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Relief at tax ruling
Page 8
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• The High Court has ruled that hauliers are entitled to claim tax relief on stocks of spare parts, tyres and diesel fuel. An appeal by the Crown against a decision of the Liverpool Tax Commissioners that Mainland Car Deliveries was not entitled to stock relief on such stocks has been dismissed by Justice Knox.
The claim for relief concerned the company's stocks of spares and fuels at the end of March 1980, valued at £63,140. The Crown argued that the spare parts and fuel did not constitute material used in the performance of services provided by the company, but were for maintaining its fixed assets.
Knox said the company's principal activity was the delivery of motor vehicles using a specialised fleet of lorries.
Schedule 5 of the Finance Act 1976 affords relief for increases in the value of trading stock and work in progress. "Work in progress" is defined as "(a) any services performed in the ordinary course of trade, profession or vocation the performance of which was partly completed at the material time and for which it would be reasonable to expect that a charge would subsequently be made and (b) any article produced and any such material as is used in the performance of any such services".
The word "used" refers not so much to consumption but to utility in the performance of services. Whether or not the supplies in question constituted material used in the performance of the company's car delivery service was an issue of fact for decision by the commissioners, and there was no basis for holding that they were wrong in their conclusion that they formed part of the company's trading stock.
In respect of the fuel, no other decision was possible. In respect of the spare parts it was more a question of degree and there was no reason to criticise the commissioner's conclusion.