Case facts. In National Car Parks Ltd (NCP) v HMRC, NCP sought a refund of VAT in connection with overpayments made via its car parks. Customers are required to pay to park using a machine which warns that change is not given and overpayments are accepted. NCP argued that such overpayments should be treated as ex-gratia payments and outside the scope of VAT. HMRC disagreed, stating that the overpayments should be regarded as consideration for the right to park.
Decision. The Court of Appeal held that the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier from the customer or a third party in return for the supply. The meaning of consideration for VAT purposes is the amount physically paid by the customer and received by NCP, in exchange for the right to park. The customer is not able to claim a refund and the notices informing the customer that overpayments are accepted showed that NCP will allow customers to use their car parks for the price stated, or a higher amount. Therefore, the amount received by NCP is the taxable amount for VAT purposes.
Tip. Ensure your clients are aware that VAT is charged on overpayments that are not repaid to their customers.
The full transcript can be found here https://www.bailii.org/ew/cases/EWCA/Civ/2019/854.html.