National Car Parks Ltd v The Commissioners for HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judge | Lord Justice Newey,Lord Justice Males,Lord Justice Patten |
| Judgment Date | 20 May 2019 |
| Neutral Citation | [2019] EWCA Civ 854 |
| Docket Number | Case No: A3/2017/2435 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 May 2019 |
[2019] EWCA Civ 854
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
Mrs Justice Rose and Judge Greg Sinfield
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Patten
Lord Justice Newey
and
Lord Justice Males
Case No: A3/2017/2435
Mr Roderick Cordara QC (instructed by Mishcon de Reya LLP) for the Appellant
Mr Brendan McGurk (instructed by the General Counsel and Solicitor to HM Revenue and Customs) for the Respondents
Hearing date: 2 May 2019
APPROVED JUDGMENT
This appeal concerns a situation familiar to motorists. A person wishing to park in a “pay and display” car park pays a sum in excess of the tariff shown for the period for which he wishes to park because, say, the coins he has do not enable him to pay the exact figure and the ticket machine does not give change. The question raised by the present proceedings is whether the excess over the tariff is subject to value added tax (“VAT”).
The appellant, National Car Parks Limited (“NCP”), operates, among others, “pay and display” car parks in which there are ticket machines which take cash. A board or boards will specify the amounts that must be paid to park for different lengths of time. Someone wishing to leave his car for a particular period has to insert coins to the value of at least the figure given for that period in order to obtain a ticket which must be placed in his vehicle's windscreen. Once the requisite coins have been accepted by the machine, the customer will be able to obtain his ticket by pressing a button. Each machine indicates that no change is given and that “overpayments” are accepted.
Before both us and the Upper Tribunal (“the UT”), the parties advanced their submissions by reference to the following hypothetical example given by the First-tier Tribunal (“the FTT”):
“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.”
As the UT noted (in paragraph 6 of its decision):
“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.”
In 2014, NCP sought to recover sums for which it had accounted to the respondents, HM Revenue and Customs (“HMRC”), as VAT in respect of “overpayments” made in its pay and display car parks between 2009 and 2012. 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 on the basis that the overpayments were to be regarded as ex gratia payments outside the scope of VAT, but the FTT (Judge Short and Gill Hunter) dismissed the appeal and the UT (Rose J and Judge Sinfield) agreed with the FTT. NCP now challenges the UT's decision in this Court.
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 …”.
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)).
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 e.g. Case 154/80 Staatssecretaris Van Financiën v Cooperatiëve Vereniging Cooperatiëve Aardappelenbewaarplaats GA [1981] 3 CMLR 337 (“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” (Case 102/86 Apple & Pear Development Council v Customs and Excise Commissioners [1988] STC 221, at paragraph 12 of the Court of Justice's judgment; see also e.g. Commission of the European Communities v Finland [2009] ECR I-10605, 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” (Case C-16/93 Tolsma v Inspecteur der Omzetbelasting Leeuwarden [1994] STC 509, at paragraph 14 of the Court of Justice's judgment; see also e.g. Case C-520/14 Geemente Borsele v Staatssecretaris van Financiën [2016] STC 1570, at paragraph 24 of the Court of Justice's judgment).
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...
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