VAT CASES - 29.06.2016

National Car Parks Limited v HMRC TC/2014/01114. Overpaid VAT

The case. This appeal concerned the application of VAT to overpayments made by customers at National Car Parks Limited (NCP)’s pay and display car parks in the UK. The claim for overpaid VAT amounted to £488,669.09. NCP argued that they were voluntary payments in excess of car parking tariffs and did not constitute consideration for a supply of services and so were not subject to VAT. HMRC ruled that the overpayments were taxable because they should be regarded as consideration for the supply of parking.

The facts. NCP appealed against the decision on the grounds that the overpayments should rightly be treated as ex-gratia payments and outside the scope of VAT. The overpayments arose as a result of customers not having the correct change to pay the amount due and so put more than the amount actually charged into pay and display ticket machines, which do not give change. The terms displayed on the ticket machine indicate that a customer will not receive any additional parking time in return for the overpayment. NCP described the additional payment made by customers as analogous to a gratuity and therefore could not be treated as consideration. NCP also argued that on first principles VAT is a tax on consumption; if nothing has been consumed for the additional payment made, it cannot be consideration for a supply of services. HMRC argued that the additional amount is part of, not separate from, the valid contract made between NCP and the customer. It cannot be treated as falling outside the terms of the contract and amounts to consideration.

The decision. The Tribunal found that in a situation where there is no legal restriction on the amount which can be charged for parking the full price paid by the customer, including any additional amount, is consideration for the supply of parking and dismissed the appeal.