Motorists who receive parking penalties will at least have the comfort of knowing that they will not have to pay Value Added Tax (VAT) on their bills after a Court of Appeal ruling that they should be viewed as ‘damages for trespass’ rather than payments for services.
Vehicle Control Services Ltd (VCS) operates car parks on behalf of hundreds of clients and retains £80 penalties charged to errant drivers. It also levies £100 to remove wheel-clamps and £160, plus storage, after vehicles are towed away.
The company has fought a long-running battle with Her Majesty’s Revenue & Customs over whether those charges should be subject to 20% VAT and has now triumphed at the Court of Appeal. The First-Tier and Upper Tribunals had previously accepted HMRC’s arguments that parking penalties are all part and parcel of the service of providing car parking for motorists and that, therefore, VAT was chargeable.
However, allowing the company’s appeal, Lord Justice Lewison ruled: “The contract between VCS and the landowner gives VCS the right to eject trespassers. That is plain from the fact that it is entitled to tow away vehicles that infringe the terms of parking. The contract between VCS and the motorist gives VCS the same right.
“Given that the motorist has accepted a permit on terms that if the conditions are broken his car is liable to be towed away, I do not consider that it would be open to a motorist to deny that VCS has the right to do that which the contract says it can. In order to vindicate those rights, it is necessary for VCS to have the right to sue in trespass. If, instead of towing away a vehicle, VCS imposes a parking charge I see no impediment to regarding that as damages for trespass”.