Car park operators whose machines don’t offer change must account for VAT on the whole sum received, not just the advertised price, the Court of Appeal has ruled.
While individual transactions are only ever likely to result in a small overpayment, the scale of car parking transactions across the country means that potentially huge sums could have been at stake in the legal action fought between National Car Parks (NCP) and HM Revenue & Customs.
“This appeal concerns a situation familiar to motorists,” Lord Justice Newey said as he began his judgment. “A person wishing to park in a ‘pay and display’ car park pays a sum in excess of the tariff shown for the period for which he wishes to park because, say, the coins he has do not enable him to pay the exact figure and the ticket machine does not give change. The question raised by the present proceedings is whether the excess over the tariff is subject to value added tax.”
NCP brought the proceedings seeking to recover the VAT paid on these “overpayments” made in its pay and display car parks between 2009 and 2012. HMRC refused the claim on the ground that the overpayments “should be regarded as consideration [for the right to park] and are therefore taxable”.
NCP appealed arguing the overpayments were to be regarded as “ex gratia payments outside the scope of VAT”.
However, the First-tier Tribunal (FTT), the Upper Tribunal (Tax and Chancery Chamber) (UT) and now the Court of Appeal all sided with HMRC.
Referring to the hypothetical example where it costs £1.40 to park, but the customer has only a pound coin and a 50p piece, he said that the offer made by NCP, which the customer accepts by entering the coins, is to “grant the right to park for an hour in return for the coins shown by the machine as having been inserted when the green light flashes”.
He added: “It follows that the price paid by customers for a set period of parking will vary somewhat. In the hypothetical example, some customers will pay just £1.40 for an hour’s parking. In other instances, the price might be up to £2 (if, say, a customer had only two one pound coins and chose to insert those). There is no question of the price being uncertain in any individual case, however. It will be whatever sum, equal to or in excess of £1.40, that the customer has paid into the machine.
“In the circumstances, I agree with the UT and FTT that, in the hypothetical example, the consideration and taxable amount was £1.50.
“Like the UT, I consider that, ‘if a customer pays £1.50, that amount is the value given by the customer and received by the supplier in return for the right to park for up to an hour’.”
To send feedback, e-mail jess.harrold@egi.co.uk or tweet @estatesgazette
