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Car Parking and VAT


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19th March 2013

Vehicle Control Services supplied what they termed ‘parking control services’ to the owners of car parks. These services obliged the client to pay a registration fee and an annual charge for signage, and in return VCS inspected the car park undertook parking enforcement. But was it VATable?

HMRC felt that VCS was liable to pay VAT on the parking penalty charges they raised for those who had not parked correctly or had overstayed their paid for time. When VCS appealed this to the First-tier Tribunal it was held that the services in question were the provision of parking to motorists, and as such the payments represented consideration paid by the motorist. Such charges would, of course, be subject to VAT. Upon appeal to the Upper Tribunal the lower Tribunal’s finding was reversed. However, they instead found that the services were services of parking control that VCS supplied to the car park owners, and the penalty charges were therefore part of VCS’ remuneration, again leaving VCS liable to pay VAT on the penalty charges.

The Court of Appeal found that the Upper Tribunal had confused the making of a contract with having the power to enforce a contract. Furthermore, the terms and conditions on which a parking ticket was issued amounted in law to an offer. A motorist accepted this offer when they first parked their vehicle after the issue of the permit. The consideration from VCS to the motorist was, at the very least, the provision of the permit itself. As such, all the necessary elements of a contract were in place when the motorist parked their car. Furthermore, VCS had promised to contract with persons nominated by the landowner, namely the motorist, and was not making the contracts as an agent of the landowner. Thus, the right to park could only be enacted by a contract between VCS and the motorist. What VCS obtained under the contract, save for the small fees it charged for permits and signage, was the right to exploit the opportunity to make money from the motorists. For this reason it could not be said that the money VCS collected from motorists by enforcing parking charges were consideration moving from the landowner in return for supplying him with parking services, as the Upper Tribunal had contended. The Court of Appeal reversed that decision.

The Court decided that the contract between VCS and the landowner give VCS the right to eject trespassers, and the contract between VCS and the motorist gave VCS the same right. As such, VCS had the right to sue for trespass, or could tow away a vehicle. If instead, they chose to impose a parking charge, there was no impediment to regarding that as damages for trespass.

Rob McCaan, a Director at The VAT People, said “This is a welcome success for third party car park operators and correctly highlights the fact that the car park operators had a legal right to collect damages from an individual parking illegally. As there is no payment for a supply of services by the operator of the car park, it has always been arguable that the operator is not obliged to charge VAT on the damages that are collected.”

If you have any car park operators who operate the parking on behalf of a third party we would be happy to discuss the case and how it may apply to them in receiving VAT back from HMRC. As with all claims, the sooner it is submitted to HMRC the better, as all claims will be time barred at four years. 

About the Author

The VAT People are leading VAT and Customs Duty consultants based in the North West of England. We work with a wide range of businesses throughout the UK as well as assisting our accountancy colleagues to unravel the thorny VAT issues for their clients. We are one of the UK's largest and most comprehensive sources of VAT and Customs advice, our consultancy team having over 140 years of experience in VAT and Customs gained in either HMRC or a Big 4 accountancy practice environment.

Call us on our VAT helpline 0800 077 4604 to discuss. All initial discussions are free with no-obligation.

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Article Published/Sorted/Amended on Scopulus 2013-05-21 09:19:19 in Tax Articles

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