Value added tax – Overpayment – Car park – Appellant operating pay and display car parks – Appellant claiming repayment of overpayments of car park tariff – Tribunals upholding refusal of repayment by respondent commissioners – Appellant appealing – Whether overpayments being consideration for taxable supply – Whether sufficient link between consideration and services – Whether overpayments subject to VAT – Appeal dismissed
The appellant operated “pay and display” car parks in which there were ticket machines that took cash. A board specified the amounts that had to be paid to park for different lengths of time. Someone wishing to leave his car for a particular period had to insert coins to the value of at least the figure given for that period in order to obtain a ticket which had to be placed in his vehicle’s windscreen. Once the requisite coins had been accepted by the machine, the customer would be able to obtain his ticket by pressing a button. Each machine indicated that no change was given and that “overpayments” were accepted. An issue arose whether the excess over the tariff was subject to value added tax (VAT).
In 2014, the appellant sought to recover sums for which it had accounted to the respondent commissioners as VAT in respect of “overpayments” made in its pay and display car parks between 2009 and 2012. The respondents refused the claim on the ground that the overpayments should be regarded as consideration for the right to park and were therefore taxable.
The appellant appealed on the basis that the overpayments were to be regarded as ex gratia payments outside the scope of VAT, but the First-tier Tribunal (FTT) dismissed the appeal and the Upper Tribunal agreed with the FTT: [2017] UKUT 247 (TCC).
The appellant appealed, contending that the requirement of a “direct link” between the service provided and the consideration received had a quantitative aspect as well as a causal one. A payment by a customer to a supplier would thus represent “consideration” only if and to the extent that there was a direct link to the supply.
Held: The appeal was dismissed.
(1) Article 1(2) of Council Directive 2006/112/EC (the Principal VAT Directive) explained that the principle of the common system of VAT entailed the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services. Amongst the transactions subject to VAT were the supply of services for consideration within the territory of a member state by a taxable person acting as such (article 2(1)(c)). By article 73, in respect of a supply of goods or services, the taxable amount included everything which constituted consideration obtained by the supplier, in return for the supply, from the customer or a third party. Under section 4(1) of the Value Added Tax Act 1994, VAT was to be charged on any supply of goods or services made in the UK, where it was a taxable supply made by a taxable person in the course or furtherance of any business carried on by him. “Supply” included all forms of supply, but not anything done otherwise than for a consideration (section 5(2)(a)).
(2) The word “consideration”, which featured in both articles 2(1)(c) and 73 of the Principal VAT Directive and section 5(2)(a) of the 1994 Act, did not in the VAT context refer to what might be deemed “consideration” for the purposes of domestic contract law but had an autonomous EU-wide meaning. The concept of the supply of services effected for consideration within the meaning of article 2(1) presupposed a direct link between the service provided and the consideration received. A supply of services was effected for consideration, and was therefore taxable, only if there was a legal relationship between the service provider and the recipient pursuant to which there was a reciprocal performance. “Consideration” was subjective, in the sense that the basis of assessment for the provision of services was the consideration actually received, not a value assessed according to objective criteria: Staatssecretaris van Financien v Cooperatieve Vereniging Cooperatieve Aardappelenbewaarplaats GA (C-154/80) [1981] 3 CMLR 337, Apple and Pear Development Council v Customs and Excise Commissioners (C-102/86) [1988] STC 221, Tolsma v Inspecteur der Omzetbelasting, Leeuwarden (C-16/93) [1994] STC 509 and Campsa Estaciones de Servicio SA v Administracion del Estado (C-285/10) [2011] STC 1603 followed.
(3) English law generally adopted an objective approach when deciding what had been agreed in a contractual context. Here, taken together, the tariff board and the statement that “overpayments” were accepted and no change given indicated, looking at matters objectively, that the appellant was willing to grant an hour’s parking in exchange for coins worth at least the minimum tariff. The contract was brought into being when the button was pressed. On that basis, the pressing of the button represented acceptance by the customer of an offer by the appellant to provide an hour’s parking in return for the coins that the customer had by then paid into the machine. At all events, there was no question of the customer having any right to repayment of any excess paid.
Roderick Cordara QC (instructed by Mishcon de Reya LLP) appeared for the appellant; Brendan McGurk (instructed by the General Counsel and Solicitor to HM Revenue and Customs) appeared for the respondents.
Eileen O’Grady, barrister
Click here to read a transcript of National Car Parks Ltd v Commissioners of HM Revenue and Customs.
