Is there Vat on Car Parking | Can I Reclaim VAT

The term VAT is no more alien to us! We pay on our daily purchases; it may include things from groceries to clothes. But does it have parking also? The answer is yes; VAT may be added to parking depending on where you park your vehicle. 

VAT on parking charges can still be a surprise for many people. Therefore, this article discusses where VAT can apply in different parking spaces and PCN (Penalty Charge Notice). 

Also read: Can I claim VAT back as a sole trader? 

Types of parking and VAT

There are two types of parking in the UK: 

On-street parking

On-street parking is handled by the Local Authority and covered by the statute. This implies that on-street parking is exempt from VAT and does not apply to on-street parking. 

Off-street parking 

Off-street parking differs from on-street parking, and VAT may likely be added in this case. You will know through your parking ticket/receipt if the off-street parking area has applied VAT. You can reclaim the VAT if the receipt has a VAT number. 

Is there VAT on parking fines in the UK?

Fines or penalties are not tax deductible expenses – the business will not receive a tax deduction when incurring them. Also, not all excess parking charges can be considered a fine or penalty – even if they are described as such. Moreover, the VAT treatment may not be as necessary as you thought. 

Generally, whether the VAT will be charged depends on the issuing body of the fine. All parking fines issued by local authorities are free from VAT; therefore, they will not be included in your VAT returns either. 

On the other hand, private car parking (operated by NCP) may or may not charge VAT on fines depending on how the overstaying charges are described. 

According to the terms and conditions – 

• If overstaying is not permitted & a penalty is charged for doing so, then the fine will not be subject to VAT. 
• If overstaying can result in an additional parking charge, even if it is more than the standard rate – VAT is payable, and you can claim it back.  

What is the VAT rate in 2022?

The standard VAT rate in 2022 in the UK currently is 20%; most purchases are charged at this rate. However, you must be aware of other VAT rates as a business entity. 

Reduced rate VAT is charged on sanitary products, energy savings measures and children’s car seats – at 5%. 

Despite no VAT being charged, the sale of zero-rate goods and services has to be kept in records and reported on your VAT return. Items like food, books, newspapers, and children’s clothes are charged at 0%. Moreover, things like financial and property transactions or postage stamps are exempt. Insurance transactions are also exempt from VAT. 

According to EU law – the standard VAT rate in EU states should be at least 15%. HMRC accepts VAT payments in various ways. One can pay it online the same day or the next day. 

For more information regarding VAT and reclaim, visit us at Pearson and McKinsey.