West Norfolk Council to continue paying VAT on customer overpayments at car parks after hearing with Upper Tribunal at the Royal Courts of Justice
A legal issue involving West Norfolk parking meters has been resolved - with the borough council now officially liable to pay VAT for customer overpayments.
West Norfolk Council charges drivers to leave vehicles at 29 car parks in the likes of Lynn and Hunstanton, but none of its machines provide change for cash payments.
This means that if the tariff for an hour's parking at one of the sites was £1.40 but someone paid £1.50, they would not receive 10p in change.
In the past, the council has argued that such overpayments were not taxable because customers could "recover" the money - a view which was previously upheld.
However, the Upper Tribunal at the Royal Courts of Justice disagreed - and a new ruling on December 6 found that the council should accept overpayments as a contractual "counter-offer" from people paying to park.
The tribunal, which was heard on October 11, saw His Majesty's Revenue and Customs (HMRC) argue that the council "entered into a contract with the driver" by accepting the counter-offers of more money for tariffs.
This meant an official appeal regarding the payment of VAT was dismissed, meaning the council is now obligated to pay VAT for the extra cash - although it has already been doing this since 2017.
A borough council spokesperson said: "This has been a long-running case, in which the courts have previously upheld the council’s position.
"This appeal was brought by the council as a test case, in order to clarify an important legal principle that concerns a number of local authorities nationwide.
"The council has not incurred any legal costs in making this appeal and, because the council has been paying the VAT pending the outcome of this case, this decision has no new financial consequences for taxpayers or the council.
"The council welcomes the certainty that the court’s decision now brings to an important area of VAT law for public bodies."
Drivers are already able to claim back overpayments at council-run car parks in the borough, and no changes have been made in relation to that.
During recent proceedings, Natasha Barnes, counsel for the borough council, made three main submissions.
These included the belief that overpayments constituted a "voluntary contribution" and were therefore "not part of the consideration for VAT purposes because there was no direct link with the supply".
However, Brendan McGurk, counsel for HMRC, said nothing in statutory frameworks prevented the council entering an agreement to collect overpayment.