This appeal to the UK Upper Tribunal (‘UT’)4 concerns the VAT treatment of overpayments for car parking. The court examined whether overpayment could be treated as consideration for a taxable supply of services and thus subject to VAT.

Background

The taxpayer, National Car Parks Limited (‘NCP’), carries on a business of operating ‘pay and display’ car parks. A person who parks in one of NCP’s car parks is required to display a ticket, obtained from a machine, in the car which shows that it is permitted to be in the car park for a specified time. Different amounts are payable for tickets at different times and depending on how long the car is to be parked. This appeal concerns machines that accept payment in cash. Where customers do not have the correct change they must put in more than the amount due as the ticket machines do not give change.

If the customer does not have the correct change and inserts coins to a value above the tariff displayed, the machine does not grant any additional parking time to the customer regardless of overpayment. The ticket issued to a customer states the full amount paid, including any overpayment.

In 2014, NCP made a claim for repayment of overpaid VAT in respect of overpayments of car park tariffs by customers using NCP’s pay and display car parks in the VAT accounting periods 06/09 – 12/12. 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 (Tax Chamber) (‘FTT’) on the ground that the overpayments were not consideration for any supply but ex gratia payments outside the scope of VAT. The FTT5 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 and thus dismissed the appeal.

Appeal to UT

The only issue is whether the overpayments are consideration obtained by NCP in return for a supply of services, namely the right to park a vehicle in a car park, and are thus chargeable to VAT.

There is no definition of consideration in the EU VAT legislation and none of the cases decided by the CJEU which dealt with the meaning of consideration and the value of supplies, is precisely similar to the situation in this appeal. The same issue has, however, been considered by the FTT in the Kings Lynn case6, similar to this appeal. The FTT in that case described the critical question as whether there is a link between the total payment made for the parking in cases of overpayment and the supply of parking services. However, in the King Lynn case the charges were fixed by statutory order which prevented the local authority from charging more than that amount for parking meaning any overpayment was a donation.

Decision

The UT focused on Article 73 of the Principal Vat Directive which provides that “..the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier..” The only issue for the UT, like for the FTT, was whether the overpayments are consideration for a supply of services by NCP for VAT purposes.

When determining the taxable amount, the question posed by Article 73 is not: could the customer have obtained the same service for less? Article 73 requires the Tribunal to ask what was consideration received or to be received by the supplier from the customer (there was no third party in this case) in return for the supply.

There was no need to analyse the supplies using English contract law concepts of offer and acceptance or consideration. What is shown on the machine or written on the ticket is of only limited relevance. According to the UT it is clear from cases such as the Dutch Potato case (C-154/80) and Campsa (C-285/10) that the meaning of consideration for VAT purposes is the value actually given by the customer in return for the service supplied and actually received. The contract is formed when the customer inserts the money into the machine and the amount paid by the customer is the taxable amount for VAT purposes.

The UT considered that the FTT decision was wrong in the King Lynn case as the tribunal was unduly influenced by the fact that the car parking charges were set by statutory order. The way the car parking charges are set cannot determine the nature of the overpayment.

The taxpayers appeal to the UT was therefore dismissed.

4. [2017] UKUT 0247 (TCC)

5. [2015] UKFTT 0666 (TC)

6. Borough Council of King’s Lynn and West Norfolk v HMRC [2012] UK FTT 671 (TC) (‘King’s Lynn’)