Vehicle Control Services Ltd v The Commissioners for HM Revenue & Customs

JurisdictionEngland & Wales
JudgeLord Justice Lewison,Lord Justice Treacy,Lady Justice Hallett
Judgment Date13 March 2013
Neutral Citation[2013] EWCA Civ 186
Docket NumberCase No: A2/2012/1804
CourtCourt of Appeal (Civil Division)
Date13 March 2013

[2013] EWCA Civ 186





Royal Courts of Justice

Strand, London, WC2A 2LL






Case No: A2/2012/1804

Vehicle Control Services Limited
The Commissioners For Her Majesty's Revenue & Customs

Lord Marks QC and Martin Hirst (instructed by Flint Bishop Solicitors) for the Appellant

Sarabjit Singh (instructed by The Commissioners for Her Majesty's Revenue & Customs) for the Respondent

Lord Justice Lewison

The issue


The issue on this appeal is whether Vehicle Control Services Ltd ("VCS") is liable to pay VAT on parking penalty charges. If those charges are consideration for a supply of goods or services, they will be subject to VAT. If, on the other hand, they are damages they will not be. Both the First Tier Tribunal ("the FTT") and the Upper Tribunal ("the UT") found against VCS. They held that the charges were consideration for a supply of services, and hence were subject to VAT. According to the FTT the services in question were the provision of parking to motorists, and the payments represented consideration paid by the motorists. However, according to the UT, the services in question were services of parking control that VCS supplied to car park owners; and the parking penalty charges formed part of VCS's remuneration. The decision of the UT is at [2012] UKUT 130 (TCC); [2012] STC 2065.

The facts


VCS's clients ("clients") are owners or lawful occupiers of car parks or land. VCS enters into a contract on standard terms and conditions with each of the clients under which VCS agrees to provide the client with "parking control services". There was some confusion about which contract was the correct version. The FTT and the UT both considered a version that the parties agreed was not the correct version. We have considered what we are assured is the right one. No one objected to this course.


Clause 1 of the contract identifies the car park "of which the Client is the lawful occupier". In clause 2 VCS undertakes to provide a parking control service at the car park. Clause 3 of the contract contains the obligations imposed on VCS. They are:

i) To erect and maintain warning signs at the car park indicating that the car park is private property for the use of valid permit holders only, and that vehicles not clearly displaying valid permits will be liable to parking enforcement procedures including the issue of a parking charge notice, vehicle immobilisation and towing away, and indicating the fees for release (Clause 3.1)

ii) To supply the client with parking permits for issue to authorised vehicles at a cost of £2 per permit and £2.50 per book of 50 guest permits, and a permit instruction sheet giving details on how to complete and display the permits (Clauses 3.2 and 3.3)


Clauses 3.4 of the contract was as follows:

"3.4 Inspect the Car Park at such Intervals as the Company in its discretion thinks necessary from time to time and take such action in respect of vehicles there found as outlined in 3.1 and

4.3 including the issue of parking charge notices, vehicle immobilisation and/or towing away as the Company shall think fit


Clause 4 contained the client's obligations which included:

i) Payment of a registration fee of £25 plus VAT;

ii) Paying an annual fee for the warning signs;

iii) Ensuring "that all vehicles authorised to use the Car Park shall clearly display upon the windscreen a valid permit supplied by [VCS]" (clause 4.3).


Clause 5 stated:

"The Client request and authorise the Company to carry out its obligations hereunder and warrants to the Company its title and authority to do so."


Clause 6.1 of the contract gave VCS the right to alter the parking penalties referred to in clause 3.1.


The warning sign sets out the requirement for valid permits or tickets to be displayed, various other rules and the charges that are imposed for failure to comply with the rules. These include a parking charge notice (£80); a wheel clamping charge (£100) and a charge for towing away (£160 plus storage). It states "You are entering into a contractual agreement. Do not park in this area unless you fully understand and agree to the above contractual terms." If a car is parked in contravention of the car park's rules, VCS issues a "parking charge notice" which is placed on the windscreen of the car. The notice sets out, through the use of a code, the nature of the contravention, and makes demand for payment to VCS. VCS enforces collection of such payments, which it retains. The appeal concerns payments arising from some only of the contravention codes (24—Not parked correctly within the markings of the bay or space; 40—Parked in a disabled space without clearly displaying a valid disabled person's badge; 81—Parked in a restricted area of the car park; and 86—Parked beyond the bay markings).


We were also shown the terms on which VCS issued permits. These received little attention before either the FTT or the UT; but it was common ground that we should examine them. Indeed, they grew in importance as the appeal proceeded. The permit is attached to (but removable from) a letter from VCS to the motorist. It begins by saying that:

"The permit permits the vehicle registered below to use the parking facilities within the zone/area designated but it does not guarantee that a space will be available. Please read carefully the terms and conditions of use listed below prior to parking the vehicle."


Under the heading "Parking Permit Disc" appears the following term:

"Prior to a permit being issued a written order in all circumstances must be received by [VCS] from the Client or authorised agent."


The General Conditions include:

"Any vehicle causing an obstruction or parked in an unauthorised parking bay and/or zone will render the permit void."


The letter also contains the following:

. "Any breach of the former terms and conditions will result in the offending vehicle being issued with either a parking charge notice and/or the affixing of a wheel clamp and/or towing away and impoundingIn such circumstances a charge will be levied prior to its releaseNo exceptions to this rule will be permitted."


VCS reserved the right to alter the terms and conditions without notice.


The only name that appears on the warning notices or on the parking permits is that of VCS.

The decision of the FTT


The FTT held that VCS had no right to sue in trespass because it did not have the right to possess or occupy the car park. It also held that there was a contract between VCS and the motorist; but that the parking and penalty charges were consideration payable under that contract, and hence within the scope of VAT.

The decision of the Upper Tribunal


The argument for VCS is that these charges are not liable to VAT either because they are damages for breach of a contract made between VCS and the motorist or because they are damages for trespass. The UT rejected both limbs of this argument. On the trespass argument they expressed their conclusion as follows:

"[27] We conclude that in this case VCS did not have a contractual right to occupy or have possession with the effective control that is necessary if Dutton is to apply. The mere right of access afforded under the contract by the client to VCS did not give VCS any right to bring an action in trespass against the motorists who parked their vehicles in breach of the relevant restrictions.

[28] Even if it had been the case that VCS had rights of occupation or possession sufficient to found an action in trespass, it is clear from Dutton that there are limits on the application of such a remedy. The remedy must protect, but not exceed, the legal rights granted by the licence. In this case the limited rights afforded to VCS under the contract do not require protection from motorists who park their cars in breach of the relevant restrictions. Indeed, such behaviour is of the very essence of the arrangements between the client and VCS. We agree therefore with the conclusion of the First-tier Tribunal in this respect."


In relation to the argument that the charges were a breach of contract, as noted the FTT had found that there was a contract between VCS and the motorist but that the penalty charges were consideration paid by the motorist for the supply of services. Thus they were subject to VAT. However, the UT concluded that the argument fell at the first fence, because there was no contract between VCS and the motorist. They expressed their conclusion to that effect as follows:

"[40] In our judgment that was an error of law. On the facts of this case we do not consider that any offer was made by VCS that was capable of forming the basis for a contract between it and the motorist. VCS was not in a position, by virtue of its limited licence, to make any offer of a right to park. The ability to offer such a right was not conferred by the contract with the client, either expressly or by virtue of the nature of the interest in the car park conferred on VCS. That interest did not amount to a licence to occupy, or give VCS any right to possession. It merely conferred a right of entry to perform VCS's obligations under the contract.

[41] The warning signs erected in the car park do not assist VCS in these circumstances. The reference in those signs to the fact that the motorist is entering into a contractual agreement cannot create a contract where there is no relevant offer from VCS that can be accepted."



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