National Car Parks - Are overpayments consideration for VAT purposes?

In National Car Parks Ltd v HMRC [2019] EWCA Civ 854, the Court of Appeal has confirmed that excess amounts paid by customers at pay and display car parks were consideration for VAT purposes.

Background

National Car Parks Ltd (NCP) operates ‘pay and display’ car parks in which ticket machines take cash. A board will specify the amounts that must be paid to park for different lengths of time. Someone wishing to leave a car for a particular period has to insert coins to the value of at least the figure given for that period in order to obtain a ticket which must be placed in the vehicle in a position which enables it to be read from outside the vehicle. Once the requisite coins have been accepted by the machine, the customer will be able to obtain the ticket by pressing a button. Each machine indicates that no change is given and that ‘overpayments’ are accepted.  

In October 2014, NCP made a claim for repayment of overpaid VAT of £488,669, in respect of overpayments of car park tariffs by customers using NCP’s car parks. HMRC refused the claim on the ground that the overpayments represented consideration for the right to park.

Both the First-tier Tribunal (FTT) and the Upper Tribunal (UT) agreed with HMRC and held that the taxable amount was the full price actually paid, including any overpayment. 

NCP appealed to the Court of Appeal. 

NCP argued before the Court of Appeal that:

1. the 'direct link' requirement, between the service provided and the consideration received, has a quantitative aspect as well as a causal one. A payment by a customer to a supplier could only represent 'consideration' if and to the extent there is a direct link to the supply. The overpayment was voluntary and so it was not part of the consideration for the supply; and 
2. the UT was mistaken in its analysis of the contractual position. The customer was contractually obligated to pay no more than the set tariff (£1.40) for up to an hour's parking. Whilst in practice it would have been difficult to recover any excess payment from NCP, in principle, any excess payment could be recovered.

Court of Appeal judgment

The appeal was dismissed.

The Court commented that English law generally adopts an objective approach when deciding what has been agreed in a contractual context. 

The Court was of the view that, taken together, the tariff board and the statement that overpayments were accepted and no change given, indicated that NCP was willing to grant an hour's parking in exchange for coins worth at least £1.40. The precise figure was settled when customers inserted their money into the machine and then elected to press the green button rather than cancelling the transaction. The contract was therefore brought into being at that time. By pressing the green button the customer accepted an offer by NCP in return for the coins that the customer had by then paid into the machine. 

Comment

Given the development of contactless payments, the implications of this decision going forward may be limited. However, the decision will be relevant to businesses who operate systems where customers may pay more than the required price for a supply.

After three adverse judicial decisions, it is unlikely that NCP will seek to appeal to the Supreme Court.

A copy of the judgment can be viewed here.