European judges in Luxembourg have replied to a high court clarification that local councils must pay VAT on their revenue from off-street parking. It had been argued that local councils should not be charged VAT in this instance as they are not ‘taxable persons’ under the EU VAT Directive. However, it was decided that an exemption would lead to a significant distortion of competition and provide local councils with an unfair advantage over private companies providing off-street parking.

For a long time local councils have accepted that they should pay VAT on such takings. However, a 2000 European Court ruling created some uncertainty when it decided in a Portuguese case, that off-street parking provision by a public authority was not necessarily subject to VAT. However, the recent EU ruling seems to point away from a case-by-case approach to a more nationwide assessment.

A lot of money is at stake when the case returns to the High Court. The four local councils involved claim £1.6 million has been paid out wrongly. This is discounting the remaining local councils that would inevitably lodge claims if off-street parking is to be exempt from VAT.

Do you think off-street parking provided by local councils should be exempt from VAT?

Sources: Times Online, BBC News
Photo: Antonio Jiménez Alonso