Car Parking Penalties Exempted From VAT

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. Shaun Underhill, a Partner at local law firm Shentons Solicitors, explains that the Court of Appeal has ruled that parking penalties 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 the company has fought a long-running battle with Her HMRC over whether their charges should be subject to 20% VAT. HMRC had argued that parking penalties are all part and parcel of the service of providing car parking for motorists and that, therefore, VAT is 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…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”.

Shaun Underhill comments “Motorists may take small comfort from the fact that VAT can no longer be added to parking penalties. This case will also be of interest to any business which imposes similar penalties.”