This was the question considered by the Upper Tribunal (UT) in the case of National Car Parks Limited

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We’ve all been there. We’ve found a NCP pay and display car park and want to park for one hour.  We find a free space and go to the pay and display ticket machine. In this example, the prices stated on the tariff board next to the pay and display ticket machine are: Parking for up to one hour – £1.40. Parking for up to three hours – £2.10. The pay and display ticket machine states that change is not given but overpayments are accepted.

Guess what? As usual, we find that we don’t have the right money and only have a pound and a fifty pence piece, so we have to put them both in the machine.  The machine meter records the coins as they are fed into the machine, starting with the pound coin. When the fifty pence piece has been inserted and accepted by the machine, the machine flashes up ‘press green button for ticket’ which we customer do. The amount paid is printed on her ticket, as is the expiry time of one hour later and we wander off  to attend our business.

So, is VAT due on the overpayment of 10p?

The First Tier Tribunal (FTT) said “yes”.  It held that the excess payments made by the customer to NCP were not voluntary because the customer was required to pay at least the amount specified in order to park their vehicle and, if the customer did not have the correct change, the customer was required to pay an additional amount in order to obtain the right to park. The only sense in which the payment could be said to be “voluntary” is that the customer could decide not to buy a ticket which would mean not parking the car and having to go elsewhere. The taxpayer then appealed to the UT.

Law

Article 2(1)(c) of the Principal VAT Directive (PVD) provides that supplies of services for consideration within the territory of a Member State by a taxable person acting as such are subject to VAT. Article 73 of the PVD provides: “In respect of the supply of goods or services… the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.”  The provisions of the PVD have been implemented in UK law by the Value Added Tax Act 1994. Section 5(2)(a) of the VAT Act 1994 defines ‘supply’ to include all forms of supply but not anything done otherwise than for a consideration and section 19(4) provides: “Where a supply of any goods or services is not the only matter to which a consideration in money relates, the supply shall be deemed to be for such part of the consideration as is properly attributable to it.”

 Decision

The UT agreed with the FTT, and so the taxpayer’s appeal was dismissed.  A distinction was made between these overpayments and optional payments such as tips (which are VAT free).  It was stated that the PVD seeks to identify what consideration was received by NCP, not whether the customer could have obtained the same service for less. NCP retained the £1.50 in return for providing the car parking and this was consequently the value of the service provided.

Commentary

We have recently dealt with a number of cases which dealt with the topic of valuation and have been successful in obtaining a refund of overpaid VAT. Unfortunately for the appellant in this case, it seems that there was little chance of success and they didn’t get to keep all of value of the overpayments. All those 10ps add up…