This case concerns car parking overpayments. The taxpayer (a commercial car park operator) submitted a claim for overpaid output tax, which HMRC refused. For background, the customer is notified by the instructions on the front of the pay and display ticket machine that the machine does not give change; “No change given overpayment accepted”. If the customer does not have the correct change and inserts coins to a value above the tariff displayed, the machine will not recognise any additional parking time. The First-tier Tribunal (FTT) concluded that the overpayments were additional payment for parking and therefore subject to VAT.
In reaching its conclusion the FTT made the following points:
- Voluntary – the payments were not voluntary. If a customer does not have the right money to pay to park, there is a binary choice, pay an additional amount and receive the service (the right to park) or don’t pay and don’t receive the right to park.
- Uncertain – the payments were not uncertain. When the button on the machine is pressed (when the contract is made), the customer and the machine knew how much money had been paid.
- Link between supply and payment - The fact that customers are paying more than the stipulated tariff, is dependent on their ability and willingness to pay (the amount of change they have). This is a commercial decision by them, a bargain made by them, at the time when they put their money into the pay and display ticket machine. This is sufficient to create a direct link between what they pay and the service provided.
- The additional amount – the taxpayer argued the customer paid for a nothing. The FTT disagreed - a customer who “overpays” has made a bad bargain as a result of their own bargaining position (a lack of change or a lack of time).
- The King’s Lynn decision – (which decided that overpayments were not subject to VAT) - as an FTT this is not binding, the FTT’s reasoning was based on the fact that King’s Lynn could not, as a matter of law, make an offer for any amount other than the tariff because it was a local authority and bound by the special regime for local authorities, and it did not consider contract law.
- Fiscal Neutrality – on the issue of different treatment of overpayments between Council and privately operated car parks the FTT repeated the comments above in distinguishing Kings Lynn from NCP.
The FTT concluded that where there is no legal restriction on the amount which can be charged for parking and taking account of EU law and English contract law, the full price paid by the customer, including any additional amount above the tariff for the period, is consideration for the supply of a single taxable service. To read the decision click here.
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