Yacht at centre of tax test case
Posted: 7th July 2014
In giving crucial guidance on the tax implications of directors making use of company assets, the First-tier Tribunal (FTT) considered in depth an entrepreneur’s glittering world of ocean-going yachts, fabulous jewels and contacts with the elite of Formula 1 racing.
The man and his wife had established a flourishing hotel and executive training business centred on two stately homes, one of which was close to the Silverstone motor racing circuit. Their connections with Formula 1 and prestige motor manufacturers formed an important plank of their success.
The couple challenged withering tax demands they had received in respect of their use of a 140-foot yacht, worth over £6 million, a collection of jewellery – including a £150,000 diamond necklace – and two antique clocks, one of which had been bought for £460,000. All those assets were owned by the couple’s companies but HM Revenue and Customs (HMRC) insisted that they should pay tax on the benefit that they received by making use of them.
The FTT found that the yacht was used to 'explore potential business opportunities' and had also been chartered out for substantial sums. It accepted that the vessel had been used by the couple for business, not private, purposes. The same was true of the jewellery, which had been worn by the wife and the couple’s daughter, not for personal pleasure, but to impress and ‘convey the right image’ to clients. The clocks were also company assets kept on business premises.
However, the FTT ruled that the couple had also enjoyed a personal benefit from the yacht, jewellery and clocks which had been 'placed at their disposal for their use' by their companies. The amount of the couple's tax liabilities was left to the parties to calculate, although the FTT accepted that they could make deductions to take account of the costs they had incurred in running the yacht.