Vehicle Control Services - Input Tax Recovery / Non-business income
The appellant was a private car park operator. The bulk of its income was derived from Parking Charge Notices (PCNs) which were issued to persons parking on the land without a ticket or permit. An earlier case had established that such income was outside the scope of VAT as a penalty as opposed to the supply of a right over land.
In this case the appellant had argued that the receipt of such non-business income should not impact on its input tax recovery position.
The Tribunal found that costs associated with the PCN activity formed part of the component costs of the VCS's supplies. Accordingly, Input tax on costs associated with the PCN activity fell to be apportioned under s 24(5), VATA 1994.
An odd case this one - I'm not so sure that I agree that the parking charge notices amount to payment of damages for 'trespass' as ruled in the earlier Tribunal case. That said it's definitely a case of HMRC having won the battle lost the war!
Full details of the case can be found here.