Borough Council of King's Lynn and West Norfolk
| Jurisdiction | UK Non-devolved |
| Judgment Date | 01 October 2012 |
| Neutral Citation | [2012] UKFTT 671 (TC) |
| Date | 01 October 2012 |
| Court | First-tier Tribunal (Tax Chamber) |
[2012] UKFTT 671 (TC)
Judge Dr K Khan, Terence Bayliss FFA, FAIA
Leslie Allen, counsel, engaged by Elysian Associates appeared for the Appellant
J P Holl, Senior Officer to HM Revenue and Customs, appeared for the Respondents
VAT - Overpayment - Whether consideration for a supply - No - No VAT charge on overpaid amounts - Appeal allowed
The First-tier Tribunal decided that a customer's overpayment for the parking tickets at a taxpayer local authority's parking areas was not a consideration with a direct link to the taxpayer's supply parking services. Thus, such overpayment was not subject to VAT under the Value Added Tax Act 1994 ("VATA 1994"), Value Added Tax Act 1994 section 5s. 5. The amount to be paid by the customers was defined under the Borough Council of King's Lynn and West Norfolk (Off-Street Parking Places) Consolidation and Variation Order 2011 ("Order 2011"). The customers could not unilaterally change the consideration by paying more, simply because they did not have the correct change to make the correct tariff charge payments.
The taxpayer local authority appealed against HMRC's decision rejecting its voluntary disclosure for VAT, which HMRC confirmed in their notice of voluntary disclosure on 21 July 2010.
The taxpayer was registered for VAT with effect from 7 July 1973. It operated car parks with ticket dispensing machines which indicated that no change was given and overpayments were accepted.
In July 2010, the taxpayer submitted a voluntary disclosure in respect of VAT charged on its customers' overpayment for the parking tickets at parking areas it managed. Such overpayment would occur where a customer did not have the correct amount of change to pay for the desired parking time. The customer overpaid in order to obtain a parking display ticket. HMRC notified the taxpayer that the parking overpayment was liable to VAT as a charge made for parking. They contended that the VAT was due on all consideration paid.
The taxpayer contended that the receipt of income, when no supplies made in return, should be treated as a non-business supply and, therefore, a non-taxable supply. The payment was ex gratia and the customer got nothing in return for the payment. Therefore, there was no link between what was supplied and what was received. Given the absence of that nexus, the payment made as an overpayment could not be treated as consideration for VAT purposes.
HMRC contended that there was a supply of services made by the taxpayer in raising a charge for parking a vehicle. That was not an exempt supply nor was it a non-business activity of the taxpayer. Once consideration was payable in money for the supply, which was not a mixed supply, then VAT was due on the whole consideration paid or payable.
Whether the customer's overpayment in issue was subject to VAT under VATA 1994, Value Added Tax Act 1994 section 5s. 5.
Held, allowing the taxpayer's appeal:
Under VATA 1994, Value Added Tax Act 1994 section 5s. 5, supply takes place for VAT purposes where something is provided or done for a consideration. There must be a direct link between the supply made and the consideration given. The supplier would normally expect something in return for a supply and will not fulfil their contractual obligation unless payment is received or forthcoming. If there is no direct link between the supply which is made and the payment received, or if a party was not obliged to pay, then it cannot be said that there was consideration for the supply. The fact that a party receives a sum of money does not mean that that sum represents consideration. Overpayment is not a payment for services and there is no contractual term which would allow the payment to be treated as such (C & E Commrs v British Telecom plcVAT[1996] BVC 276, considered).
Here, the Tribunal held that the 2011 Order was clear on the rate of charge, which was fixed on a sliding scale basis. It was critical to determine whether there was a link between the total payment made for the parking, in cases of overpayment, and the supply of parking services. The link was to be determined by reference to the agreement between the parties and that agreement was determined by reference to the scale of charges which were published in the 2011 Order. The sliding scale published tariffs which were shown on the machine reflected the scale charges in the 2011 Order. The agreement between the parties was that the payer ought to pay the scale charges in order to obtain a ticket for parking. The consideration could not be unilaterally changed by the customer paying more simply because they did not have the correct change to make the correct tariff charge payments. The customer was only obliged to pay the amount indicated on the tariff charges and that was the amount of the consideration which gave rise to the reciprocal performance by the taxpayer. That was the amount which should be treated as received by the taxpayer and on which, VAT was to be accounted. Therefore, the overpayment in issue was not subject to VAT.
1.The disputed decision of the Commissioners for HM Revenue and Customs ("the Commissioners") is contained in a letter dated 14 July 2010 rejecting a Voluntary Disclosure for VAT in the sum of £44,820.76. The decision was confirmed by the issue of a Notice of Voluntary Disclosure form VAT657 issued on 21 July 2010 in the sum of £44,798.00 (rounded down).
2.The Appellant is a Local Authority providing statutory and non-statutory services. They conduct their business from premises at King's Court, Chapel Street, King's Lynn, Norfolk PE30 1EX.
3.The Appellant was registered for VAT with effect from 7 July 1973 under registration number 106 932 87.
4.By a letter dated 5 July 2010 the Appellant submitted a Voluntary Disclosure in the sum of £44,820.76 for the period 1 June 2006 to 31 March 2010. This was in respect of VAT which had been accounted for where members of the public had paid more than the set tariff amount into parking ticket machines at parking areas managed by the Appellant. It would be expected that such overpayment would occur where a member of the public did not have the correct amount of change to pay for the desired parking time. They overpaid in order to obtain a parking display ticket.
5.By letter dated 14 July 2010 the Respondents notify the Appellant that the parking overpayment was liable to VAT as a charge made for parking. VAT was due on all consideration paid.
6.The Appellant operates car parks with ticket dispensing machines. The machines display sliding scale hourly parking charges car park information, opening times and payment instructions. The machines indicate that no change is given and overpayments are accepted.
7.Where a member of the public puts money into the machine they obtain a parking sticker which can be fixed to the windscreen of their vehicle. It shows the day, month and year, the amount paid and the period of validity of the ticket. The Tribunal was offered copies of one such ticket as a sample of what the payer obtains.
8.The machine accepts a variety of coins including 5p, 10p, 20p, 50p, £1 and £2. The parking facilities are available on a twenty-four hour seven day a week basis and tickets are purchased for daily parking between the periods 8.00am and 6.00pm and overnight parking at a fixed rate. The first hour is charged at £1.40. The first three hours at £2.10 and the first five hours at £4.10. The scale of charges for the charging periods are fixed by Order.
9.An overnight stay, after the daily opening period, is at the fixed rate of £1. The metered parking, properly called pay and display packing, provides a way for the Council to make money from its parking facilities and to augment its budget. The car parking charges are normally increased minimally after every two or three years.
10.The issue in this case concerns the voluntary overpayment by customers, which occurs when people pay more for a parking ticket than they are required to pay. The overpayment as a percentage of the total income varied from between 2.25% to 3.46% of total payments per year. It is not easy to establish when individual customers have overpaid. When the total takings from the machines are counted, overpayments are then established and it is then possible for the machine to provide a printout of the amounts that have been paid which can be checked against the ticket issued for the payments. This in turn shows any overpayments made.
11.The Tribunal is grateful for the witness statement of Mr Dale Harvey Gagen, Corporate Project Officer with the Appellant. The Statement provided an outline of the parking facilities, the workings of the machines and the revenue receipts.
(1)VAT shall be charged on any supply of goods or services made in the United Kingdom where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him.
(2)A taxable supply is a supply of goods or services made in the United Kingdom other than an exempt supply.
Determination of value
(1)For the purposes of the Act any supply of goods or services shall, except as otherwise provided by or under this Act, be determined in accordance with this section and Value Added Tax Act 1994 schedule 6Schedule 6, and for those purposes subsections (2) to (4) below have effect subject to that Schedule.
(2)If the supply is for a consideration in money its value shall be taken as such amount as with the addition of the VAT chargeable, is equal to the consideration.
(3)…
(4)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.
(5)For...
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