This long running case about whether local authorities can treat supplies of off street parking as VAT free without causing significant distortion of competition reached the Court of Appeal (CoA), some ten years after the original Tribunal hearing on the issue. Local authorities act under a special legal regime when making these parking supplies but that in itself is not enough to make the income payment for supplies by non-taxable persons and therefore VAT free. Non-taxation of these charges must also not be significantly distortive and it is that point which has caused the main difficulties and another loss for the taxpayers.
This case was earlier referred to the CJEU by the High Court to decide what economic tests should be applied to determine if non-taxation would lead to significant distortions of competition. The High Court then referred the case back to the First-tier Tribunal (FTT). In 2012, the FTT concluded that non-taxation would distort competition. This decision was upheld by the UT and appealed by the taxpayers to the CoA. The CoA has had to decide whether the FTT made an error of law in light of its findings of fact that, in a hypothetical world where VAT had not been charged by local authorities on off street parking, this would have created a reduction in upward pressure on pricing, which would distort the market. The CoA has now found that the FTT was correct in its finding of fact and has dismissed the taxpayers’ appeals. If one supplier in the market was able to have lower prices over time because of its special tax status, this is likely to significantly distort competition. It remains to be seen whether permission is sought or granted to take this case to the Supreme Court. The sums at stake here, not just for the appellant taxpayers but all the claims stood behind the lead case, are significant. To read the decision click here.