[2011] UKFTT 125 (TC)

TC00999

Appeal number   TC/2009/15554

VAT-  parking enforcement on private land- does management company with a licence have sufficient interest in land to take proceedings for trespass as principal- no- parking charges are in consideration of supply of services under contract with motorist - therefore subject to VAT at standard rate – charges which are notified  are not punitive fines akin to damages in lieu of trespass outside scope of VAT . 

FIRST-TIER TRIBUNAL

TAX 

	VEHICLE CONTROL SERVICES LIMITED	Appellant

	- and -

	THE COMMISSIONERS FOR HER MAJESTY’S
	REVENUE AND CUSTOMS	Respondents

				TRIBUNAL: Barbara J King (Tribunal Judge)
						G Noel Barrett LLB 

Sitting in public at City Exchange Leeds on 17 January 2011

Tim Brown of Counsel for the Appellant

Julian Winkley of  HM Revenue and Customs, for the Respondents

© CROWN COPYRIGHT 2011

DECISION

Background
1.	Vehicle Control Services Limited (VCS), which registered for VAT on 5 October 2000, manage and operate parking enforcement on private car parks. Until 2007 they accounted for VAT on some of their income from parking infringements but considered that other income was outside the scope of VAT because it was paid as damages in lieu of trespass. VCS say that this latter income was received by them as principal and not as agent for the landowners. HMRC say that the income from these infringements was received either as part of a contractual arrangement between VCS and the motorist or, if it was damages, it was received by VCS as agent for the landowners and therefore retention of it by VCS was as remuneration for a supply of services to the landowner.
2.	This appeal relates to all the income which VCS previously considered was outside the scope of VAT. The first appeal by VCS concerned VAT for periods from 04/05 until 10/09. Pending the hearing of this appeal, VCS made a payment under protest of the VAT for the income under dispute. A further appeal was lodged in respect of ongoing income in the same category – under appeal number TC/2010/01071 and this was consolidated with the appeal being heard under number TC/2009/15554. The amounts are not in dispute.
Evidence
3.	Simon Renshaw-Smith, the managing director of VCS, attended the hearing and gave oral evidence. He produced a sample of the ‘Terms and Conditions of contract’ which VCS enter into with each of their clients –the owners of the private land involved. He said that this appeal related to the ‘Fully Comprehensive Scheme’ provided by VCS for their clients and that the client in each of the car parks involved  allowed only authorised users in the car park ie there was no ‘pay and display facility’ in the car parks involved.  
4.	The ‘Fully Comprehensive Scheme’ contract includes at 3.1 a clause to the effect that VCS will erect and maintain warning signs for which the client will pay £30 plus VAT per sign per annum. VCS will also supply all permits for authorised vehicles at a cost of £2 per permit and £2.50 per book of 50 guest permits. These items of income are not the major income for VCS. Most of the income of VCS comes from motorists who pay VCS money following a parking ticket being applied to their vehicle.
5.	The obligations of VCS are in clause 3 which includes that VCS will:-
“3.4  Inspect the Car Park at such intervals as the Company (VCS) in its discretion thinks necessary from time to time and take such action in respect of vehicles there found as outlined in 3.1 and 4.3 including the issue of parking charge notices, vehicle immobilisation and/or towing away as the Company shall think fit
3.5 Collect (which may extend to debt recovery and/or court action)  and retain all fees/charges from parking enforcement action as stated in clause 3.4 herein
3.7 Operate in accordance with the British Parking Association’s AOS code of practice-Parking Enforcement on Private Land and Unregulated Car Parks.”

6.	A copy of the ‘VCS Clamp Sign, Design 22’ was produced. This contains various conditions and logos to the effect that ‘Parking Charges’ apply at ‘£80 including VAT’ if paid within 7 days and £120 thereafter. Wheel clamp charge is at ‘£100 including VAT’. Cars removed and impounded incur a charge of ‘£160.... including VAT.’ Vehicle storage is at ‘£20 per day ...including VAT.’ If more than one enforcement procedure is exercised then both charges are applied. It also contains the wording 
“You are entering into a contractual agreement. Do not park in this area unless  you fully understand and agree to the above contractual terms and conditions.”
7.	Samples of VCS ‘PARKING CHARGE NOTICES’ were also produced. These are the notices which are affixed to the windscreen of vehicles which VCS consider have parked ‘otherwise in compliance’ with the terms for parking on the private land involved in each site.
8.	The ‘PARKING CHARGE NOTICE’ contained a list of contravention codes. The ‘codes’ printed in a horizontal line do not accord precisely with those in the subsequent list but the numbers appear to be as follows:
“24-  NOT PARKED CORRECTLY WITHIN THE MARKINGS OF THE BAY OR SPACE
  40-  PARKED IN A DISABLED SPACE WITHOUT CLEARLY DISPLAYING A VALID  
                   DISABLED PERSONS BADGE.
  80-  PARKED FOR LONGER THAN THE MAXIMUM PERIOD PERMITTED
  81-  PARKED IN A RESTRICTED  AREA OF A CAR PARK
  82- PARKED AFTER THE EXPIRY OF TIME IN A PAY AND DISPLAY CAR PARK
  83- PARKED WITHOUT CLEARLY DISPLAYING A VALID TICKET/ PERMIT
  86- PARKED BEYOND THE BAY MARKINGS
  89- VEHICLE PARKED EXCEEDS MAXIMUM WEIGHT AND/OR HEIGHT PERMITTED IN AREA
  94- PARKED WITHOUT DISPLAYING A VALID TICKET/PERMIT
  95- RETURING TO A CAR PARK WITHIN THE NO RETURN PERIOD/TIME
  AB- OTHER(SPECIFY)”
9.	Alison Green, an officer of HMRC, gave evidence that this Appeal concerned only the income from contraventions under codes 24, 40, 81 and 86. Mr Renshaw-Smith, whilst stating that he was not a lawyer, thought the reason for VCS not accounting for VAT in respect of income from these codes was that he thought that VCS had considered that the income from these was more in keeping with damages for trespass. He thought that income from the other codes was received by VCS as part of a contract between VCS and the motorist and VCS had included this income in their VAT returns for many years. 
10.	No evidence was produced by VCS to show that they had taken professional advice as to why some contraventions were treated differently. Mr Renshaw-Smith did not know what ‘ground for action’ had been pleaded in any proceedings for recovery of monies in the small claims court ie whether VCS had pleaded that they were entitled to damages for trespass or to charges as part of a contractual arrangement between VCS and the motorist involved. He did however think that any proceedings in the small claims court had been issued in the name of VCS and not in the name of the landowner concerned. He knew that VCS employed debt collection agencies to recover any unpaid charges. 
The legal arguments
11.	 Mr Brown, for the Appellants VCS, argued that Dutton v Manchester Airport [1999] 2 All ER 675 held that a contractual licensee had a sufficient interest in land, without having exclusive possession of the land, such that  proceedings could be brought by the licensee in its own name against trespassers. In that case Laws LJ said (at 689) that
“ a licensee not in occupation may claim possession against a trespasser if that is a necessary remedy  to vindicate and give effect to such rights of occupation as by contract with his licensor he enjoys.” 

12.	In our view the contract to Manchester Airport specifically stated that they had been granted “a licence to enter and occupy” land belonging to the National Trust. Manchester Airport brought the action for trespass before they had entered and occupied the land. The whole point of the licence being granted in the first place was to enable Manchester Airport to occupy the land in order to fell some trees and this could not be done because of the trespassers. The court allowed them to have possession against the trespassers to enable then to put the terms of their licence into effect. 
13.	No such right to occupy has been specified in the licence given by the landowners to VCS. VCS has been given a right to enter the land in order to inspect the car park and to take actions against motorists and their cars. A vehicle which is thought to be parked in breach of the terms for parking on the land does not prevent VCS from entering onto the land to inspect, to issue tickets, to affix clamps, to bring on a tow truck, to instruct debt collection agencies or to issue claims in the small claims court. They were therefore able to give effect to the terms of their licence. We find that they were not being given any right to possession of the land onto which they were entering nor did they require any rights of possession in order to carry out the terms of the contract with the landowner.VCS are not therefore in a position to bring actions for trespass as principal but can only do so as an agent of the land owner.
14.	We were also referred to Seagar Enterprises Limited t/a Ace Security Services v CCE [1998] (London/97/1190), which involved motorists in ‘Pay and Display’ car parks on private land. Seagar Enterprises Limited was a car parking control firm who collected fees. The motorists were held to have been trespassers and as Seagar Enterprises were held not to have exclusive possession of the land they were found to have collected the fees as agent for the landowner. The Tribunal held that 
‘By allowing the Appellant to retain the fee the landowner had notionally paid back the fee to the Appellant as a fee for carrying out its services to the landowner of carrying out parking control. That transaction is liable to VAT as payment for a standard rated service.’ 
15.	No consideration was given in that case as to whether the motorist had entered into a contract with Seagar Enterprises Limited
16.	Mr Brown argues that Seagar is no longer good law as it was decided before Manchester Airport. We find that Manchester Airport has not assisted the case of VCS and Seagar was dealing with a different type of car parking arrangement.
17.	Arthur v Anker [1996] 3 All ER 783, considered that a motorist had consented to the risk of clamping by a parking control company where the motorist  involved was a trespasser The court held that clamping was a reasonable form of remedy against  a trespasser, that the demand for a release fee was not a form of blackmail and accepted that the fee should go to the company who had put in on. The question of payment of VAT was not considered.
18.	The case of Bristol City Council v HMRC [2001] also involved ‘Pay and Display’ car parks.  The Tribunal in that case considered that the ‘excess charges’ ie those over and above the initial parking fee (if paid) were either damages for trespass or penalties for infringement because a ‘local statutory instrument’ gave Bristol City Council the authority to impose the excess charges. In either case the charges were outside the scope of VAT. The excess charges were found not to have arisen under the terms of the contract between the motorist and Bristol City Council and were not therefore paid as ‘consideration for a supply of parking’. 
19.	In this appeal, as no ‘Pay and Display’ car parks are involved, we find that the activity being carried on is not the same as in the Bristol City case. The motorists entering the private land involved in this appeal are likely to be staff working at the business premises which are connected to the car park. Others may be visitors to the businesses. Many will have been issued with or have purchased permits in accordance with the terms of the contract between VCS and the landowner. The signage at the entrance sets out the terms for parking on the land and makes it clear that a contractual arrangement is being entered into. What is being offered is a right to park in accordance with the signs without fear of an action for trespass being brought by the private landowner. Parking in one of these car parks is an acceptance of the offer and payment of the additional charges is a term of that contract not a consequence of breaching that contract. Anyone who breaches that contract – ie refuses to pay the additional charges is likely to have an action brought against them firstly by VCS in an action for payment of the parking charges and also runs the risk of being sued for trespass. 
20.	Thus any motorist who pays the charges, without the need for court proceedings, is producing income in consideration for the supply of a service –which is subject to VAT. Any motorist who does not pay until after court proceedings may be paying an additional element of damages which would be outside the scope of VAT but no evidence has been produced by VCS that any of the income under the infringements 24, 40, 81 and 86 has been produced in this way. Mr Renshaw- Smith gave evidence that the parking charges for those who are in breach of these infringements are charged at the same amount as for all the other infringements and it was not clear from the evidence produced to us that any actions were actually started in the small claims court as actions involving  trespass. 
21.	Concerning HMRC brief 57/08 which explains the revised policy of HMRC following the Bristol City case. We find that the parking charges set out by VCS in their signs are terms of the original contract between the motorist and VCS and not ‘punitive fines’ for those who breach the original terms. The payments are not therefore affected by this change in policy. 
22.	We were shown a copy of the Code of Practice drawn up by the British Parking    Association (BPA) in respect of the control and enforcement of parking on private land. Mr Renshaw-Smith is now an elected member of the board of BPA. Whilst we accept that the Code of Practice is not law we noted that it recites at clause B10.1 :-
“A driver who is invited to park on private land and pay a fee does so under a contract with the car park operator. Any transaction between the driver and the operator comes under the laws of contract.”
23.	This appears to us to be very much in accordance with our findings.
24.	 There is no suggestion in the Code of Practice that car park enforcement companies can bring an action for trespass
Decision
25.	We find that under the terms of their licence agreements with private landowners, VCS do not have an interest in that land which entitles VCS to sue trespassers as principal but only to bring an action for such, as agent of the landowner.
26.	On balance we find that it has not been shown that any of the income involved in this appeal has been obtained through actions for trespass brought on behalf of the land owner, but if it has, we find that those damages are payable to the landowner in the first place. Retention of the monies by VCS, who has had to bring that action as agent of the landowner, is for the agent’s services to the landowner, not under the terms of the licence but for the additional service of bringing such actions as agent. The retained monies are remuneration for this service and are subject to VAT.
27.	We further find that VCS have not shown that the income which is the subject of this appeal involves damages for breach of contract. We find that the income from payment of the parking charges as set out in the notices, has been paid as a condition of the contract between VCS and the motorist and is therefore in consideration for a supply of services. It is therefore chargeable to VAT at the standard rate.
28.	This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009.   The application must be received by this Tribunal not later than 56 days after this decision is sent to that party.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.

Barbara J King
TRIBUNAL JUDGE

RELEASE DATE: 16 February 2011