** · 19 June 2014, 14:00

Originally posted by northernladuk View Post

Any chance you can copy the article or is that naughty? I bet not many of us have a taxation account to read the rest

The full judgement is here:
MC & LJ Ive Ltd & Anor v Revenue & Customs [2014] UKFTT 400 (TC) (01 May 2014)

TLDR; (as best I can interpret it) even though the director was in effect paying for the lease by way of his DLA, because the lease was in the company name it was still satisfied that the company was providing the car and so a BIK had arisen. It also looks like part of the issue was that there was no formal agreement or requirement for the director to pay the company for use of the car.

I wonder if HMRC chose to pursue this particular case due to the amount of NIC involved in company cars.

I don't think anybody needs to worry about the occasional personal expense going through the books and being credited to the DLA (I accidentally ordered a pizza using the wrong card once!) but if there is an overarching agreement or contract in the company name and the payments are made by the company but credited to the DLA, then it could fall into the scope of this ruling.

**Jessica@WhiteFieldTax** · 19 June 2014, 16:57

Originally posted by TheCyclingProgrammer View Post

The full judgement is here:
MC & LJ Ive Ltd & Anor v Revenue & Customs [2014] UKFTT 400 (TC) (01 May 2014)

TLDR; (as best I can interpret it) even though the director was in effect paying for the lease by way of his DLA, because the lease was in the company name it was still satisfied that the company was providing the car and so a BIK had arisen. It also looks like part of the issue was that there was no formal agreement or requirement for the director to pay the company for use of the car.

I wonder if HMRC chose to pursue this particular case due to the amount of NIC involved in company cars.

I don't think anybody needs to worry about the occasional personal expense going through the books and being credited to the DLA (I accidentally ordered a pizza using the wrong card once!) but if there is an overarching agreement or contract in the company name and the payments are made by the company but credited to the DLA, then it could fall into the scope of this ruling.

I think you are right TCP. An occasional mis charge on company card moved to DCA is fine. Its the bug stuff where people try and get clever that is at risk.

We see them sometimes as clients /potential clients, conversation goes:

"Can I claim XXX"
"Well only if its business related, I don't think it is from what you are saying"
"Well supposing I say its YYY, can I claim it then"
"Not really"
"Well, I'll say ZZZ, thats OK for you?"
"Its not me you've got to convince"

Repeat to fade

**northernladuk** · 19 June 2014, 17:40

I think he was lucky to have some of items dismissed but anyway. Any idea how much this cost him?

**Jessica@WhiteFieldTax** · 19 June 2014, 17:46

Originally posted by northernladuk View Post

I think he was lucky to have some of items dismissed but anyway. Any idea how much this cost him?

A quick look up on a mid price Range Rover on 40% tax, and its going to be just shy of £10k a year in Income Tax on the BIK, plus around £3k NI, so say £13k per year, plus interest, penalties, plus costs of going to tribunal...

**northernladuk** · 19 June 2014, 19:27

Originally posted by Jessica@WhiteFieldTax View Post

A quick look up on a mid price Range Rover on 40% tax, and its going to be just shy of £10k a year in Income Tax on the BIK, plus around £3k NI, so say £13k per year, plus interest, penalties, plus costs of going to tribunal...

And it would have been one hell of a lot more but they couldn't go all the way back because the appeal on timings was allowed?

MC and LJ Ive Ltd & M Ive (TC3529)