HM Revenue and Customs Brief 57/08
Submit Articles Back to Articles
Issued 8 December 2008
VAT - Excess charges in non-local authority car parks
This Revenue & Customs Brief explains our revised policy on VAT on excess
charges and other penalties levied in non-local authority car parks and what you
should do if you have incorrectly accounted for VAT on such charges. Certain
excess charges which have to date been regarded as further consideration for a
taxable supply of parking are now regarded as outside the scope of VAT.
Business Brief 19/02 explained our policy on the VAT treatment of excess
charges in off-street car parks following the tribunal case of Bristol City
Council (LON/99/261) ('BCC'). The Tribunal had concluded that excess charges
levied by the Council in its off-street car parks were outside the scope of VAT
because they were levied pursuant to the Road Traffic Regulation Act 1984 and
were not part of the contract entered into between the driver and the council.
We accepted that the decision would also apply to other local authorities
operating off-street car parks under the same statutory framework.
However, where off-street car parks were not operated by local authorities,
we considered that excess charges would normally be subject to VAT because they
arose under the terms of the contract between the driver and car park operator.
This followed the rationale adopted by the Tribunal in the case of J G Leigh t/a
Moor Lane Video [LON/89/83X], which concerned additional charges for videos held
by customers beyond the agreed period of hire.
We have recently reconsidered that policy in the light of new legal advice
and have concluded that, in the case of BCC, the Tribunal's decision was founded
as much upon the contractual relationship as the statutory regime. Therefore, we
now accept that there is a difference between the situation where the contract
under which parking is supplied allows for an extension of the original terms,
for which additional consideration will be payable, and the situation where the
driver is not permitted to extend the original terms and a penalty for breach of
contract ensues if this in fact happens. Thus, where a car park operator makes
an offer of parking under clear terms and conditions, setting punitive fines for
their breach, the fines constitute penalties for breaching the contract, rather
than additional consideration for using the facilities. Consequently, they are
outside the scope of VAT. Since the same contractual relationships arise between
drivers and local authority car park operators as arise between drivers and
other car park operators, we have also concluded that the VAT treatment of
excess charges will be the same for all car park operators.
Excess charges not subject to VAT
The penalty charges that will no longer be subject to VAT are those that are
levied where a driver is in breach of the terms of the contract with the car
park operator. The commonest situations where a driver may be in breach of the
- no parking ticket on display
- overstaying purchased parking time
- returning within a specified time
- parking outside marked bays
- parking in bays set aside for disabled drivers or parents with children
Excess charges subject to VAT
Where the terms and conditions make it clear that the driver can continue to
use the facilities after a set period upon payment of a further amount without
being in breach of the contract - for example, no charge for an initial three
hours parking but £70 if that period is exceeded - then the payment will be
consideration for use of the facilities and subject to VAT.
Excess charges retained by contractors
Some parking site owners contract out the management and operation of their
parking sites and allow the contractor to retain all or part of the penalties
collected. Any such payments retained by the contractor will constitute further
consideration for their services supplied to the parking site owner and are
subject to VAT.
If you believe that you have accounted for VAT when you should not have done,
you may make a claim for the overpaid tax in line with the provisions of
Notice 700/45: How to correct errors on your VAT Return. Please note that
such claims will be subject to 'capping' and may also be subject to the unjust
If you have any queries in relation to this, or any other tax matter, please
contact the National Advice Service on Tel 0845 010 9000.
About the Author
© Crown Copyright 2008.
A licence is need to reproduce this article and has been republished for
educational / informational purposes only. Article reproduced by permission of
HM Revenue & Customs under the terms of a Click-Use Licence. Tax briefs are
updated regularly and may be out of date at time of reading.
Follow us @Scopulus_News
Article Published/Sorted/Amended on Scopulus 2008-12-11 21:58:48 in Tax Articles