Overclaimed input tax on motorcycles

Black Wolf Ltd had traded as a locksmith since 2013 and was registered for VAT. The taxpayer was the sole director and shareholder although he asserted that his nephew DC owned 49% of the shares in the later years and was the key decision maker. The company ceased to trade in 2022.

HMRC reviewed the returns for the periods February 2019 to November 2021 and identified a series of underpayments.

The main one was linked to an input tax claim on the purchase of three motorcycles which HMRC alleged had been ‘fully private vehicles with no apportionment made for private use’. It issued an assessment plus a deliberate behaviour penalty. The company had ceased to trade so HMRC issued a personal liability notice (PLN) to the taxpayer for the penalty.

The taxpayer appealed. He said the motorbikes had a business purpose because they were an important...