VAT and parking Contracts and consequences In the second article on UK VAT rules, Keith Miller, of specialist tax advisory firm ETC Tax, looks at what firms should now consider following changes in HMRCs thinking about the VAT treatment of parking services lthough the main impact of recent VAT changes has been on operators who issue and enforce parking charge notices (PCNs), the potential consequences spread much further, to all those involved in parking activities, including landowners and payment service providers. HMRC had until recently allowed landowners to treat PCN income as VAT free, but a recent change in HMRCs PCN policy now means that landowners can only do so if they are the operator and have a contract with the motorist. Where a landowner appoints an operator, who will typically contract with the motorist, any PCN share going to the landowner will now be subject to VAT. This is a consequence that does not yet appear to have been picked up by most landowners or operators but is one that HMRC has identified. A A recent change in HMRCs PCN policy now means that landowners can only treat PCN income as VAT free if they are the operator and have a contract with the motorist I have heard claims that PCN share or other payments made to landowners should be VAT exempt because the payments are essentially land-related. This ignores the fact that payments in relation to the lease or occupation of land are subject to VAT where the land is to be used for parking vehicles, so exemption cannot apply. The central importance of contractual arrangements when considering the VAT treatment of PCNs leads onto another risk area for operators who manage parking facilities where payment is required, such as pay and display car parks. Parking payments and VAT Pay-site operators need to be aware that HMRC is now increasingly likely to look closely at the contractual relationship between the motorist, the operator and the landowner when establishing who is providing parking services, particularly if the landowner is either not VAT registered or has not paid VAT on parking revenue. Even if 100 per cent of parking proceeds are distributed to the landowner, HMRC may still argue that it is the operator who is providing the parking services to motorists if signage, tariff boards and other notifications indicate this. If VAT goes unpaid by the landowner, HMRC may find it easy to collect unpaid VAT from the unwitting operator. 34 britishparking.co.uk PN July 2021 pp34-35 VAT.indd 34 25/06/2021 12:10