Borough Council of King's Lynn and West Norfolk (No. 2)
| Jurisdiction | UK Non-devolved |
| Judgment Date | 18 January 2021 |
| Neutral Citation | [2021] UKFTT 10 (TC) |
| Date | 18 January 2021 |
| Court | First Tier Tribunal (Tax Chamber) |
[2021] UKFTT 10 (TC)
Judge John Brooks
Dario Garcia of Mishcon de Reya LLP appeared for the appellant
Brendan McGurk, counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the respondents
Value added tax – Public authority car park – Whether overpayment of parking charge consideration for VAT purposes – Whether distinguishable from National Car Parks Ltd v R & C Commrs [2019] BVC 30 – No – Appeal dismissed.
The FTT held that overpayments made into coin operated machines which dispensed car parking tickets were additional consideration for supplies of parking, and were therefore subject to VAT.
The Council operated a number of car parks where parking tickets could be purchased from coin operated machines. The machines did not provide change if customers paid more than the published tariff. The Council considered that excess payments received (usually because the customers did not have the correct coins to pay the exact charge) were not subject to VAT because they did not represent consideration paid by the customer for a supply of parking.
This is the second time the FTT has considered overpayments received by the Council.
In Borough Council of King's Lynn and West Norfolk (No. 1) [2012] TC 02342 the FTT determined that, because the parking tariff was set by statutory order, the overpayments were not additional payment for parking (and they were therefore not subject to VAT). However, in National Car Parks Ltd [2019] BVC 30 (“NCP”), the Court of Appeal found that similar overpayments received by a commercial car park operator were additional consideration for the supply of car parking. In its reasoning the Court of Appeal criticised the FTT's decision in Borough Council of King's Lynn and West Norfolk (No. 1) and suggested that it had been wrongly decided.
In this appeal the Council argued that the FTT had decided the first case correctly. It sought to distinguish itself from the decision in NCP on the founds that its tariff was set by statute and not by contract (para. 15).
Having considered the argument presented by the Council and HMRC the FTT concluded that the overpayments were additional consideration paid by customers for a supply of parking and dismissed the appeal (para. 22).
The basis for this conclusion was the FTT's analysis of the contract between the Council and the customer. It concluded that, via the notices on the ticket machine, the Council made an offer to the customer by which, for the published price, a number of hours parking could be purchased. Customers who put a higher amount of money in the machine were making a counter offer which, when the machine dispensed a ticket, the Council accepted. In accepting the customer's counter offer the Council was not acting to either extend its powers or impose a higher charge. Having analysed the contract in this way it was not necessary for the FTT to refer to the Court of Appeal's decision in NCP (para. 18–21).
The FTT's dismissal of the appeal was based on its analysis of the contract between the Council and the customer. Although it did not rely on National Car Parks Ltd [2019] BVC 30 (“NCP”) in order to reach this conclusion, given that in NCP the Court of Appeal concluded that similar overpayments received by a commercial company were additional consideration for supplies of parking, the FTT's conclusion is not surprising.
[1] This appeal concerns the VAT treatment of an “overpayment” for parking at a public authority “pay and display” off-street car park. This is a situation that arises when, for example, a person who wishes to park their car for an hour, for which the tariff is £1.40 and who has only a pound coin and a 50p piece, puts £1.50 into a ticket machine that does not give change. The sole issue to be determined is whether that 10p “overpayment” should be treated as consideration for the supply of parking services and therefore subject to VAT.
[2] In National Car Parks Ltd v R & C Commrs [2019] BVC 30 (“NCP”) the Court of Appeal held that such an overpayment, the 10p in the example, was part of the consideration if provided by a private supplier of car parking services. However, in a previous appeal by the present appellant, the Borough Council of King's Lynn and West Norfolk [2012] TC 02342 (“King's Lynn No 1”), the First-tier Tribunal (“FTT”) had concluded that an overpayment was not consideration and therefore not subject to VAT if the car parking services was provided by a public authority.
[3] Although there was no appeal against the decision of the FTT in King's Lynn No 1, as Newey LJ (with whom Males and Patten LJJ agreed) observed in NCP, at [23]:
The UT [Upper Tribunal] expressed the view that Borough Council of King's Lynn and West Norfolk [2012] TC 02342 had been wrongly decided. That case concerned car parks operated by a local authority where the “scale of charges” was laid down in a bye-law (viz. the Borough Council of King's Lynn and West Norfolk (Off-Street Parking Places) Consolidation and Variation Order 2011). A differently-constituted FTT concluded that overpayments were not to be treated as consideration. Not ourselves having been taken to the Order or heard any argument on its implications, I do not think I am in a position to express a final view on the correctness of the FTT's decision. I would certainly not wish, however, to be taken to have endorsed it.
[4] On 7 September 2019, almost four months after the Court of Appeal's decision in NCP, the Borough Council of King's Lynn and West Norfolk (the “Council”) filed a “VAT652 error declaration” form. This notified HMRC of potential errors in its VAT returns in respect of the supply of car parking services and claimed a repayment of £4,518.86. In essence this was on the basis that King's Lynn No 1 was correctly decided and, as it was distinguishable from NCP, remained good law. Following the rejection of its claim by HMRC, by letter dated 2 October 2019, the Council, on 15 October 2019, appealed to the FTT.
[5] The Council were represented by Dario Garcia of Mishcon de Reya LLP. Brendan McGurk of counsel appeared for HMRC. I am grateful to both for their clear and succinct submissions, both written and oral.
[6] In relation to VAT, as it is equally applicable in the present case, I can do no better than adopt what was said by the Court of Appeal in NCP:
[6] Article 1(2) of Council Directive 2006/112/EC on the common system of value added tax (“the Principal VAT Directive”) explains that the principle of the common system of VAT “entails the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services”. Amongst the transactions subject to VAT are “the supply of services for consideration within the territory of a Member State by a taxable person acting as such” (article 2(1)(c)). By article 73, in respect of a 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 …
[7] Provisions to similar effect are to be found in the Value Added Tax Act 1994. Under section 4(1), VAT is to 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”. “Supply” includes “all forms of supply, but not anything done otherwise than for a consideration” (section 5(2)(a)).
[8] The word “consideration”, which features in both articles 2(1)(c) and 73 of the Principal VAT Directive and section 5(2)(a) of the 1994 Act, does not in the VAT context refer to what might be deemed “consideration” for the purposes of domestic contract law but has an autonomous EU-wide meaning (see eg Staatssecretaris van Financiën v Coöperatieve Aardappelenbewaarplaats GA, (The Dutch Potato case) (Case C-154/80) (1981) BVC 456 (“the Dutch potato case”), at paragraph 9 of the judgment of the Court of Justice). “[T]he concept of the supply of services effected for consideration within the meaning of art 2(1) of the Sixth Directive [i.e. the predecessor of the Principal VAT Directive] presupposes the existence of a direct link between the service provided and the consideration received” (Apple and Pear Development Council v C & E Commrs (Case No 102/86) (1988) 3 BVC 274, at paragraph 12 of the Court of Justice's judgment; see also e.g. EC Commission v Finland (Case C-246/08) [2010] BVC 1,062, at paragraph 45 of the Court of Justice's judgment). A supply of services is effected “for consideration”, and hence is taxable, “only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient” (Tolsma v Inspecteur der Omzetbelasting Leeuwarden (Case C-16/93) [1994] BVC 117, at paragraph 14 of the Court of Justice's judgment; see also e.g. Gemeente Borsele v Staatssecretaris van Financiën; Staatssecretaris van Financiën v Gemeente Borsele (Case C-520/14) [2016] BVC 18, at paragraph 24 of the Court of Justice's judgment).
9. The authorities also show that “consideration” is a “subjective value” in the sense that “the basis of assessment for the provision of services is the consideration actually received and not a value assessed according to objective criteria” (the Dutch potato case, at paragraph 13 of the judgment). In Campsa Estaciones de Servicio SA v Administración del Estado (Case C-285/10) [2012] BVC 258, the Court of Justice explained in paragraph 28 of its judgment:
According to settled case law …, the taxable amount for the supply of goods or services...
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