Value added tax – Supply – Parking control services – Appellant agreeing with landowners to provide parking control services – Appellant imposing parking penalty charges on motorists for failing to comply with rules – Whether appellant liable to pay VAT on parking penalty charges – Whether appellant providing services to landowners – Appeal allowed The appellant company, which was registered for value added tax (VAT), managed and operated parking enforcement on private car parks. Its clients were owners or lawful occupiers of car parks or land. The appellant entered into a contract on standard terms and conditions with each of the clients under which the appellant agreed to provide the client with “parking control services”. An issue arose whether the appellant was liable to pay VAT on parking penalty charges. If those charges were consideration for a supply of goods or services, they would be subject to VAT but if they constituted damages, they would not be. Both the First-tier Tribunal (FTT) and the Upper Tribunal found against the appellant. The FTT decided that the services in question were the provision of parking to motorists and the payments represented consideration paid by the motorists: [2011] TC 00999; [2011] UKFTT 125 (TC). However, according to the Upper Tribunal, the appellant provided services of parking control to car park owners and the parking penalty charges formed part of its remuneration. Since the appellant did not have a right under its contract with the car park owner to grant a licence to park, it could not have contracted with the motorist to grant such a right ([2012] UKUT 130 (TCC); [2012] STC 2065). The appellant appealed, contending that the correct position in law was that the payments received by it in respect of the charges were outside the scope of VAT either because they were a penalty or damages for breach of contract (“the contract issue”) or because they were damages for trespass (“the trespass issue”). The respondent commissioners argued that there was no contract between the appellant and the motorists that could be subject to a breach; and that the appellant had acquired no licence to occupy land which was capable of giving it rights to sue for trespass. Held: The appeal was allowed. (1) On the breach of contract issue, the Upper Tribunal’s reasoning was flawed in that it confused the making of a contract with the power to perform it. The terms and conditions on which the parking permit was issued by the appellant at the request of the landowner amounted in law to an offer to permit the permit holder to park in the designated zone or area on terms of the letter to which the issued permit was attached. It was to be inferred that the acceptance of the offer took place when the motorist first parked the vehicle after the issue of the permit. The fact that the appellant could perform the contract because the landowner allowed it to do so did not alter the contractual analysis. If the appellant were unable to perform the contract, the motorist might be entitled to sue it for the lost value of the right to park. Further, the appellant was not the landowner’s agent for the purposes of contracting. It was an independent contractor providing services for the landowner as principal. The landowner was simply the recipient of the services under an agreement whereby the appellant acquired the right to enforce parking restrictions and keep the proceeds. In all the circumstances, the monies collected by the appellant from motorists by the enforcement of parking charges were not consideration moving from the landowner in return for the supply of parking services. (2) As regards the trespass issue, the contract between the appellant and the landowner gave the appellant the right to eject trespassers which was plain from the fact that it was entitled to tow away vehicles that infringed the terms of parking. The contract between the appellant and the motorist gave the appellant the same right. In order to vindicate those rights, it was necessary for the appellant to have the right to sue in trespass. There was no impediment to regarding the imposition of a parking charge, instead of towing away a vehicle, as damages for trespass: Hill v Tupper (1863) 2 H & C 121, Manchester Airport plc v Dutton [1999] 1 EGLR 147, Monsanto plc v Tilly [1999] PLSCS 272; [1999] EGCS 143, Countryside Residential (North Thames) Ltd v T [2000] 3 PLR 55, Alamo Housing Co-operative v Meredith [2003] EWCA Civ 495; [2003] PLSCS 77 and Mayor of London v Hall [2011] 1 WLR 504 considered. Lord Marks QC and Martin Hirst (instructed by Flint Bishop Solicitors, of Derby) appeared for the appellant; Sarabjit Singh (instructed by the Solicitor to HM Revenue and Customs) appeared for the respondents. Eileen O’Grady, barrister
Vehicle Control Services Ltd v HM Commissioners of Revenue and Customs
Value added tax – Supply – Parking control services – Appellant agreeing with landowners to provide parking control services – Appellant imposing parking penalty charges on motorists for failing to comply with rules – Whether appellant liable to pay VAT on parking penalty charges – Whether appellant providing services to landowners – Appeal allowed The appellant company, which was registered for value added tax (VAT), managed and operated parking enforcement on private car parks. Its clients were owners or lawful occupiers of car parks or land. The appellant entered into a contract on standard terms and conditions with each of the clients under which the appellant agreed to provide the client with “parking control services”. An issue arose whether the appellant was liable to pay VAT on parking penalty charges. If those charges were consideration for a supply of goods or services, they would be subject to VAT but if they constituted damages, they would not be. Both the First-tier Tribunal (FTT) and the Upper Tribunal found against the appellant. The FTT decided that the services in question were the provision of parking to motorists and the payments represented consideration paid by the motorists: [2011] TC 00999; [2011] UKFTT 125 (TC). However, according to the Upper Tribunal, the appellant provided services of parking control to car park owners and the parking penalty charges formed part of its remuneration. Since the appellant did not have a right under its contract with the car park owner to grant a licence to park, it could not have contracted with the motorist to grant such a right ([2012] UKUT 130 (TCC); [2012] STC 2065). The appellant appealed, contending that the correct position in law was that the payments received by it in respect of the charges were outside the scope of VAT either because they were a penalty or damages for breach of contract (“the contract issue”) or because they were damages for trespass (“the trespass issue”). The respondent commissioners argued that there was no contract between the appellant and the motorists that could be subject to a breach; and that the appellant had acquired no licence to occupy land which was capable of giving it rights to sue for trespass. Held: The appeal was allowed. (1) On the breach of contract issue, the Upper Tribunal’s reasoning was flawed in that it confused the making of a contract with the power to perform it. The terms and conditions on which the parking permit was issued by the appellant at the request of the landowner amounted in law to an offer to permit the permit holder to park in the designated zone or area on terms of the letter to which the issued permit was attached. It was to be inferred that the acceptance of the offer took place when the motorist first parked the vehicle after the issue of the permit. The fact that the appellant could perform the contract because the landowner allowed it to do so did not alter the contractual analysis. If the appellant were unable to perform the contract, the motorist might be entitled to sue it for the lost value of the right to park. Further, the appellant was not the landowner’s agent for the purposes of contracting. It was an independent contractor providing services for the landowner as principal. The landowner was simply the recipient of the services under an agreement whereby the appellant acquired the right to enforce parking restrictions and keep the proceeds. In all the circumstances, the monies collected by the appellant from motorists by the enforcement of parking charges were not consideration moving from the landowner in return for the supply of parking services. (2) As regards the trespass issue, the contract between the appellant and the landowner gave the appellant the right to eject trespassers which was plain from the fact that it was entitled to tow away vehicles that infringed the terms of parking. The contract between the appellant and the motorist gave the appellant the same right. In order to vindicate those rights, it was necessary for the appellant to have the right to sue in trespass. There was no impediment to regarding the imposition of a parking charge, instead of towing away a vehicle, as damages for trespass: Hill v Tupper (1863) 2 H & C 121, Manchester Airport plc v Dutton [1999] 1 EGLR 147, Monsanto plc v Tilly [1999] PLSCS 272; [1999] EGCS 143, Countryside Residential (North Thames) Ltd v T [2000] 3 PLR 55, Alamo Housing Co-operative v Meredith [2003] EWCA Civ 495; [2003] PLSCS 77 and Mayor of London v Hall [2011] 1 WLR 504 considered. Lord Marks QC and Martin Hirst (instructed by Flint Bishop Solicitors, of Derby) appeared for the appellant; Sarabjit Singh (instructed by the Solicitor to HM Revenue and Customs) appeared for the respondents. Eileen O’Grady, barrister
