THE Court of Appeal has ruled against a taxpayer in his long-running battle to recover VAT on his Lamborghini Diablo company car.

Christopher Upton claimed that he drove the supercar exclusively for his business, a cigarette vending machine firm called Fagomatic, and therefore that he should be able to reclaim VAT on the price of the car.

But his claim for £19,571 input VAT on the Diablo was challenged by HM Customs & Excise which originally blocked the VAT recovery because the car was technically available for private use.

In a colourful original hearing, a VAT tribunal heard that Upton had upgraded his car from an Aston Martin to a Lamborghini to ensure he had VIP access to cigarette vending machines in pubs and nightclubs. Doormen and bouncers would allow him to park outside the clubs in the Diablo, while coning off the area to other cars.

The ruling of the tribunal revealed that: 'the supply and servicing of cigarettes vending machines in clubs appears to be an affair of cut-throat rivalry where image is everything.

'If you turn up in a plain white van, you are treated accordingly; if you turn up in a car costing more than £100,000 you are treated as a person of consequence.

' has reached the top of his particular slippery pole - his representative referred to him as the king of the cigarette vending machines - and he intends to stay there.'

As a result, the tribunal found in Upton's favour, but Customs appealed and the High Court overturned the verdict. Upton then pursued his claim to the Court of Appeal, but the court once again ruled in favour of Customs.

The case has important ramifications about the legal definition of a car being 'available for private use', an issue relevant to VAT claims by firms that attempt to recover VAT on company cars used 100% for business. Analysis by PricewaterhouseCoopers said: 'The mere fact that a business can show that a particular car is never used, nor intended to be used, for anything other than business travel is not enough.

'In order to secure input tax recovery it is, on the basis of this judgement, necessary for the business to prove the car is not available for such use, ever.'

PWC suggested the most obvious way to prove a car is unavailable for private use is to insure it for business travel only, or treat the car as a pool car that is never available for use out of working hours.