April 2016

Parking facilities

VATLP15100 – Car parks (heading 1h): what is meant by “car parks”? – HMRC internal manual

Parking facilities are facilities designed or provided specifically for the purpose of parking vehicles. The licensing of parking facilities includes the rental, leasing or licensing of such facilities.

The normal rules apply where the parking facility is incidental to the supply of an interest in property. In such cases where there is a single economic transaction in which the parking facility and the good are both supplied at the same time by the same seller and are located reasonably close to each other, the liability of the provision of the parking facility will normally follow responsibility for the provision of the good (see Reviews 742 Land & Properties for more details).

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

The case concerned the exemption from VAT of the rental of garages located in garage blocks. The Court held that Article 13(B)(b) of the Sixth Directive must be interpreted as meaning that the expression ‘rooms and places for the parking of vehicles’ covers the rental of all places intended to be used for parking vehicles, including closed garages. However, such rentals cannot be excluded from the exemption when their rental is closely linked to the rental of immovable property intended for another use, such as housing, which is itself exempt from VAT.

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

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

You may find that a garage designed to park vehicles is actually used for other purposes. In this case, the rental of the garage is always at the standard rate, unless there is a specific ban on the use of the garage for parking a vehicle.

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

The company has rented a number of converted boxes and stables. Where the garages were to be used for storage, no tax was charged on the grounds that they were not parking facilities. The court noted that although it was known prior to the tenancy that the garages were to be used for storage, the lease did not prevent the tenant from using the facilities to park a vehicle. Accordingly, he concluded:

“In our opinion, the granting of a lease of a box or stables fitted out in absolute terms necessarily implies that there has been the granting of facilities for the parking of a vehicle. This involvement stems from the nature of the premises.

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