Off-street Car Parking Referred to Luxembourg

19 Feb 2007

Commissioners for Her Majesty’s Revenue and Customs v Isle of Wight Council and others [2007] EWHC 219 (Ch)

Under Article 4.5.2 of the Sixth VAT Directive public authorities are required to charge VAT on their supplies, when not to require them to do so “would lead to significant distortions of competition” with private sector operators.  This ‘test’ case concerned the provision of off-street car parking by local authorities.

Following an appeal by HMRC the High Court (Rimer J.) has decided to refer a number of questions to the European Court of Justice in order to clarify the way in which the required competition assessment should be carried out.  The VAT and Duties Tribunal had originally held that there were no issues of Community law that needed to be clarified and had concluded that was no significant distortion of competition in any of the areas of the four local authorities concerned.

The reference to the ECJ will focus broadly on three issues.  First, whether the assessment of competition is to be carried out on a national or local authority-by-local authority basis.  Second, what is the required degree of probability of distortions of competition arising?  Previous ECJ caselaw suggested that “would lead to significant distortions” might be read as “could lead to”. The difference can be important.  As his Lordship noted many people might think England could win the Ashes in 2009, far fewer that they would win them.  Thirdly was the issue of whether in this context “significant” means “exceptional?  References to the ECJ can take up to 18 months.

Christopher Vajda QC, Paul Harris and Ben Rayment were instructed by HMRC.