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Ever Had the Wrong Change For A Ticket Machine? Read On!

Almost every motorist has suffered the annoyance of not having the right change to put into a ticket machine. It may, however, be a comfort for that nameless multitude to know that a car park operator has been refused a six-figure VAT rebate in respect of overpayments reluctantly made by its customers.

Car parkThe operator’s machines applied a tariff system whereby clients were required to pay fixed sums for the right to park their vehicles for particular periods of time. Overpayments by those who did not have the right money were common. Longer parking periods were not afforded to those who put in more than the required sum and, as the machines did not give change, the extra money was kept by the operator.

The operator sought a £488,669 rebate on the basis that it had mistakenly paid VAT in respect of customer overpayments over a period of three and a half years. HM Revenue and Customs, however, refused and its decision that no rebate was due was subsequently upheld by the First-tier Tribunal.

In challenging that decision before the Upper Tribunal (UT), the operator pointed out that its machines do not grant any additional parking time to customers, regardless of overpayments made. It was argued that the overpayments had not been made as consideration for the supply of services and were thus not subject to VAT.

The UT observed that there was no direct legal authority on the point. In dismissing the operator’s appeal, however, it noted that it was necessary to look at the contractual relationship between the operator and its clients. The reality was that sums paid by the latter, including any overpayments, represented the value tendered for the right to park for a particular period. The full amounts paid were therefore taxable.