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HM Revenue and Customs Brief 57/08


HM Revenue and Customs -Tax Authorities

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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.

Revised policy

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 contract are:

  • no parking ticket on display
  • underpayment
  • 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.

What next?

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 enrichment provisions.

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.

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Article Published/Sorted/Amended on Scopulus 2008-12-11 21:58:48 in Tax Articles

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