VAT on parking: what parking service operators should know

Parking services can generate significant revenue, so it's important that you apply the correct VAT treatment. With the different parking options impacting VAT, it pays to know which rates to apply. 

This guide delves into the intricacies of VAT and parking to help you understand them better. 

Please be aware that this blog benefits parking service operators, not drivers who pay for the service. 

How are parking options defined?

Parking options for motorists include on-street, off-street, privately run, and council-run parking. Payment is often required, especially in busy urban areas.

VAT and on-street parking 

On-street parking, where cars are parked on the roadside in designated areas, can only be granted by a local authority. This means HMRC treats it as a non-business activity. The local authority is not required to charge VAT.

VAT and off-street parking

For off-street parking services, such as car parks (including multi-storey), VAT is charged at the standard rate (20%). This applies whether a local authority or a private company provides the parking service.

Examples of various parking charges

VAT and airport parking

Travel is mostly zero-rated for VAT. However, as stated above, off-street car parking is typically standard-rated. Where off-street parking is offered at airports, it is also subject to VAT at the standard rate when the provider is VAT registered.

VAT and train station parking

The payment for parking at train stations is treated as a separate activity from the train travel itself. This means the parking is treated the same way as any other off-street parking and is subject to VAT at the standard rate.

VAT and parking at country parks

Parking in public country parks is not considered the same as off-street parking. Car parking provided within a country park is outside the scope of VAT when:

• The park is designated as a country park under the Countryside Act
• The park is located in an area where it is rare that other public car parks which charge a fee will operate
• Parking is provided by the local authority
• Parking is provided according to byelaws (parking orders) made under the Road Traffic Regulations Act 1984

If the above conditions are not met (i.e., the parking is provided by a commercial operator), the parking charges are subject to VAT at the standard rate.

Where there is no fee for parking in a country park, there is no supply for VAT purposes.

Fines and penalties 

When drivers incur a parking fine or penalty, the VAT treatment of such fines can be complicated.

A true fine or penalty is a separate payment from the standard charge for the main supply. This type of payment is outside the scope of VAT as no supply has been made by the recipient of the payment.

Where the fine is there to penalise an unlawful act, such as parking on yellow lines, there has been no supply. Any charge made is outside the scope of VAT.

When an additional charge is incurred for parked vehicles that exceed the time paid for, and an additional consideration is due, the liability for this consideration follows the original supply and is subject to VAT at the standard rate if the parking fee is a standard rate.

On the other hand, when a car park operator makes a clear offer of parking within specific terms and conditions, the fines for breaching the terms constitute penalties for breaching the contract. The fines are therefore outside the scope of VAT.

Summary of VAT and parking fees

When on-road parking is provided, it is outside the scope of VAT. However, off-street parking is standard-rated, regardless of who provides the parking service.

Parking provided by an independent company at country parks is subject to VAT at the standard rate unless the private company does not charge for parking. In this case, there is no supply for VAT purposes.

The VAT incurred on parking does not have to be detailed on a parking ticket, as a breakdown of the VAT is not required for values under £100.