Borough Council of King's Lynn and West Norfolk v R & C Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 06 December 2022 |
| Neutral Citation | [2022] UKUT 326 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2022] UKUT 326 (TCC)
Mr Justice Miles, Judge Ashley Greenbank
Upper Tribunal (Tax and Chancery Chamber)
Value added tax – Off-street car parking provided by local authority – Effect of parking tariffs set by order of the local authority – Whether overpayments are consideration for a taxable supply – Yes – Appeal dismissed.
In The Borough Council of King’s Lynn and West Norfolk v R & C Commrs [2022] BVC 512 the Upper Tribunal concluded that, as is the case in carparks operated by commercial companies, overpayments made when people purchased car parking tickets from coin operated machines in council run carparks were additional consideration for a supply of car parking, and they were therefore subject to VAT. The fact that the car parking was supplied by a council whose charges were set by statue did not change this analysis of the contractual relationship.
The Council has litigated the VAT treatment of overpayments made into coin operated ticket machines located in its car parks twice. In the first litigation, Borough Council of King’s Lynn and West Norfolk (no. 1), the First Tier Tribunal concluded that the overpayments were not additional consideration, and were therefore outside the scope of VAT. This was on the basis that the charges the council could make for car parking were set by statute and could not be increased except by statue. However, in the second litigation, Borough Council of King’s Lynn and West Norfolk (no. 2), the FTT concluded that the overpayments were, as a matter of contract law, additional consideration and were therefore subject to VAT. Effectively, at the second hearing the FTT determined that the decision in King’s Lynn (no. 1) was incorrect. The case was litigated twice because, after King’s Lynn (no. 1), in National Car Parks Ltd v R & C Commrs the Court of Appeal ruled that overpayments made into ticket machines at commercial car parks were additional consideration for supplies of car parking.
The Council appealed the decision in King’s Lynn (no. 2) to the Upper Tribunal on the grounds that it had made an error of law. It argued that it had no statutory authority to enter into a contract for car parking for any price other than that set in the relevant regulations and that the FTT had erred in concluding that it had entered into a contract to supply parking for a higher price.
The overpayments being considered typically arise when a person parks their car in a carpark where the ticket machine does not give change. The tribunal considered a hypothetical person who wished to park their car for an hour in a carpark where the advertised tariff for one hour of parking is £1.40 but, because they only had a pound coin and a 50p, put £1.50 into the machine, thus overpaying by 10p in full knowledge that they would not receive 10p as change.
The UT accepted that Councils are only permitted to levy charges if permitted by the relevant statute, but rejected the argument that in this hypothetical example the Council was levying an additional charge. As the UT expressed it ‘At no point in the course of the transaction with a customer using the car park does the Council seek to impose a charge of anything other than the authorized tariff of £1.40’, it noted that customers were made aware of the charges by the signs in the carpark, were aware that the machine did not give change and were not obliged to overpay — they could, for example, go and find the correct change before parking (para. 53).
As the Council was not exceeding its statutory authority, the question of whether the overpayments were additional consideration for parking was a matter of contract law. The Court of Appeal decision in National Car Parks Ltd applied, they were additional consideration and were therefore subject to VAT.
Commercial carpark operators will be pleased that they are on the same footing as local councils when overpayments are considered.
Comment by Sarah Kay, Lead VAT Writer, Croner-i Ltd.
Natasha Barnes, Counsel, instructed by PSTAX Limited appeared for the appellant
Brendan McGurk, Counsel, instructed by the General Counsel and Solicitor to His Majesty's Revenue and Customs appeared for the respondents
[1] This is an appeal by the appellant, the Borough Council of King's Lynn and West Norfolk (the “Council”), against a decision of the First-tier Tribunal (the “FTT”) dated 18 January 2021 and reported at [2021] UKFTT 10 (TC) (the “FTT Decision”) dismissing a claim by the Council for repayment of VAT overpaid. The respondents are the Commissioners for His Majesty's Revenue and Customs (“HMRC”).
[2] The appeal concerns the VAT treatment of off-street parking provided by local authorities where charges for parking are collected by a machine which does not offer change. In particular, it concerns the VAT treatment of “overpayments” made by customers who tender an amount which exceeds the advertised tariff.
[3] The VAT treatment of off-street car parking has come before the courts and tribunals in several previous cases in the context of supplies made by both local authorities and private sector providers. In a previous appeal by the Council, which is reported as Borough Council of King's Lynn and West Norfolk [2012] TC 02342 (“King's Lynn No.1”), the FTT decided that an overpayment was not part of the consideration for a supply made by a local authority, such as the Council. However, in National Car Parks Ltd v R & C Commrs [2019] BVC 30 (“NCP CA”), the Court of Appeal held that, in similar circumstances, an overpayment was part of the consideration for a supply of off-street car parking by a private sector provider. The Upper Tribunal, in that case, had reached a similar conclusion and, in doing so, had expressed the view that King's Lynn No.1 was wrongly decided (see National Car Parks Ltd v R & C Commrs [2017] BVC 518 (“NCP UT”) at [44]). However, having not heard argument on the specific considerations that might apply to the provision of off-street car parking by local authorities, the Court of Appeal declined to take a view on the correctness of the FTT's decision in King's Lynn No.1 (NCP CA [23]).
[4] The question before the tribunal in this case is essentially whether the conclusion of the Court of Appeal in NCP CA applies equally to the provision of car parking services by local authorities (and accordingly whether King's Lynn No.1 was rightly decided). The FTT (Judge Brooks) decided that an overpayment was part of the consideration for a supply of off-street parking by the Council. It is therefore implicit in Judge Brooks's decision that, in his view, the FTT's decision in King's Lynn No.1 was wrong. The Council appeals against the FTT Decision with the permission of the FTT.
[5] The facts are not disputed. They are set out in the FTT Decision (at [13]), and were taken from the decision of the FTT in King's Lynn No.1 where the FTT stated (at [6]–[8]):
[6] The [Council] 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. …
[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.
[6] In its decision in this case, the FTT (FTT Decision [1]) referred to an example of a person, who only has a pound coin and a 50p piece, who wishes to park their car for one hour, for which the advertised tariff is £1.40, and who puts £1.50 into a ticket machine that does not provide change. The same example was used by counsel in their submissions before us and we will also refer to it in this decision notice.
[7] It will help our explanation if we set out some of the relevant statutory provisions and case law background at this stage.
[8] We will begin with the relevant VAT legislation and case law.
[9] Article 2(1)(c) of Council Directive 2006/112/EC (the “Principal VAT Directive” or “PVD”) provides that transactions that are subject to VAT include:
the supply of services for consideration within the territory of a Member State by a taxable person acting as such.
[10] Article 73 PVD determines the taxable amount of any supply. It provides so far as relevant:
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 …
[11] The provisions of the Principal VAT Directive have been implemented in UK law by the Value Added Tax Act 1994 (“VATA”). Neither party suggested that the provisions of the Principal VAT Directive had not been properly implemented. The equivalent domestic law provisions are found in sections 5 and 19 VATA. Section 5(2)(a) VATA defines “supply” to include:
all forms of supply but not anything done otherwise than for a consideration.
Section 19 VATA sets out the value of a supply for VAT purposes in the following terms:
(1) For the purposes of this Act the value of any supply of goods or services shall, except as otherwise provided by or under this Act, be determined in accordance with this section and Schedule 6, and for those...
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The Borough Council of King's Lynn and West Norfolk v HM Revenue and Customs [2022] UKUT 00326 (TCC
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