Vehicle Control Services Ltd (aka Excel) - Spanked again - this time at Tax Court

HO87 · 27 April 2011 at 1:49AM

VCS had been assessed for VAT by HMRC on some of the charges they had levied against drivers for certain contractual breaches at their car parks.

They appealed using the arguments that either the monies received were akin to punitive fines and therefore beyond the scope of VAT or, that as they had sufficient [legal] interest in the car parks they patrolled to justify retaining the charges as damages for trespass as if they were principals.

Sadly, the tax tribunal disagreed and ruled that they would have to pay the VAT (the money had already been paid under protest).

The decision is available through BAILII - Click Here (full citation Vehicle Control Services Ltd v Revenue & Customs [2011] UKFTT 125 (TC)) and makes for interesting reading, in places.

At para 10, it states:

Mr Renshaw-Smith did not know what ‘ground for action’ had been pleaded in any proceedings for recovery of monies in the small claims court ie whether VCS had pleaded that they were entitled to damages for trespass or to charges as part of a contractual arrangement between VCS and the motorist involved. He did however think that any proceedings in the small claims court had been issued in the name of VCS and not in the name of the landowner concerned. He knew that VCS employed debt collection agencies to recover any unpaid charges.

Could it be that Mr Renshaw-Smith's ignorance of the ground for action in court proceedings was because there never had been any or for some other reason? (Surely, he must remember the case of Hetherington-Jakeman and the ground for action there?)

Given the arguments advanced on VCS's behalf - which I would suggest reveal the real thinking behind the standard PPC model - I'm sure that some judges would be very interested to see its content bearing in mind that Mr Renshaw-Smith is a member of the board of the BPA.

TwistedPsycho · 27 April 2011 at 5:04AM

What a most excellent result.

I did chuckle at paragraph 26: "On balance we find that it has not been shown that any of the income involved in this appeal has been obtained through actions for trespass brought on behalf of the land owner, but if it has, we find that those damages are payable to the landowner in the first place." or as I translated it "You have never been sucessful in court so trespass is a null and void argument, idiot."

peter_the_piper · 27 April 2011 at 7:41AM

This is the bit that worried me, maybe I am reading it wrong.
""They appealed using the arguments that either the monies received were akin to punitive fines and therefore beyond the scope of VAT ""
Do not the VAT men say they are not punitive ie penalties?

Coblcris · 27 April 2011 at 9:22AM

A very interesting case.

SodG24 · 27 April 2011 at 10:05AM

peter_the_piper wrote: »

This is the bit that worried me, maybe I am reading it wrong.
""They appealed using the arguments that either the monies received were akin to punitive fines and therefore beyond the scope of VAT ""
Do not the VAT men say they are not punitive ie penalties?

Maybe I've mis-read it but surely a PPC can't actually charge someone with a "punitive fine" and so therefore arguing that in a tax court brings their whole business model tumbling down ?

peter_the_piper · 27 April 2011 at 10:35AM

That's what I thought but does not the finding say that as they charged vat then a penalty is allowed? Very confusing.

halibut2209 · 27 April 2011 at 10:47AM

to me it seems that the PPC tried to appeal stating that the "fines" were penalty charges, and the court said "no they're not"

HO87 · 27 April 2011 at 12:10PM

In fairness to VCS (or at least their argument) I used some of the keyword summary included on the case header, the relevant section of which says:

charges which are notified are not punitive fines akin to damages in lieu of trespass outside scope of VAT

That's certainly where the word "akin" came from. Keep in mind that the tribunal was making a determination in respect of whether VAT was payable for some contraventions - not all - dealt with by VCS. VCS's argument in respect of some of those codes i.e.

24 - NOT PARKED CORRECTLY WITHIN THE MARKINGS OF THE BAY OR SPACE
40 - PARKED IN A DISABLED SPACE WITHOUT CLEARLY DISPLAYING A VALID
81 - PARKED IN A RESTRICTED AREA OF A CAR PARK
86 - PARKED BEYOND THE BAY MARKINGS

was as stated by Mr Renshaw-Smith - though reported only in the third person:

Mr Renshaw-Smith, whilst stating that he was not a lawyer, thought the reason for VCS not accounting for VAT in respect of income from these codes was that he thought that VCS had considered that the income from these was more in keeping with damages for trespass.

And this is expanded upon by VCS's representative who attempted to argue that VCS, as a contractual licensee, had sufficient interest in the land of the car parks it patrols to be able to pursue miscreant drivers for damages for trespass. The tribunal ruled that VCS do not have sufficient rights to pursue drivers as a principal, only as an agent of the landowner and that as they had retained the charges obtained (that were properly due to the landowner) they would be regarded as remuneration and therefore liable to VAT.

The tribunal went on to say however:

On balance we find that it has not been shown that any of the income involved in this appeal has been obtained through actions for trespass brought on behalf of the land owner

Which rather rips the bottom out of VCS's argument which I find bizarre given Mr Renshaw-Smith's involvement in the BPA and their avowal that the only applicable law is that of contract. His argument does smack to me of attempting to ride two horses and given his companies involvement in previous court action for breach of contract one wonders what he based the argument on?

Of even more interest is the following (at para 27):

We further find that VCS have not shown that the income which is the subject of this appeal involves damages for breach of contract. We find that the income from payment of the parking charges as set out in the notices, has been paid as a condition of the contract between VCS and the motorist and is therefore in consideration for a supply of services. It is therefore chargeable to VAT at the standard rate.

As I read para. 27 it can only mean one of two things if VCS is to "control" its VAT liability. Either they will have to have any damages paid to the landowner and try to live off a retainer (don't see that happening - the whole business model is predicated on there being no charge to the landowner and the PPC recovering its costs from any actions it takes) or inclduing a VAT analysis on their tickets and invoices. I'm sure even the densest are likely to twig that no "proper" parking ticket is liable to VAT.

That also sounds like all those poor innocents who have paid up could now properly request a VAT receipt.

Might it also be that a number of companies who have skated along relying on the same argument will now be obliged to register for VAT? If so, stand by for a mass phoenix.

Then again, VCS might just appeal to the next tier.

AlexisV · 27 April 2011 at 1:28PM

Just because payment is made under the guise of an apparently agreed contract, it doesn't make the contract enforceable. If a sign said I would have to pay £1 million for being over a line and I paid it wouldn't be VAT zero rated just because the company declared it as damages. It obviously isn't the result of damages, so it must the result of a contractual arrangement.

But the action of payment means acceptance of the contract, not that the contract was enforceable. Hence why you could sue on it, as per Patel v Parking Eye Ltd.

peter_the_piper · 27 April 2011 at 3:50PM

halibut2209 wrote: »

to me it seems that the PPC tried to appeal stating that the "fines" were penalty charges, and the court said "no they're not"

I posted earlier saying that on reflection I'd agree with you but it has disappeared.

AlexisV · 27 April 2011 at 4:17PM

A case of not being able to have your cake and eat it.

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Vehicle Control Services Ltd (aka Excel) - Spanked again - this time at Tax Court

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