Off-Street Parking Charges

December 21st, 2015 by James Goudie KC

A local authority is not entitled to recover VAT on charges for off-street car parking.  The authority is as a matter of principle not a “non-taxable person” for VAT purposes when it charges members of the public for off-street car parking.  Otherwise, there would be “significant distortions of competition”.  So the Court of Appeal has held in the test case of Isle of Wight Council v HMRC [2015] EWCA Civ 1303.

Off-street car parking (“OSCP”) is provided and charged for pursuant to the Road Traffic Regulation Act 1984 (“the RTRA”), specifically Sections 32, 55 and 122. Any surplus of income over expenditure in respect of OSCP falls into the local General Fund (under Section 91 of the Local Government Finance Act 1988), a single undifferentiated fund from which most local authority activities are financed.  Unlike on-street car-parking receipts, there is no ring-fencing of OSCP which restricts the application of any surplus.

The Court of Appeal concluded that:-

  1. In a hypothetical world, in which VAT had never been imposed on OSCPP charges, those charges would have been lower: paragraphs 64-68;
  2. Local authorities are permitted to set OSCP charges with a view to at least covering the cost of operating loss-making of free of charge car parks: paragraph 69;
  3. When local authorities fix OSCP charges so as to give effect to the various traffic management, planning, economic and environmental policies properly to be taken into account in the provision of OSCP, it is entirely lawful and correct of them to have regard to the overall constraints of meeting the cost of providing OSCP: paragraph 70;
  4. The absence of any liability of local authorities to pay VAT on OSCP charges would permit the authorities to meet the cost of providing OSCP while charging less to those using that facility: paragraph 72; and
  5. If one supplier in the market for OSCP is able to have lower prices over time because of its special tax status that is likely significantly to distort competition: paragraph 76.

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