National Car Parks (NCP) has lost its claim for recouping VAT from overpayments on parking fees.
The issue arose because of the way NCP’s ticket machines operated. Fees were £1.40 for up to one hour and £2.10 for up to three hours. Customers without the correct coins had to pay more than the amount due as the machines did not give change.
The ticket stated the full amount paid, including any overpayment, but no additional parking time was granted. A customer could cancel a transaction at any time before a ticket was issued and leave the car park without paying anything.
NCP claimed a refund of the VAT on the overpayments, arguing they should be classed as tips or gratuities and so therefore not taxable.
The Revenue refused the claim because the overpayments were part of the fee for the right to park and so were taxable.
The tax tribunal ruled in favour of HMRC. It accepted that gratuities were not liable to VAT because they were optional and uncertain, and their amount was impossible to determine.
However, in this case, the overpayments were not gratuities because a contract was formed when the customer received a ticket after inserting money into the ticket machine. All the money paid was therefore the taxable amount for VAT purposes.
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