Ryan- Munden v Revenue & Customs [2011] UKFTT 12 (TC) (16 December 2010)

DECISION

1. This is an appeal by Mrs Angela Ryan-Munden relating to

a) Revenue Amendments and Closure Notices under Section 28A (1) and (2) of the Taxes Management Act 1970.

b) Enquiries under Section 9A of the Taxes Management Act 1970 into Self Assessment Tax Returns for 2005/06 and 2006/07 opened on 28.11.2007 and 7.11.2008 respectively and

c) Revenue Assessments made under the provisions of Section 29 of the Taxes Management Act 1970.

2. The issues specifically are whether a Mercedes Benz CD320CDI car owned by the company Securidoor (NE) Limited (Securidoor) used by the appellant, a Director of that company

a) met the requirements of Section 167 Income Tax (Employment and Pensions) Act 2003 to be a pool car or

b) whether the car, being available for the appellant’s private use as defined by Section 118 Income Tax (Employment and Pensions) Act 2003, gave rise to charges to income tax under Section 120 and Section 149 of the Income Tax (Employment and Pensions) Act 2003 in respect of car and fuel benefits.

3. Mrs Ryan-Munden was appointed as a Director of Securidoor on 1.5.03. During a visit to the company premises on 22.11.06 HMRC officers established that the company owned a Mercedes Benz car, provided fuel for it and made it available for use by Mrs Ryan-Munden.

4. At a meeting on 22.11.06, attended by Mrs Ryan-Munden’s husband Mr D Munden (described as Technical Manager of Securidoor) and Mr Thompson and Mr Hodgson of HMRC, Mr Munden was asked to explain details of the use of a number of vehicles which were the property of Securidoor. Mr Munden disclosed that his wife is provided with a company van, a Land Rover Discovery, which is classed as a van because it only has two seats and all the windows are filled in at the back.

5. Mention was also made of the Mercedes car, mentioned above, and Mr Munden was asked who had the use of this vehicle. Mr Munden said that it is a company pool car and that it is garaged at the company premises where it is “usually used by Mrs Ryan-Munden”. Mr Munden said that there was no log maintained in respect of pool car journeys and it was put to him by Mr Hodgson of HMRC that there was an issue regarding the Mercedes car and it was not considered that this was a pool car and it was further suggested that it was in fact used on a regular basis by Mrs Ryan-Munden. Mr Munden evidently did not refute this altogether but he indicated his understanding of the law namely that if a car is not used by one individual it will be classed as a pool car. The issue was not resolved at that meeting.

6. The issue of the maintenance of a log with regard to pool car use was raised again at that same meeting and the notes of the meeting (prepared by HMRC) are made available to the Tribunal today; the following is a paragraph relating to the issue of pool cars and records:

“Again Munden was asked if there were any logs maintained to support the pool car status, Munden stated that there weren’t any logs, however, it would be quite easy for him to make them up, to satisfy the business journeys. Hodgson advised Munden that the so called making up of retrospective records would not be acceptable; again Munden retracted this statement and said that he would not necessarily be making them up as in the terms of fabrication, however, records could be put together. Hodgson said that comments on this matter would be noted.

There then followed a long discussion on the status of the position of the pool cars, with Mr Munden being advised that he should give serious consideration to what he had told us, as Hodgson was of the opinion that the cars did not satisfy the pool car legislation and he was of the opinion that the cars did not satisfy the pool car legislation and he was of the opinion that the vehicles in question were actually used by Mr and Mrs Munden personally”.

7. The notes of that meeting were submitted to Mr Munden for approval subsequently. He does not dispute today the fact that he did not challenge those notes. Reference to the notes of that meeting will be made again below.

8. HMRC have persisted in the view that the Mercedes car was not a pool car and was in fact available for the exclusive use of Mrs Munden and consequently Closure Notices and Revenue Amendments have been issued, as set out in the Basic Bundle, disclosing a total sum of £25,176.92 income tax due. The Closure Notices, Amendments and Assessments were issued against Mrs Ryan-Munden, the appellant, who has attended the Tribunal today and given evidence but the conduct of her case has been undertaken by her husband Mr Munden and the evidence given by him and Mrs Ryan-Munden today indicates that he was the driving force behind the business.

9. The business had been trading since 1987 and manufactured, installed and serviced high security doors, shutters and gates. Products ranged from pedestrian doors to large industrial doors. At all material times there were some 18 to 20 employees. The business was evidently started by Mr Munden but, again at all material times, the sole director and shareholder was Mrs Ryan-Munden.

10. Mr Munden explains to the Tribunal that his wife, between 2003 and 2007, had the use of a Land Rover Discovery (a company vehicle). She also had a number of private vehicles over the years including a BMW, a Jaguar and a Range Rover. The Tribunal notes from the papers that she may also, latterly, have had a Bentley.

11. Mr Munden tells the Tribunal that his wife had paid tax in respect of a benefit in kind with regard to her use of the Land Rover Discovery which was a company vehicle.

12. In her evidence to the Tribunal Mrs Ryan-Munden says that she used the Mercedes car when visiting customers. When a customer enquiry was received she would visit the site and get some measurements and the General Manager would then put a quote together. Mrs Ryan-Munden’s role was to go out and do the surveys and take measurements. It further emerged in evidence that Mr Munden, the General Manager and the Production Manager also performed this role.

13. Mrs Ryan-Munden says in her evidence that the Mercedes was purchased new in 2003 for a figure in excess of £50,000.00. She says that for her personal use she had her own BMW car which was also new in 2003 (not a company car).

14. Mrs Ryan-Munden says that the Mercedes car was always kept in a steel container at the factory where Securidoor conducted its business. This was a 40ft unit. She says that between 2003 and 2007 the Mercedes car covered 19,000 or 20,000 miles in total. She says that she never took it home but always left it parked at the factory. She says that the only other person who had use of it was her husband. She explains to the Tribunal that when visiting customers in some areas it was appropriate to impress in order to demonstrate that the business was successful; it seemed appropriate to display an expensive Mercedes car as representing a thriving company. She says that she did not use the Mercedes for any private use whatsoever because she had her own BMW car and the use of the company Land Rover. The only occasion that she may have gone home in the Mercedes is if she forgot her case or her glasses or something similar. She says it was never used for anything other than business purposes.

15. Both Mrs Ryan-Munden and her husband have dealt, at great length, in their evidence with the matter of the maintenance of any log of pool car journeys. It has been noted abovethat at the meeting on 22.11.08 Mr Munden said that there were no logs maintained to support the pool car status; he said that there were not any logs but suggested that it would be quite easy for him to make them up. Mr Hodgson advised him that making up of retrospective records would not be acceptable.

16. Mr Munden has subsequently said, and has maintained to the Tribunal today, that a contemporary log of use of the Mercedes car on company business was in fact kept but that it has gone missing in mysterious circumstances. He says this may or may not be related to a difficulty which he had with a dishonest employee. He says that this log would have disclosed, on a contemporary basis, all journeys made in the Mercedes car on company business.

17. In the absence of the contemporary log mentioned above Mrs Ryan-Munden and her husband have been unable, until September 2010, to assist any further with the matter of contemporary record-keeping with regard to use of the Mercedes car. On 13.9.2010 Mrs Ryan-Munden sent to the Tribunal Service a number of pages in support of her case which purport to be extracted from vehicle logs which were actually diary entries and her manuscript lists disclose numerous journeys made between 2003 and 2007, some by herself and some by her husband. All the mileages are listed and, while the Tribunal has not attempted to do the arithmetical addition, it may be that the figures total something in the region of 20,000 miles.

18. At the Tribunal hearing itself Mr Munden has produced five diaries for the years 2003 to 2007 and these purport to have records of all journeys undertaken in the Mercedes car by himself and his wife. Again, the Tribunal has not checked each and every entry but it may well be that the manuscript lists provided by Mrs Ryan-Munden with her letter of 13^th September 2010 do indeed correspond with the entries taken day by day from the diaries.

19. Mr Munden tells the Tribunal that these diaries were kept in the Mercedes car and records were made of each journey at the time of the journey. It could be said that this is the hub of his case because it would corroborate his assertion that the car was a pool car being used by himself and his wife, two employees of the company.

20. The Tribunal has studied these diaries and they are all in extremely clean and almost pristine condition with very little sign of wear and it is concluded that they are quite inconsistent with volumes which would have been kept in a vehicle for periods of up to twelve months. They do indeed purport to have two different handwritings for the various entries but the Tribunal cannot accept that they are contemporary records and makes a finding of fact that they are not such records. The diaries themselves, or Mrs Ryan-Munden’s collated lists of journeys, could have been made available to HMRC long ago and there is no explanation as to why she has not done so until September 2010. The Tribunal is mindful of the fact that at the meeting on 22.11.06 Mr Munden denied that there was any log whatsoever. He did not say that some log had been lost or disappeared, nor did he say that there were the diaries which would form the basis of a reconstruction of a log. The evidence of Mrs Ryan-Munden and her husband is lacking in credibility on the issue of the diaries and the Tribunal makes a finding of fact that they are not a contemporary record of journeys made by the Mercedes car on company business.

21. The Tribunal has been anxious to find any other evidence in support of a contemporary record of journeys made on company business by the Mercedes car. There is no other evidence. In particular there is no other evidence of use of the car by Mr Munden. The only convincing evidence about use of the car is the evidence to the effect that the user was Mrs Munden. It is not suggested that the car was used by the General Manager or the Production Manager of Securidoor. The Tribunal would not imagine that these two individuals would habitually be dressed in dirty overalls and so there would be nothing inconsistent about them using a smart Mercedes car if the company so desired.

22. Mr Munden tells the Tribunal that he has had a lot of trouble with an employee who was apparently dishonest. He wonders whether other forms of “log” of the vehicle use have gone missing as a consequence of misbehaviour by this lady. The Tribunal concludes that there is no credible evidence in this case that documentation has gone missing in such circumstances.

23. At this stage it can also be said that the Tribunal has formed a conclusion about the credibility of Mr Munden in his conduct and evidence given to the Tribunal. He is lacking in credibility: his evidence has, on several occasions, been evasive and it has been difficult for the Tribunal and, indeed, for HMRC’s representative Mrs Oliver, to keep him to the point and extract answers to the questions which are put to him.

24. Mr Munden had the use of a Porsche car which was also the property of Securidoor. The evidence given by him and his wife to the Tribunal today is that both the Porsche and the Mercedes were kept in a steel container at the factory and Mr Munden tells the Tribunal that both vehicles had exactly the same status i.e. they were company pool cars. It is observed by Mrs Oliver, and not effectively challenged by Mr Munden, that there has also been an issue with HMRC over the use of the Porsche car and Mr Munden has not contested a decision by HMRC that it is not a pool car and consequently he has become liable to pay tax on the use of a benefit in kind in this respect. His admission that the Mercedes car was in exactly the same category as the Porsche car assists the tribunal in reaching its conclusions today. The Tribunal finds on the balance of probabilities that Mr Munden had use of the Porsche while Mrs Ryan-Munden had use of the Mercedes.

25. Mrs Munden and her husband both give evidence that she would habitually use Securidoor’s Land Rover Discovery for the purpose of driving from home to work and back again; she would leave the Land Rover at work and use the Mercedes for making site visits to customers. The Tribunal finds this inherently unlikely. It is noted that on the day of the original meeting with HMRC (22.11.2006) Mrs Ryan-Munden was away from the factory in the Mercedes car; however the Land Rover was not there; Mr Munden told the officers that his wife had got a lift to work that morning.

26. The Tribunal further concludes that the Mercedes car was not available for use by anybody else at Securidoor, other than Mrs Ryan-Munden. It is not pretended that it was used by the General Manager or Production Manager and, as stated above, there is no credible evidence that it was used by Mr Munden. It was not therefore available for use by anybody other than Mrs Ryan-Munden; she had exclusive use of it.

27. A brief perusal of the diaries, mentioned above, would tend to confirm that the purported use of the Mercedes car was about 50% for each of Mrs Ryan-Munden and her husband but, as stated above, the Tribunal does not accept that the diaries are a valid contemporary record.

28. The witness statement of Sheila Loader, an officer of HMRC, discloses that some information was provided to her by three witnesses, identified as A, B and C who were former employees of Securidoor. The information is summarised in her statement. At best this evidence is hearsay; Mrs Ryan-Munden has not had the opportunity to challenge or cross examine the witnesses and indeed Mrs Loader says she is not at liberty to disclose their identity. The other HMRC witness, Mr Vincent Hodgson, likewise refers to anonymous witness evidence. The Tribunal has read the witness statements of Mr Hodgson and Mrs Loader and is aware that they have disclosed the purported contents of former employee witness statements but little judicial notice is taken by the Tribunal of these matters.

29. Likewise Mrs Ryan-Munden has produced for the Tribunal witness statements by her husband (who has given evidence today) and Jim McKay (former Maintenance Engineer employed by Securidoor), Jim Chandler (former General Manager of Securidoor) and Robin Hall (former Production Manager of Securidoor) but the three former employees have not been called to give evidence. Consequently Mrs Oliver is unable to cross examine them. Again, the Tribunal takes little judicial notice of these statements.

30. The Tribunal’s attention has been directed to, and full notice has been taken of, Section 118 of the Income Tax (Employment and Pensions) Act 2003 which defines when a car is not available for private use. Furthermore Section 120 and 149 of the Income Tax (Employment and Pensions) Act 2003 charge car benefits and car fuel benefits to income tax where a car is available for private use. Section 167 of the Income Tax (Employment and Pensions) Act 2003 details the conditions for a vehicle to qualify as a pool car.

31. Section 167(3) of the Income Tax (Employment & Pensions) Act 2003 sets out the conditions for inclusion of a car as a pool car namely that in relation to a particular tax year a car is included in a car pool for the use of employees of one or more employers if in that year

a) the car was made available to, and actually used by, more than one of those employees,

b) the car was made available, in the case of those employees, by reason of the employee’s employment,

c) the car was not ordinarily used by one of those employees to the exclusion of others,

d) in the case of each of those employees, any private use of the car made by the employee was merely incidental to the employee’s other use of the car in that year, and

e) the car was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making the car available to them.

32. The Tribunal finds that the Mercedes car was not made available to, nor actually used by, more than one employee of Securidoor. The only employee who used it was Mrs Ryan-Munden.

33. The Tribunal finds that the Mercedes car was not made available to other employees, apart from Mrs Ryan-Munden.

34. The Tribunal finds that the car was ordinarily used by Mrs Ryan-Munden alone, to the exclusion of others within the company.

35. The Tribunal concludes that Mrs Ryan-Munden had the use of the Mercedes car for private purposes which were more than incidental to her other use of the car in relevant years.

36. Mrs Ryan-Munden and Mr Munden have both given evidence that the Mercedes car was always kept overnight in a sealed container at the factory. There is no evidence to contradict this. It may well be that the car was often kept there but there has been no real or further enquiry as to occasions when it may have been kept elsewhere.

37. In summary Mrs Ryan-Munden has failed to provide satisfactory evidence to show that all five of the conditions in Section 167 apply to her or the company.

38. The Tribunal concludes, therefore, by finding that the Mercedes car was not a pool car; Mrs Ryan-Munden had it available to her to use as she wished notwithstanding that it was owned by the company; charges to income tax properly arise in respect of Mrs Ryan-Munden’s use of the car and car fuel benefits.

39. Accordingly this appeal is dismissed.

40. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

WDF COVERDALE

First-tier Tribunal (Tax)

THE COMMISSIONERS FOR HER MAJESTY’S

REVENUE AND CUSTOMS Respondents

TRIBUNAL JUDGE

RELEASE DATE: 16 December 2010

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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Ryan- Munden v Revenue & Customs [2011] UKFTT 12 (TC) (16 December 2010) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2011/TC00889.html Cite as: [2011] UKFTT 12 (TC)