VAT goes into “reverse” for Councils on Car Parking Excess Charges
Following the Upper Tribunal judgement on the treatment of Excess Parking Charges taken by National Car Parks (NCP), HMRC has written to the CIPFA VAT Committee to outline their approach. Concern has been noted on their comments to apply retrospective redress where councils have recovered “over declared“ VAT on Excess Charges from HMRC and had these repaid, as well as started to treat such excess charges as non-VATable.
The judgement in the NCP case confirmed that the whole amount car park users pay “via machines that do not give change, is consideration for parking, even where the amount paid exceeds the advertised tariff.”
A further issue noted in the judgement is that the Upper Tribunal (UT) ruled that the earlier “King’s Lynn” council case which ruled in favour of the non-business treatment of such excess charges by the council was “wrongly decided”. The result is that HMRC line is all such income is consideration for the standard rated supply of the right to park a vehicle.
After the “King’s Lynn” case HMRC did not appeal against that judgement and had processed VAT refunds to councils but now, possibly emboldened by the NCP case decision, HMRC have outlined the retrospective action they are planning for such past refunds. Their letter to CIPFA states they will raise assessments to recover VAT claimed by and paid back to councils relating to such “overpayments” made in the last four years and goes on to invite councils to voluntarily disclose such amounts.
There will be a legal discussion around whether HMRC can apply the UT ruling from the NCP case retrospectively. In taking this stance it’s a further insight, we feel, into the increasing moves HMRC are taking to maximise VAT revenue yield across all sectors and the need for taxpayers to be equally as vigorous in challenging the inequitable approach HMRC often take.
On the NCP case we understand that the company has sought leave to appeal the decision so the decision is not final and may run on for many more months yet. There is also the question of the UT’s right to comment that the “Kings Lynn” judgement was wrong without reviewing the facts from all parties.
Whilst uncertainty will continue it would still be advisable for affected councils to establish the potential impact not just on any retrospective refunds of VAT on excess charges they have received but also on the pricing model and VAT treatment on parking income going forward.