VATGPB8640 - Other local authority activities: miscellaneous (A to E): car parking

On-street parking

Authorisation for parking on a public highway can only be granted by a local authority. The authority is acting in its capacity as a highway authority using powers provided in the Road Traffic Act 1988 and the Road Traffic Regulations Act 1984. Therefore any income from sources such as parking meters, the issue of permits in controlled parking zones and the like is non-business as there is no competition with the private sector.

Off-street parking

Following the Court of Appeal judgment in Isle of Wight Council and Others (2014) UKUT 446 (TCC), off-street parking is standard rated, even if supplied by a local authority.

Parking in a country park

Where a Local Authority provides car parking in a country park it is responsible for managing, the service may either be standard rated or fall outside the scope of VAT depending on the nature of the country park, as well as the powers under which the car parking is provided.

Local authorities have powers under the Countryside Act 1968 (CA68) to designate land as a country park. The Act also permits the authority to provide facilities including car parking facilities within the country park. The legislation allows local authorities to provide parking spaces within country parks and control and govern the proper use of the country parks. However, the parking can be run by another party and the CA68 neither directs local authorities to provide parking facilities, nor does it require them to provide parking facilities which would be subject to a legal framework separate to that of privately run car parks. As such, CA68 does not amount to a special legal regime. Consequently, parking income in respect of the country park where the car parking is provided pursuant to powers under the CA68 is by way of business and is standard rated.

Under Section 35 of the Road Traffic Regulations Act 1984 (RTRA), local authorities are empowered to make byelaws, usually referred to as parking orders, to enforce parking within country parks. The number of requirements within this empowerment, and the ability to make contraventions an offence, means that a local authority using these byelaws (or parking orders) is acting under a special legal regime.

As such, HMRC accept that where car parking charges in country parks are:

  • levied pursuant to byelaws (parking orders) made under Section 35 of the RTRA; and
  • levied in respect of a parking facility provided by the local authority in a country park which has been designated as such by the local authority under its powers deriving from Section 7(1) of the Countryside Act 1968

then the service will fall outside the scope of VAT.

Any other car parking charges in country parks are not made under a special legal regime and are therefore business activities taxed at the standard rate of VAT.

Definition of a ‘Country Park’

Section 7(1) of the Countryside Act 1968 allows local authorities to provide Country Parks within the countryside.

As explained above, in order for car parking provided within a country park to fall outside the scope of VAT, the parking must be provided within a country park which has been designated as one provided under the Countryside Act and the parking itself must be provided pursuant to byelaws (parking orders) made under the Road Traffic Regulations Act 1984.

HMRC recognises a country park to be designated as such for the purposes of the Countryside Act where certain conditions are met.

Designation under the Countryside Act

Firstly, the local authority must be able to evidence that it treats a park as a country park for the purposes of the Countryside Act. Such evidence could come from written byelaws or resolutions, or other internal documentation.

The country park may also be listed as such on the Natural England, NatureScot or equivalent devolved government websites. This is likely to indicate that the park is designated as a country park under the Countryside Act, although parks which are not listed on such sites but still meet the criteria could meet the definition.

Location

Secondly, the park must be located in a place where it is very unlikely that other public car parks which charge a fee will operate. This condition is necessary to ensure that outside the scope treatment of the car parking is unlikely to cause a significant distortion of competition with other car parking operators. It should be noted that the Countryside Act allows country parks to be treated as such where they are located on a site ‘in the countryside’.

Features of a Country Park

Additionally, it is expected that a country park will feature some (although not necessarily all) of the following:

  • Open green space
  • A Café or restaurant
  • Public toilets
  • A visitor information point
  • Paths and trails
  • Areas designated for wildlife
  • Woodland
  • Lakes or ponds
  • Recreational activities and/or special events

Parking and garaging with housing

Parking facilities and garaging provided with housing is covered in more detail at VATGPB8345. Generally provision of garaging in conjunction with council housing is a non-business activity. There is often a limit of two parking spaces or lock-up garages per dwelling but this is purely a local authority imposed condition. The number of parking spaces provided with housing has no effect on the VAT treatment.

Excess charges

Excess parking changes are covered in more detail in the VAT Supply and Consideration Manual (VATSC57600) (external users can find the guidance at http://www.hmrc.gov.uk/manuals/vatscmanual/VATSC57600.htm).

Penalty charges

A penalty charge for illegal parking is outside the scope of VAT.

Overpayments

HMRC’s view is that all payments for off-street car parking are consideration for a supply and are therefore taxable.

In National Car Parks Limited v HMRC (UT/2016/0058) the upper tribunal found that the whole amount paid by car park users was the taxable amount. This was confirmed by the Court of Appeal. VAT is therefore due on the overpayment as well as the advertised tariff.

The Upper Tribunal also concluded that the FTT decision in King’s Lynn had been wrongly decided. King’s Lynn had held that if tariffs were set by statutory order, then any overpayment must be ex gratia and therefore outside the scope of VAT. As such HMRC expects local authorities to account for VAT on the full amount received.