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HMRC internal manual

VAT Government and Public Bodies

Other local authority activities: miscellaneous (N to Z): park and ride schemes

Introduction

The VAT treatment of park and ride schemes run by local authorities will be dependent upon the services provided and whether a consideration is charged. Because these schemes can differ, Officers should establish the full facts about the scheme in question before providing a decision.

Description of Park and Ride

Many local authorities offer park and ride schemes. These schemes are designed to reduce levels of congestion and pollution in town centres by encouraging drivers to park out of town and continue their journey using public transport. Most park and ride schemes use buses but the public transport element may be any form of public transport. Examples include a mini-bus, tram, train or ferry. For convenience we refer to bus in this guidance.

This guidance refers to the situation where any separate supply of public transport qualifies for zero rating. However, not every form of transport qualifies for this relief and you will need to satisfy yourself that the transport in question does qualify.

Local authorities may operate entire schemes or work in partnership with the private sector to provide the facilities. 

Interim measures

Between 2009 and 2017 interim measures applied to park and ride schemes. This guidance is available at the National Archive webpage . This new guidance below applies to park and ride scheme from 1 June 2017.

Scenarios

The most common scenarios are listed below. 

  1. Park and Ride provided without charge.
    If there is no consideration payable either for the right to park or the right to use the associated public transport, then the supply is outside the scope of VAT. VAT incurred by the local authority on goods and services purchased in connection with the park and ride scheme can, in these circumstances, be recovered under section 33 of the VAT Act 1994.

  2. Parking is free but there is a charge to use the public transport.
    If the car park is available to anyone without charge but people must pay a fare to use the bus, it is a consideration for a zero-rated supply of public transport. This applies regardless of how the service is advertised or where payment is taken. Consequently, the local authority supply of car parking is outside the scope of VAT.
    A local authority may expect the bus ticket to be used to effect exit from the car park to prevent unauthorised use but this on its own would not mean the consideration is for car parking.

  3. The public transport is free but people must pay for the car parking.
    In this scenario there is a standard-rated supply of car parking. None of the consideration can be attributed to the use of the public transport.

  4. Separate charges for parking and for the bus.
    In this scenario there are two separate supplies: a standard-rated supply of car parking, and a zero-rated one of public transport.  

  5. One charge for both supplies.
    There has been some debate over whether a single charge for both transport and parking services is consideration for two supplies or for one supply with one element being ancillary to the other. Therefore the first thing to determine is the link between the two supplies.

Following the judgment in the case of The Purple Parking C-117/11; [2012] STC 1680, HMRC takes the view there is a single standard-rated supply because the public transport is ancillary to the car parking. 

If a local authority argues the opposite you should ask for full details and then consider the position using the guidance in VATSC80000. Policy will consider any representations once the facts have been gathered including the apportionment figure.  

Arguments not accepted by HMRC

Special legal regime - HMRC does not accept that park and ride schemes are provided under a special legal regime, and is consequently a non-business activity with VAT recovery.  If a local authority argues it is operating under a special legal regime then HMRC would need to see the legislation to support this. Even if there were a special legal regime, it is unlikely to be non-business under section 41A of the VAT Act, because it would be in competition with other car parking. (See the judgment in the Isle of Wight.)  

Subsidy – Some local authorities have argued they subsidise park and ride schemes and consequently this is a non-business activity.  HMRC disagrees. Where there is a direct link between the consideration and the service received by the car driver and passengers a supply has been made for VAT purposes, even if the activity is not profit making.