Court of Appeal: Clamp removal fees for illegally parked cars are subject to VAT
The Court of Appeal has determined that clamp removal fees issued by a private car park are subject to VAT on the basis that a service is being provided to the motorist.
It had previously been found by the Tax Appeal Commissioner that the clamping fees were payment in lieu of damages for trespass by a motorist with an invalid parking ticket and therefore not subject to VAT.
However, the court overturned this decision and held that the act of de-clamping a vehicle was a service within the meaning of the VAT Directives that was provided to an offending motorist. The court held that a motorist who parked in one of the appellant’s car parks was in fact consenting to the clamping of their car if they did not have the necessary permissions.
The appellant was Nationwide Controlled Car Parking Systems Limited which operated several car parks in the country. Its revenue was generated from the payments for parking tickets by motorists. If a motorist parked illegally, either without a ticket or with an expired ticket, NCPS would clamp the vehicle. This was advertised by signage in the car park. The clamp would only be removed when payment was made to NCPS by the motorist.
In 2014, NCPS made a claim for repayment of VAT in the sum of nearly €1.8 million. The company claimed that the clamping removal fees paid by motorist was payment in lieu of damages for trespass, and accordingly was not a taxable service within the meaning of the Value-Added Tax Consolidation Act 2010. The Appeal Commissioner accepted NCPS’s argument, but later issued a case stated to the High Court asking for the correct interpretation of the law.
In the High Court, it was determined that the Commissioner had erred in the findings of the case. The court held that NCPS was engaged in economic activity in clamping vehicles and recovering release fees. Further, it was held that there were legal relationships and reciprocal performances in those relationships between parties, even if they were not technically contracts. Accordingly, the court held that “the fact that NCPS is enforcing rights does not allow it to escape the obligation to charge VAT.” A defaulting motorist could offer a specified fee which was capable of being accepted by NCPS.
The NCPS appealed that decision to the Court of Appeal.
Court of Appeal
In a jointly-written judgement, Mr Justice Brian Murray and Mr Justice Maurice Collins held that the Commissioner was incorrect in characterising the clamping fees as payment in lieu of damages for trespass.
The court began its analysis by stating that NCPS had no statutory power to clamp a vehicle. The court held that determining the source of this power to clamp a vehicle was critical to the resolution of the case. The court considered the cases of Arthur v. Anker  QB 564 and Vine v. Waltham Forest Borough Council  4 All ER 169, noting that neither case characterised the release fees as damages. Further, it was noted in the Anker case that the motorist was on notice that if he parked without permission, he was liable to be clamped and pay a fee for its removal. As such, the motorist had consented to the clamping of his car and the car park was entitled to payment of a stipulated fee. Once paid, the car park was obliged to release the car.
The court then considered several cases which related to the question of damages for trespass. The court’s analysis focused on Vehicle Control Services v. Revenue and Customs Commissioners  EWCA 186, which was considered in detail. In that case, it was determined that the imposition of parking charges and towing of vehicles (clamping is outlawed in the UK) provided the car park with a right to sue in trespass and that the parking penalty charges were not subject to VAT.
However, the court held that the present case was materially different and could be distinguished because there was a definitive service provided by NCPS in the removal of a clamp, rather than the imposition of fines in the VCS case. Applying Inland Fisheries Ireland v. O’Baoill  IEHC 550, the court said that the clamp removal fee could not be characterised as damages for trespass or payment in lieu of damages.
The court said that the fundamental remedy to NCPS for illegally parked cars was to immobilise them with a clamp. Based on the licensing agreement between NCPS and the landowner, there was no possibility of NCPS maintaining a claim for trespass.
The court held that a liability to pay NCPS only arose after the vehicle was clamped. No liability attached before that, no matter how flagrant the infringement of parking rules by the motorist.
Based on all this analysis, the court held that the payment made to NCPS was for the release of the clamp. Motorists were taken to consent to the clamping of their vehicle if they were parked without the necessary permissions. NCPS was entitled to demand payment for to release the car.
Although the relationship between NCPS and motorists was not strictly contractual, there were still obligations for both parties which were binding and enforceable. As such, the court held that the removal of clamps was a service and this was therefore taxable as to VAT by the Revenue.
The court held that the Commissioner erred in deciding that clamping fees were payments in lieu of damages rather than part of a service. The clamping removal fees were subject to VAT and accordingly the appeal was dismissed.