In National Car Parks Limited v HMRC [2017] UKUT 247 (TCC), the Upper Tribunal (UT) upheld a VAT assessment, confirming that VAT is due on the amounts actually paid by customers on car park fees, regardless of whether there had been overpayments made by customers on those fees.

Background

National Car Parks Limited (NCP) carries on a business of operating “pay and display” car parks. A person who parks his car in one of NCP’s car parks is required to display a ticket in the car which shows that it is permitted to be in the car park for a specified time. The ticket is obtained from one of the ticket machines in the car park. Different amounts are payable for tickets at different times and depending on how long the car is to be parked. The amounts payable are set out on tariff boards in the car park.

Where customers do not have the correct change to pay the exact amount they must, if they wish to park, put into the ticket machines more than the amount due as the ticket machines do not provide change.

In October 2014, NCP made a claim to HMRC for repayment of overpaid VAT in respect of overpayments of car park tariffs by customers using NCP’s pay and display car parks. 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 to the First-tier Tribunal (FTT) on the ground that the overpayments were not consideration for any supply but ex gratia payments outside the scope of VAT.

The FTT dismissed NCP’s appeal and held that the full amount, including any excess, paid by the customer was consideration for the taxable supply of the right to park in the car park for a particular period of time.

NCP appealed to the UT.

UT’s decision NCP’s appeal was dismissed.

The issue before the UT was whether NCP was required to account for VAT on the payments in excess of the charges for car parking shown on the ticket machines. This turned on whether such payments were consideration for a supply of services by NCP for VAT purposes.

The UT said that it was clear from the case of Tolsma v Inspecteur der Omzetbelasting Leuwarden [1994] STC 509, that there is a supply of services for VAT purposes where there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance.

The UT also commented that Article 73 of Council Directive 2006/112/EC states that the taxable amount is everything which constitutes consideration obtained, or to be obtained, by the supplier from the customer or a third party in return for the supply. For example, a customer who paid £1.50 to obtain a ticket which allowed him to park for up to an hour could have obtained the same right in return for a payment of £1.40. When determining the taxable amount, the UT said that the question posed by Article 73 was not: could the customer have obtained the same service for less? Instead, Article 73 required the Tribunal to ask what consideration was received or was to be received by the supplier from the customer in return for the supply. 

In the view of the UT, the meaning of consideration for VAT purposes is clear from cases such as Staatssecretaris van Financiën v Association Coöperatieve Aardappelenbewaarplaats GA [1981] ECR 445 and Campsa Estaciones de Servicio SA v Administración del Estado [2011] ECR-I 5059. It is the value actually given by the customer (or a third party) in return for the service supplied and actually received by the supplier and not a value assessed according to objective criteria. The service and the value given, or to be given, in return for it may be ascertained from the legal relationship between the supplier and the customer.

Under the contract between NCP and the customer, which was formed when the customer inserts money into the ticket machine and receives a ticket, NCP grants the customer the right to park his car for one hour in return for inserting not less than £1.40. If the customer wishes to park for up to three hours then he must pay not less than £2.10. It followed that NCP agrees to grant a customer the right to park for up to one hour in return for paying an amount between £1.40 and £2.09. 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 one hour. Accordingly, the UT held that this is the taxable amount for VAT purposes and therefore upheld the VAT assessment, confirming that VAT is due on the amounts actually paid by customers on car park fees, regardless of whether there had been overpayments made by customers on those fees.

Comment

This case serves as a useful reminder that VAT is due on everything which constitutes consideration obtained, or to be obtained, by the supplier from the customer or a third party in return for the supply, irrespective of whether there has been an overpayment made by the customer for that supply.

A copy of the decision is available to view here.