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HMRC internal manual

VAT Government and Public Bodies

Other local authority activities: housing and community projects: local authority garages

Ordinarily charges for parking or garaging facilities for vehicles are standard rated. However, different treatment can apply where they are let in conjunction with a dwelling.

The VAT liability follows the dwelling where the garaging or parking is:

  • in reasonable proximity to the dwelling, and
  • let by the same landlord to the same tenant, whether under a single or separate agreement.

As the letting of houses and flats by a local authority is a non-business activity, garages or parking spaces let to tenants are also non-business.

Under ‘right to buy’ legislation many former council tenants have opted to buy their homes. Where they have continued to rent a garage the liability depends on whether the property has been sold to them freehold or leasehold.

A freehold owner who continues to rent a garage receives a taxable supply because the authority is no longer the landlord of the dwelling. But if a council tenant buys the leasehold and pays ground rent to the local authority, the authority remains the landlord albeit only the ground landlord. In these circumstances, if the tenant pays ground rent for both the dwelling and the garage, or pays ground rent for the dwelling and rents the garage, the provision of the parking facility is a non-business activity.