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HMRC internal manual

VAT Land and Property

Parking facilities (Item 1h): what is meant by 'parking facilities'?

Parking facilities are facilities designed for, or provided specifically for the purposes of parking vehicles. The grant of parking facilities includes the letting, leasing or licensing of those facilities.

The normal rules apply where the parking facility is ancillary to the supply of an interest in property. In such cases where there is a single economic transaction in which the parking facility and property are both supplied at the same time by the same vendor and are situated reasonably close to each other, the liability of the supply of the parking facility will normally follow the liability of the supply of the property (see Notice 742 Land & property for further details).

This was clarified by the European Court Judgment in the case of Morten Henriksen (C-173/88) where the interpretation of the EC Sixth Directive Article 13 B(b) (now Article 135(2)(b) of the Principal VAT Directive) concerning parking facilities was considered.

The case turned upon whether the letting of garages situated in blocks of garages is exempt from VAT. The Court ruled that Article 13B(b) of the Sixth Directive must be interpreted as meaning that the phrase ‘premises and sites for parking vehicles’ covers the letting of all places designed to be used for parking vehicles, including closed garages. However, such lettings cannot be excluded from the exemption where the letting thereof is closely linked to the letting of immovable property to be used for another purpose, such as residential property, which is itself exempt from VAT.

When considering whether there is a standard rated supply of parking facilities it is important to remember that the facilities must either:

  • be designed for the purpose of parking vehicles, or
  • provided specifically for the purpose of parking vehicles.

You may find that a garage designed for parking vehicles is actually used for another purpose. In this case the letting of the garage is still standard rated, unless there is specific prohibition on the use of the garage for parking a vehicle.

This treatment was confirmed by the judgment of The Court of Session in the case of Trinity Factoring Services (STC 504):

The company leased a number of lock-up garages and converted stables. Where the garages were to be used for storage no tax was accounted for on the basis that they were not facilities for parking. The court noted that even though it was known prior to the letting that the garages were to be used for storage the lease did not preclude the lessee from using the facilities for parking a vehicle. As a result, it concluded:

‘In our opinion, where a lease is granted of a lock-up garage or converted stables in unqualified terms, the necessary implication is that there has been a grant of facilities for parking a vehicle. That implication arises from the nature of the premises.