Date of issue: 30th March 2009
NO VAT ON PARKING FINES
HM Revenue & Customs (HMRC) has
done a U-turn over VAT on parking fines and while the policy change will
not benefit motorists, chartered accountants Clement Keys say off-street
car park operators could be in line for a VAT refund.
“In light of new legal advice HMRC
has acknowledged that, in many cases, the payment of excess charges was
incorrectly regarded as a further payment for taxable supplies – instead
of a breach of contract – and these penalties should not have been
subject to VAT,” says director of VAT Services Steven Simmonds.
VAT may have been incorrectly
accounted for on excess charges where no parking ticket was on display,
where an underpayment was made or where the motorist overstayed the
parking period. Other common
reasons for fines include parking outside marked bays or in bays set aside
for people with disabilities or parents with children and returning to
park inside the time period permitted, for example ‘no return within two
hours’.
“If the terms and conditions
specify that the penalty charge is inclusive of VAT the operator will have
a difficult time trying to obtain a refund because HMRC will argue
‘unjust enrichment’, that is to say the VAT cost has been passed on to
the offender and has not therefore been suffered by the operator,” adds
Mr Simmonds.
“However, if they are silent on
this point and the operator can show that the fines were set as a punitive
charge to discourage breaches of contract, without any consideration of
VAT, then the overpaid VAT should be refundable.”
Claims are capped to three years
from the date of the claim and car park operators are therefore advised to
calculate and submit a claim without delay.Car park operators who think
they are due a refund should get in touch with their VAT advisor urgently.