Vehicle Control Services Limited v The Commissioners for HM Revenue and Customs
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Arnold,Judge Walters |
| Neutral Citation | [2016] UKUT 0316 (TCC),[2016] UKUT 0316 (TCC) |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Subject Matter | Tax,13 July 2016 |
| Date | 13 July 2016 |
| Published date | 21 February 2017 |
[2016] UKUT 0316 (TCC)
Appeal reference
UT/2015/0191
Value add tax – input tax – supplies purchased for the purposes of both generating
revenue from activities outside the scope of VAT and making taxable supplies –
entitlement of taxpayer to deduct – whether revenue based apportionment justified
UPPER TRIBUNAL
TAX AND CHANCERY CHAMBER
VEHICLE CONTROL SERVICES LIMITED
Appellant
- and –
THE COMMISSIONERS FOR HER
MAJESTY’S REVENUE AND CUSTOMS Respondents
Tribunal: The Hon Mr Justice Arnold and Judge John Walters QC
Sitting in public in London on 16 June 2016
Lord Marks QC, instructed by Freeths, for the Appellant
Alan Bates, instructed by the Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2016
DECISION
Introduction
1. This is an appeal from a decision of the First-Tier Tribunal (Tax) (Tribunal Judge
Michael Connell and Peter Whitehead) dated 2 March 2015 [2015] UKFTT 443 (TC)
dismissing an appeal by Vehicle Control Services Ltd (“VCS”) against a decision of
the Commissioners for Her Majesty’s Revenue and Customs (“HMRC”) to require an
apportionment of the input VAT incurred by VCS on supplies purchased for the
purposes of both generating revenue from activities outside the scope of VAT and
making taxable supplies.
Background
2. VCS is a car park operator, which manages and operates car parking on private land.
Its clients are the owners of the car parks, which VCS operates for them under
contract. The central features of the contracts are as follows:
i) VCS provides a parking control service.
ii) VCS provides signage at its discretion.
iii) VCS supplies to the client (at a fee) parking permits for the client to issue to
those people the client wishes to be allowed to park in its car park. Permit
instruction sheets are also supplied by VCS. Permits are, on their face, issued
by VCS, so that the distribution by the client is an onward issue by the client
of VCS’s permits.
iv) The client undertakes to give exclusivity in managing the car park to VCS.
The agreement is for a fixed one year initial term, but extends automatically.
v) The warnings as to the enforcement action that VCS will take in the event of
contraventions are entirely a matter for VCS. The action actually to be taken is
also in VCS’s discretion.
3. In practice, most of VCS’s revenue is derived not from parking permits, but from
parking charge notices (“PCNs”) which it issues to motorists who are in breach of the
rules for parking in the clients’ car parks (“PCN revenue”). This formerly included
clamping and tow-away charges which were charged to motorists prior to such
charges being outlawed by the Protection of Freedoms Act 2012. In the tax year
2012/13 92% of VCS’s income came from PCNs, and just 8% from parking permits.
4. On 13 March 2013 the Court of Appeal decided that the PCN revenue was not subject
to VAT ([2013] EWCA Civ 186, [2013] STC 892). This was because VAT is
chargeable only in respect of revenue from the supply of goods or services. The Court
of Appeal held that the PCN revenue was not earned in respect of supplies of services
liable to VAT. Rather, the PCN revenue represented damages for breach of contracts
between VCS and the motorists and/or damages for trespass by the motorists.
5. Following the decision of the Court of Appeal, and no doubt consequent upon it, on
18 July 2013 HMRC denied VCS a VAT credit for the VAT period 04/13 in respect
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