Famer tells taxman to get off his drive

Heard the one about a farmer, a driveway and capital expenditure? All three featured in an intriguing tax tribunal case which has lessons for all types of business. Nick Huber reports

Giles Mooney and Tim Good from TAXtv discuss the recent case in the September episode of TAXtv.

G Pratt & Sons v HMRC (TCO 1269) centred on the tax treatment of a farmer’s drive which was dug up and resurfaced with new tarmac at a cost of £23,300.

The farmer argued that it was a repair, meaning that it was an ongoing cost and revenue repairs could be claimed immediately.

HMRC argued that the effect of concreting the drive was to provide an entirely new and better surface than before. This work had improved the business and should therefore should be treated as a capital expenditure.

Continued...

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Comments
johnjenkins's picture

I had a case like this quite a few years ago

johnjenkins | | Permalink

and won. The inspector argued that the value, rather than the substance of the repair put it into capital.

A carpenter will spend thousands on replacing drills, routers etc. some heavy duty items are very expensive.

The argument (in my view) has to be whether the spend is an improvement on the original item.

Although you then come up against upgrades etc. What if the drive was made out of titanium with the old drive used as ballast?

ianthetaxman's picture

road to no-where...

ianthetaxman | | Permalink

I've also had a similar situation where the inspector challenged a "repair" to an access/service road by a client due to the level of the expense.  We ended up inviting him to come and see the stretch of road that had been repaired, and when he did, he agreed to the deduction.

Me too

hiu612 | | Permalink

I had an almost identical situation with a farmer and a driveway, and also convinced the inspector that we were dealing with a repair and not capital expenditure.

Me too

hiu612 | | Permalink

I had an almost identical situation with a farmer and a driveway, and also convinced the inspector that we were dealing with a repair and not capital expenditure.

mydoghasfleas's picture

Why was it at the Tribunal

mydoghasfleas | | Permalink

I think many of us have had the experience.

What concerns me is how this finished up at a Tribunal hearing and what the cost was.  The tax at stake would not have been £10,000.00. 

How much has HMRC spent taking it and how much additional cost is there for a partnership?  16 years ago, we had a represented case at the Specials - cost about £35,000 for two days of hearings.  Here at least the partnership did not have Counsel representing but when you take into account the cost of the accountant representing the appellant has the partnership benefited from winning?

I would be disappointed if this was taken only on a point of principle.  If the costs have exceeded the amount in issue, was it a victory worth having?

You have to question if the Inspector took advice before pressing ahead with it; whilst it seems to have added little to law a recent decision always looks good in an argument.

aiwalters's picture

implied right of access

aiwalters | | Permalink

I actually thought this article was going to be about implied right of access, as per the post here: http://www.accountingweb.co.uk/group-thread/do-we-care-about-tv-anymore

aiwalters's picture

implied right of access

aiwalters | | Permalink

I actually thought this article was going to be about implied right of access, as per the post here: http://www.accountingweb.co.uk/group-thread/do-we-care-about-tv-anymore

Why was it at tribunal

samuelspaniel | | Permalink

I also have come across similar situations where an Inspector has taken a view which is quite unjustified and then won't back down.  In some cases it was obvious that the Inspector knew that the taxpayer could not afford to argue the case and so would accept his view.  To me this is totally wrong and should be fought with vigour and if that requires a visit to the tribunal then so be it.  The costs attached to such a move are exactly what the Revenue play on - bearing in mind that they can spends thousands, lose a case and no-one suggesting that their hands should be slapped.  Principle has a price and if the Revenue was to understand that taxpayer's will fight them all the way for that principle they might just sit back and reconsider.

Dear Mydoghasfleas

anndartnall | | Permalink

If your client has (good) fee protection against Investigations & Enquiries, the issue of not going to Court because of cost shouldn't arise.

I drop the hint that my client has this protection which is why I will be doing all the interaction, at an early stage so he/she can take the hint that I won't be backing down until the money runs out (min £75k). Strangely, none of my clients have had an investigation for over 4 years........

Ann Dartnall

Abacus 161 Ltd

Fee Protection and Attitude

samuelspaniel | | Permalink

Strange that, wouldn't you say?

 

Review

leon0001 | | Permalink

samuelspaniel wrote:

I also have come across similar situations where an Inspector has taken a view which is quite unjustified and then won't back down.  In some cases it was obvious that the Inspector knew that the taxpayer could not afford to argue the case and so would accept his view.  To me this is totally wrong and should be fought with vigour and if that requires a visit to the tribunal then so be it.  The costs attached to such a move are exactly what the Revenue play on - bearing in mind that they can spends thousands, lose a case and no-one suggesting that their hands should be slapped.  Principle has a price and if the Revenue was to understand that taxpayer's will fight them all the way for that principle they might just sit back and reconsider.

 

Try applying for a review first - not much cost involved and you still retain the right to go to tribunal if unhappy with result.