Hospital parking is a VAT exempt supply

The CA has found in favour of the taxpayer, an NHS Foundation Trust, ruling that the supply of car parking at hospital sites is a VAT exempt supply. Although not a formal test case, several similar appeals are currently in progress.

For the provision of parking to be an exempt supply, two conditions must be met. The first is that the car parking is provided by a taxpayer ‘acting as a public authority’, and second that not charging VAT would not distort competition.

For the provision of parking to be an exempt supply, two conditions must be met. The first is that the car parking is provided by a taxpayer ‘acting as a public authority’, and second that not charging VAT would not distort competition.

HMRC accepted that the Foundation Trust was a ‘body governed by public law’ but claimed it was not acting as a public authority when providing car parking. Based on earlier case law, to be acting as a public authority in providing parking the Foundation Trust would need to be acting under a special legal regime. The CA found in the taxpayer’s favour that the guidance provided in guidelines issued by the Department of Health (2015 Parking Principles), had a significant impact on how the car parking was operated, including what could be charged. As a result, the legal conditions 

 operation.

under which the Foundation Trust operated its car parks was materially different to private operators, and so the FTT and UT had erred in law in deciding that a special legal regime was not in

When considering whether not charging VAT would distort competition, the CA concluded that the onus should be on HMRC to prove that this was the case, and that they had not provided sufficient evidence to show that there was an effect on competition. The taxpayer’s appeal was therefore allowed.

As well as being of interest to other NHS Foundation Trusts operating car parks, this case provides guidance for organisations acting as public bodes as to what constitutes a ‘special legal regime’.

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