"[i]f a customer pays ￡1.50, that amount is the value given by the customer and received by NCP in return for the right to park.
Quite rightfully so, the highly intelligent three Court of Appeal Judges - LORD JUSTICE PATTEN LORD JUSTICE NEWEY AND LORD JUSTICE MALES, dismissed the appeal from THE UPPER TRIBUNAL (TAX AND CHANCERY CHAMBER) of NATIONAL CAR PARKS LIMITED - and -THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS.
The Court of Appeal has confirmed The Upper Tribunal finding and The Upper Tribunal has confirmed the First-tier Tribunal's finding that, for VAT purposes, additional sums paid for parking by motorists without the correct change represented taxable consideration for parking services.
It was also found by the Tribunal that Borough Council of King's Lynn and West Norfolk v HMRC [2012] UKFTT 671 (TC) was wrongly decided and that even the existence of a statutory scale of charges did not alter the fact that the total paid, and retained by the car park operator, stemmed from a conscious decision not to park elsewhere. It was the price that the customer was both prepared to pay and actually paid, and there was a direct link between that and the right to park, the minimum charge for which was the official tariff.
This judgement establishes that the most important question in ascertaining consideration for VAT purposes is whether there is a direct link (under a legal relationship) between the service and the payment, even if this exceeds market value (although a large disparity may indicate the absence of a direct link). This may be contrasted with, for example, keeping separate pots within a gaming machine, with one going to the operator and the other to be paid out as winnings (and never retained by the operator). Taxpayers and advisers should be particularly aware that "consideration", for VAT purposes, does not have the same meaning as for English contract law and so must determine what is actually paid for a service to determine the amount on which VAT is due.
The UT, upholding the FTT's decision, considered that in the hypothetical example the taxable amount and consideration for VAT purposes was the full ￡1.50 actually paid rather than the ￡1.40 tariff for up to an hour's parking.
"The meaning of consideration for VAT purposes is clear from the Dutch Potato case and Campsa: it is the value actually given by the customer (or a third party) in return for the service supplied and actually received by the supplier and not a value assessed according to objective criteria. The service and the value given or to be given in return for it may be ascertained from the legal relationship between the supplier and the customer. Under the contract between NCP and the customer which is formed when the customer inserts money into the ticket machine at the car park and receives a ticket, NCP grants the customer the right to park his or her car for one hour in return for inserting not less than ￡1.40. If the customer wishes to park for up to three hours then he or she must pay not less than ￡2.10. It follows that NCP agrees to grant a customer the right to park for up to one hour in return for paying an amount between ￡1.40 and ￡2.09. If a customer pays ￡1.50, that amount is the value given by the customer and received by the supplier in return for the right to park for up to one hour. Accordingly, that is the taxable amount for VAT purposes."
In English law, of course, generally adopts an objective approach when deciding what has been agreed in a contractual context. Here, it seems to me that, taken together, the tariff board and the statement that "overpayments" were accepted and no change given indicated, looking at matters objectively, that NCP was willing to grant an hour's parking in exchange for coins worth at least ￡1.40. In the hypothetical example, the precise figure was settled when the customer inserted her pound coin and 50p piece into the machine and then elected to press the green button rather than cancelling the transaction. The best analysis would seem to be that the contract was brought into being when the green button was pressed. On that basis, the pressing of the green button would represent acceptance by the customer of an offer by NCP to provide an hour's parking in return for the coins that the customer had by then paid into the machine. At all events, there is no question of the customer having any right to repayment of 10p. The contract price was indeed ￡1.50. The contractual analysis in the hypothetical example where the customer has only a pound coin and a 50p piece, and therefore has no alternative but to pay ￡1.50 if she wishes to park in the car park. However, the analysis is the same even if it is possible for the customer to obtain the right coins, for example by obtaining change from another user of the car park. If the customer nevertheless chooses to insert ￡1.50 and presses the green button, it remains the case that she has accepted the offer to provide an hour's parking at that price.
The price paid by customers for a set period of parking will vary somewhat. In the hypothetical example, some customers will pay just ￡1.40 for an hour's parking. In other instances, the price might be up to ￡2 (if, say, a customer had only two one pound coins and chose to insert those). There is no question of the price being uncertain in any individual case, however. It will be whatever sum, equal to or in excess of ￡1.40, that the customer has paid into the machine which ought to give change.
Always give people more than what they expect to get. Good customer service costs less than bad customer service. Friendly makes sales – and friendly generates repeat business. For us, our most important stakeholder is not our stockholders, it is our clients.
Monty Jivraj
For LSGA Solicitors.