Does VAT apply to parking rights?
Partner James Burgess looks into the VAT treatment of parking rights
Whilst the supply of land by way of letting or licence would normally be exempt from VAT unless an option to tax had been made, if you provide facilities for parking vehicles your supply will normally be standard rated (subject to certain exceptions). The same is true if you let or licence land for parking of any kind, whether that be cars, taxis, bicycles, touring caravans etc.
However, if you grant an interest in, a right over, or make a letting or grant a licence to occupy land but the disposition of the land or buildings makes no specific reference to use the land for the parking of vehicles your supply will be exempt (unless you have opted to tax) unless it is of garages, designated parking bays or other facilities which are specifically designed for parking. Further, any VAT-exempt disposition of land or buildings where any reference to parking a vehicle is only incidental to the main use will remain exempt. This exemption also applies to the disposition of land or buildings to a business that deals in or with vehicles, such as a transportation firm or vehicle distributor or vehicle auctioneer, or indeed for the letting of land where parking is incidental to other activities such as holding a market or car boot sale, or an exhibition of vehicles etc.
Also where parking is supplied with a ‘zero rated’ sale or long lease of a new dwelling, then the parking/garages are also treated as zero rated. However this zero rating is dependent upon the letting of the parking facilities being made at the same time as the sale or letting of the dwelling and if the letting of the parking is done later, then it is likely to be standard rated.
As the supplier of the parking rights, you may not be required to register for VAT if your total potentially VAT-able turnover for the last 12 months was less than £85,000 but if your turnover exceeds such sum then you must register for VAT and pay HMRC any VAT you owe, from the date that you are registered.
Please note therefore that the supply and/or the disposal of parking land and/or land with parking rights has potential additional VAT concerns, and due care must be taken to establish the VAT position for any dealings with land for parking and/or parking facilities.