National Car Parks Ltd v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 16 June 2017 |
| Neutral Citation | [2017] UKUT 247 (TCC) |
| Date | 16 June 2017 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2017] UKUT 0247 (TCC)
Upper Tribunal (Tax and Chancery Chamber)
The Hon Mrs Justice Rose DBE (Chamber President), Judge Greg Sinfield
Dario Garcia, solicitor, 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 – Car parking – Whether overpayments consideration for taxable supply of services – Link between consideration given and service received – Whether sufficient link between consideration given and service received – Whether overpayments subject to VAT – Appeal dismissed.
The Upper Tribunal (UT) decided that overpayments made when purchasing tickets in pay and display car parks amounted to additional taxable consideration for the right to park a vehicle.
National Car Parks Ltd (NCP) carried on a business of operating pay and display car parks. Charges were payable in accordance with a tariff based on the time and duration of the stay. The dispute concerned ticket machines which accepted payment in cash. Where customers were unable to pay the exact amount, they could pay more than the amount due but, as the ticket machines did not give change, the excess was retained by NCP. In October 2014, NCP submitted a claim to HMRC for repayment of VAT to the value of £488,669 declared on the excess payments. HMRC refused the claim on the ground that the overpayments were consideration for the right to park and were, therefore, taxable. NCP challenged this decision in the First-tier Tribunal (FTT) claiming that the amounts were ex gratia payments falling outside the scope of VAT. The FTT found that the full amount, including any excess paid by the customer, was consideration for a taxable supply of the right to park a vehicle in the car park for a specified period of time. Upon appeal by NCP, the only issue for the UT was whether the overpayments amounted to consideration obtained by NCP from the customer in return for a supply of services, namely the right to park a vehicle in a car park, and were, therefore, chargeable to VAT.
Both sides agreed that the appropriate starting point was to consider the contract in order to determine what was being supplied and what was being paid. NCP contended that the UT should apply the EU law concept of consideration to the contract to determine the nature of the supply and the price agreed by the parties. It submitted that there was no causal connection between the excess amount and the supply of parking because the supply would be made if the customer did not pay the excess. NCP also submitted that there was no quantitative connection because it made the same supply notwithstanding the excess or the amount of it. HMRC argued that the only test for determining whether a payment was consideration for a supply was whether there was a direct link between the two. In their view, there was such a link.
In addressing the question of whether an excess payment was consideration for a supply of services by NCP, the UT observed that there was no definition of “consideration” in EU VAT law and that none of the cases decided in the European Court of Justice (ECJ) dealing with the meaning of consideration and the value of supplies was precisely analogous to the situation in this appeal. Moreover, consideration for the purposes of VAT did not have the same meaning as it did for the purposes of English contract law and, in the view of the UT, an analysis based on domestic law would not necessarily produce the correct result for VAT purposes. The UT preferred the meaning of consideration for VAT purposes from Staatssecretaris van Financiën v Association Coöperatieve Aardappelenbewaarplaats GA (Case 154/80) [1981] ECR 445 (the Dutch potato case) and Campsa Estaciones de Servicio SA v Administración del Estado (C-285/10) [2012] BVC 258: it was the value actually given by the customer, or a third party, in return for the service supplied by the supplier and not a value assessed according to objective criteria.
Under the contract between NCP and the customer, which was formed when the customer inserted money into the ticket machine, NCP granted the customer the right to park his or her vehicle for, say, one hour in return for inserting not less than, for example, £1.40. If the customer wished to park for up to three hours then he or she was required to pay, say, not less than £2.10. It followed that NCP agreed to grant a customer the right to park for up to one hour in return for paying an amount between £1.40 and £2.09. If a customer paid, say, £1.50, that amount was the value given by the customer and received by the supplier in return for the right to park for up to one hour. Accordingly, in the judgment of the UT, the total payment made by the customer was taxable. The appeal was duly dismissed.
In the very similar case of Borough Council of King's Lynn and West Norfolk [2012] TC 02342, relied on by the appellant, the FTT had found that there was no direct link between the service and the consideration and that VAT was not due on the overpayments. The UT took the view that the decision in that appeal, although widely applied by car park operators, was wrong. The decision of the higher court in the present appeal will be considered by HMRC as binding authority to collect VAT on overpayments retained by businesses using coin-operated machines.
[1] National Car Parks Limited (“NCP”) carries on a business of operating “pay and display” car parks. A person who parks his or her car in one of NCP's car parks is required to display a ticket in the car which shows that it is permitted to be in the car park for a specified time. The ticket is obtained from a machine. Different amounts are payable for tickets at different times and depending on how long the car is to be parked. The amounts payable are set out on a tariff board or boards in the car park. This appeal concerns machines that accept payment in cash. Where customers do not have the correct change to pay the exact amount stated on the tariff board, they must, if they wish to park, put in more than the amount due as the ticket machines do not give change.
[2] In October 2014, NCP made a claim for repayment of overpaid VAT of £488,669 in respect of overpayments of car park tariffs by customers using NCP's pay and display car parks in the VAT accounting periods 06/09–12/12. The Respondents (“HMRC”) refused the claim on the ground that the overpayments “should be regarded as consideration [for the right to park] and are therefore taxable”. NCP appealed to the First-tier Tribunal (Tax Chamber) (“FTT”) on the ground that the overpayments were not consideration for any supply but ex gratia payments outside the scope of VAT.
[3] In a decision released on 15 December 2015 with neutral citation [2015] TC 04784 (“the Decision”), the FTT (Judge Short and Gill Hunter) dismissed NCP's appeal. The FTT held that the full amount, including any excess, paid by the customer was consideration for the taxable supply of the right to park in the car park for a particular period of time.
[4] NCP now appeals, with permission of the FTT, against the Decision.
[5] There was no dispute about the material facts for the purposes of this appeal and both Mr Garcia, who appeared for NCP, and Mr McGurk, who appeared for HMRC were content to make their submissions on the basis of the hypothetical example of a typical transaction given by the FTT in [22]:
A customer enters an NCP pay and display car park wishing to park for one hour. She parks her car in an available space and locates the pay and display ticket machine. 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 and that coins of a value less than 5 pence are not accepted.
The customer finds that she only has change of a pound coin and a fifty pence piece and puts these into the pay and display ticket 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 the customer does. The amount paid is printed on her ticket, as is the expiry time of one hour later. The customer displays the ticket in her car and leaves the car park.
[6] If the customer does not have the correct change and inserts coins to a value above the tariff displayed, the machine does not grant any additional parking time to the customer regardless of overpayment. The ticket issued to a customer states the full amount paid, including any overpayment. There are no barriers at a car park of this type and a customer could press a red button to cancel the transaction at any time until the green button is pressed for the issue of a ticket and drive away without paying anything.
[7] Article 2(1)(c) of Council Directive 2006/112/EC (the Principal VAT Directive or “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, other than as referred to in articles 74 to 77 [which are not relevant to this appeal], 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.
[8] The provisions of the PVD have been implemented in UK law by the Value Added Tax Act 1994 (“VATA94”). Neither party suggested that the provisions of the PVD had not been properly...
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