The Upper Tribunal has rejected a VAT appeal by a borough council in relation to parking tariffs set by the local authority, holding that overpayments are a consideration for a taxable supply – The Borough Council of King’s Lynn and West Norfolk v HMRC  UKUT 326 (TCC).
As stated near the start of the decision, the point at issue was “the VAT treatment of off-street parking provided by local authorities where charges for parking are collected by a machine which does not offer change. In particular, it concerns the VAT treatment of ‘overpayments’ made by customers who tender an amount which exceeds the advertised tariff.”
The Upper Tribunal, rejecting the council’s appeal, summarised its position as follows:
“As we have described, the meaning of consideration for VAT purposes is clear from the case law. It does not have the same meaning as it does for the purposes of English contract law. It is the value of everything given by the customer (or a third party) and received by the supplier in return for the service supplied. It is not a value assessed according to objective criteria, for example, by reference to the market value of the service.
The service and the value given or to be given in return for it can be ascertained from the legal relationship between the supplier and the customer. Under the agreement between the Council and the customer which is formed when the customer inserts money into the machine at the car park, the Council grants the customer the right to park their car for one hour in return for inserting coins with a value of not less than the advertised tariff, in our example, £1.40. If a customer accepts that offer by inserting coins of a higher value, in our example £1.50, that amount (including the overpayment) is the value given by the customer and received by the Council under the legal relationship between them in return for the right to park for up to one hour. That is the taxable amount for VAT purposes.”
In the light of this, and some other related technicalities, the Upper Tribunal concluded as follows:
“For the reasons that we have given above, we agree with the FTT that, for VAT purposes, the overpayments are part of the consideration for the provision of off-street parking by the Council.”
The appeal was therefore dismissed.