0n 3 June 2021, the Advocate General (AG) opined that a parking fine is consideration for VAT purposes (rather than a VAT-exempt amount of compensation). In the AG’s view, there was a direct link between the parking fine and a service received by the motorist (being a space to park). Accordingly, VAT should be charged on the parking fine. The AG expressed the view that ‘compensatory’ payments should only be exempt from VAT where the payment is compensation for a supply having not occurred.
In the UK, Revenue and Customs Brief 12 (2020) set out HMRC’s view as to the potentially incorrect historic VAT treatment of so-called compensation payments. HMRC also set out their view as to the correct VAT treatment of parking fines in the VAT manual.
It remains to be seen whether the ECJ will follow the AG’s opinion. Despite Brexit, the ECJ’s decision could still influence HMRC’s approach to parking fines and compensatory payments generally
The AG’s opinion (Danish language version) can be viewed here.
The HMRC Brief 12 (2020) can be viewed here.
HMRC’s guidance on parking fines can be viewed here.