In the UK, car parking is well-regulated, with different rules for public and private lands. Therefore, understanding VAT on car parking and the conditions under which it is applied is important. As per the laws, some parking fees are chargeable with VAT, and some are not, but the difference needs to be studied.
Read this blog to learn about the rules, rates, and exemptions, and all the facts you need to know when you’re paying VAT on car parking.
What is VAT?
Typically, VAT stands for Value Added Tax. It is defined as a consumption tax levied incrementally by the UK government on goods and services. And, the businesses charge it in the price, and then the companies pass it on to consumers. All in all, it is paid by the ultimate consumer.
What is VAT on Car Parking?
Now, if we talk about the VAT on car parking, it comes with its own HMRC unique rules. Generally, most parking services are taxable and VATable, but the rules are different for off and on-street parking.
Companies and drivers should check the parking tickets for VAT numbers. If included, VAT is due, and you may recover it. Without it, there is no VAT to claim. HMRC advice emphasises that parking operators enter VAT properly to avoid mistakes.
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On-Street VAT on Car Parking
UK on-street car parking, usually administered by local councils under legal powers, is a non-business activity. On-street parking is outside the scope of VAT because councils provide it under statutory powers, not as a business activity. Meter charges, control zone permits, or penalty charges are not VATable.
In short, if you pay by meter or pay-and-display on the council-operated public highway, you will not see VAT charged in that ticket. The exemption, however, depends on the authority to act under exclusive legislation.
Off-Street VAT on Car Parking
Off-street parking in Car parks usually includes VAT in their parking fees. You see this on supermarket, hospital, and shopping centre parking tickets. Private providers and councils charge the standard rate (20%) if they provide these car parks.
It is normally the customer who pays VAT on using off-street parking facilities, with the tax collector being the operator who has to send the tax to HM Revenue & Customs. Although VAT may not be necessary in some cases, in other words, if the parking provider is not VAT-registered, they don’t have to charge it.
VAT on Airport Parking
A common question is: Does VAT on airport parking apply? The straightforward answer is yes. Airport car parking is just the same as any other off-street parking, and in most cases VAT at 20 % will be chargeable.
Even if you reserve your airport car parking via a third-party comparison or aggregator, VAT will be included in the total price.
Having said that, there could be a few airports or parking providers that grant special concessions (or thresholds) for short stays, but they are the exceptions rather than the rule. (Note: they might price differently, but VAT is still 20%)
What is the VAT Treatment of Parking Facilities in the UK?
Generally, if a parking facility is operated by a commercial entity and charges a parking fee, it is considered a taxable supply and VAT is applicable. For example, if the parking facility is operated by a local authority or a non-profit organisation, it may qualify for a VAT exemption.
In some cases, parking provided as part of a wider service, such as a hotel stay or a shopping centre visit, may also have different VAT treatment.
Short-term parking, typically defined as less than 24 hours, is usually subject to standard rate VAT. On the other hand, long-term parking, which is often used by commuters or travellers, may qualify for a reduced rate of VAT or even be exempt from VAT altogether.
If you’re operating a parking facility or have specific questions about the VAT treatment of parking facilities, it’s always a good idea to consult with a tax professional or HMRC for accurate and up-to-date information.
What is the VAT Rate for Car Parking?
In the majority of UK cases, the VAT on car parking is the 20% standard rate. So when you pay £6 to a private car park, the “net” you’re actually paying is typically £5, and £1 VAT (20 %). But there are significant exceptions:
- If the car park operator is not VAT-registered, then they don’t charge VAT.
- If the car park is under specific legal rules (e.g., some country parks under byelaws), it might be outside VAT’s scope. (GOV.UK)
- The operators may choose “opt to tax” property supplies, making certain land-based services taxable despite being otherwise exempt under property rules. So, in all business car parking situations, expect 20% VAT to be included in the parking fee.
Parking in a Country Park
Country parks are beautiful natural areas that offer recreational activities and a chance to connect with nature. When it comes to parking at a country park, it’s important to check the specific rules and regulations of each park, as they can vary.
It’s always a good idea to arrive early, especially on weekends or during peak seasons, as parking spaces can fill up quickly. Some country parks may have limited parking availability, so it’s best to plan and consider carpooling or using public transportation if possible.
When parking at a country park, make sure to follow any signage or instructions regarding parking restrictions or time limits.
Penalty Charge Notices
A penalty charge notice is typically issued for parking violations or other traffic-related offences. When you receive a PCN, it means that you have been found to have violated parking regulations or committed an offence, such as parking in a restricted area, overstaying the permitted time, or not displaying a valid parking permit.
PCNs are usually issued by local authorities or private parking companies. The notice will include details about the violation, the location, the date and time, and the amount of the fine. If you believe that the PCN has been issued incorrectly or unfairly, you have the right to appeal.
The appeal process will vary depending on whether the PCN was issued by a local authority or a private company.
It’s worth noting that PCNs can vary in terms of the amount of the fine. It’s important to pay attention to the deadline for payment or appeal, as failure to respond within the specified timeframe may result in additional charges or legal action.
If you receive a PCN, it’s always a good idea to seek advice or consult with a legal professional to understand your options and ensure that you take the appropriate steps.
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Can I Claim VAT Back on Car Parking?
If you are VAT-registered, you might ask yourself, ‘Can I claim VAT on car parking? Yes, in the majority of cases. If the car parking is used entirely or partially for business, and the car parking operator is VAT-registered (and you have a receipt inclusive of VAT), you can claim the VAT back as input tax on your VAT return, under normal rules.
For instance, parking for an official meeting, to a client’s premises, or to a seminar would usually be eligible to claim VAT back.
But there are a few conditions:
- You should have a valid VAT receipt or invoice that proves the VAT component.
- You may only reclaim VAT relating to business use. If the parking is not solely for business purposes (e.g., for private use), it must be excluded.
- If the parking supplier is not VAT registered, there is no VAT to claim.
Special rules may apply to some employee car parking schemes or benefits. So yes, you can claim VAT in the majority of business scenarios. Just make sure the scenario and documentation fall in line with HMRC regulations.
Is Parking VAT Exempt or Zero-Rated in the UK?
After understanding VAT on car parking, it is important to learn about zero-rated goods. Because it is quite confusing. Is parking VAT-exempt or zero-rated? The answer is no. Most VATable parking is just standard-rated or outside the scope of VAT.
To make it clear:
- Zero-rated means that the supply is taxed (so input VAT can be recovered), but the customer pays a rate of 0%. Parking is rarely zero-rated.
- Exempt means that it is the supply that is outside the VAT domain (there is no VAT payable, and no input VAT can be claimed). Some local authority supplies (e.g., councils’ on-street car parking) are exempt. The local authority is supplying under a statutory obligation, not a commercial supply.
In certain country parks, in byelaws, parking charges can be taken out of the VAT scope (i.e., exempt) where the local council is issuing the charge using statutory powers. (GOV.UK) Parking is thus normally standard-rated; it’s zero-rated only rarely.
Do Parking Fines Have VAT?
No, in general, parking tickets, penalties, or fines for non-compliance are considered to be penalties. As opposed to a supply of service, they are consequently outside the scope of VAT. The following are the conditions:
- If the charge represents an extended parking period, VAT applies.
- If the charge is a penalty for non-compliance, VAT does not apply
But pure fines (e.g., for illegal parking) are not outputs of supplies, so aren’t taxed.
Key Rules, Edge-Cases & Exemptions
Here is a summary of important rules, special circumstances, and pitfalls to avoid:
Local Authority & Statutory Powers
If a local authority charges parking fees under statutory byelaws (such as for on-street parking or enforcement under traffic regulation acts), such fees are likely to be outside the VAT domain.
VAT on Car Parking in Country Park
If a council offers car parking in a country park in one of the designated country park byelaws (under Countryside Act / RTRA), then this car parking is outside the scope of VAT. All other commercial car parking in the park is usually taxable under VAT. (GOV.UK)
Council-Run Car Parks
Most of the councils operate off-street car parks (multi-storey, surface, etc.). Where the local authority treats it as a commercial supply, they will apply VAT at 20%.
Failure to Register for VAT on Car Parking
If the parking operator is not VAT-registered (e.g, turnover less than the VAT threshold), they can’t charge VAT, so the cost is VAT-free and can’t be reclaimed.
Employee Parking/Benefits in Kind
If parking is provided as a benefit by an employer to an employee, there are specific tax rules (on benefits in kind), but VAT depends on whether the supply is a taxable parking service and whether a VAT receipt exists.
Hospital / NHS parking
A recent ruling (2024) stated that car-parking charges levied by an NHS trust are not VAT chargeable. Moreover, the consequence is that those car-parking charges are outside of the VAT regime in that particular case.
What is the Drawback of VAT on Car Parking?
One of the main drawbacks is that car parking fees are generally subject to VAT, which stands for Value Added Tax. This means that the cost of parking your car can increase due to the addition of VAT.
The drawback here is that VAT adds an extra financial burden for individuals and businesses using car parking facilities.
Another drawback is that VAT on car parking may not be recoverable for certain businesses. While some businesses can reclaim VAT on their expenses, there are limitations when it comes to car parking.
In general, VAT can only be reclaimed on car parking fees if it is directly related to the business activities and the business is VAT registered. This means that businesses that are not VAT registered or those using car parking for non-business purposes may not be able to recover the VAT paid.
Additionally, the inclusion of VAT on car parking fees can make parking more expensive for individuals and can impact the overall cost of living in urban areas. This can be a disadvantage for individuals who rely on car parking for their daily commute, shopping, or other activities.
It’s worth noting that the application of VAT on car parking can vary depending on the specific circumstances and the type of parking facility. Different rules may apply to short-term parking, long-term parking, or parking in specific locations.
While VAT on car parking does have its drawbacks, it’s important to understand that VAT is a tax that contributes to government revenue and helps fund public services. The inclusion of VAT on car parking fees is part of the broader VAT system in the UK.
The Bottom Line
VAT on car parking affects day-to-day life and business costs. From off-street to Airport parking, all UK citizens must understand where value-added tax is applied and why. So, if you need an expert to deal with all the VAT-related issues, reach out to our experts!
Disclaimer: The information provided on AccountingFirms.co.uk is for informational purposes only and should not be considered as financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.