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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Isle of Wight Council & Ors v HM Revenue and Customs [2015] EWCA Civ 1303 (16 December 2015) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2015/1303.html Cite as: [2016] STC 2152, [2016] PTSR 620, [2016] BVC 3, [2016] RTR 21, [2015] WLR(D) 531, [2015] EWCA Civ 1303, [2016] STI 65 |
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OF
APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE UPPER TRIBUNAL (TAX)
The Honourable Mrs Justice Proudman, Judge Bishopp
[2014] UKUT 0446 (TCC)
![]() ![]() Strand, London, WC2A 2LL |
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B e f o r e :
OF
THE HIGH COURT
LORD JUSTICE UNDERHILL
and
LORD JUSTICE DAVID RICHARDS
____________________
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Appellant |
|
- and - |
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THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS |
Respondent |
____________________
Alison Foster QC, Ben Rayment, Brendan McGurk (instructed by HMRC ) for the Respondent
Hearing dates : 3rd December 2015
____________________
OF
JUDGMENT
Crown Copyright ©
The Chancellor (Sir Terence Etherton):
The VAT legislation
"(1) States, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respectof
the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with these activities or transactions.
(2) However, when they engage in such activities or transactions, they shall be considered taxable persons in respectof
these activities or transactions where treatment as non-taxable persons would lead to significant distortions
of
competition.
(3) In any case, these bodies shall be considered taxable persons in relation to the activities listed in Annex D, provided they are not carried out on such a small scale as to be negligible."
The legal framework surrounding local authorities' provision of
OSCP
"(1) Where for the purposeof
relieving or preventing congestion
of
traffic it appears to a local authority to be necessary to provide within their area suitable parking places for vehicles, the local authority, subject to Parts I to III
of
Schedule 9 to this Act—
(a) may provide off-street parking places (whether above or below ground and whether or not consistingof
or including buildings) together with means
of
entrance to and egress from them, …"
"(1) It shall be the dutyof
every local authority upon whom functions are conferred by or under this Act, so to exercise the functions conferred on them by this Act as (so far as practicable having regard to the matters specified in subsection (2) below) to secure the expeditious, convenient and safe movement
of
vehicular and other traffic (including pedestrians) and the provision
of
suitable and adequate parking facilities on and off the highway or, in Scotland, the road.
(2) The matters referred to in subsection (1) above as being specified in this subsection are—
(a) the desirabilityof
securing and maintaining reasonable access to premises;
(b) the effect on the amenitiesof
any locality affected and (without prejudice to the generality
of
this paragraph) the importance
of
regulating and restricting the use
of
roads by heavy commercial vehicles, so as to preserve or improve the amenities
of
the areas through which the roads run;
(bb) the strategy prepared under section 80of
the Environment Act 1995 (national air quality strategy);
(c) the importanceof
facilitating the passage
of
public service vehicles and
of
securing the safety and convenience
of
persons using or desiring to use such vehicles; and
(d) any other matters appearing to the local authority to be relevant."
Background
"1. Is the expression 'distortionsof
competition' to be ascertained on a public body by public body basis such that, in the context
of
the present case, it should be determined by reference to the area or areas where the particular body in question provides off-street parking or by reference to the totality
of
the national territory
of
the Member State?
2. What is meant by the expression 'would lead to'? In particular, what degreeof
probability or level
of
certainty is required for that condition to be satisfied?
3. What is meant by the word 'significant'? In particular, does 'significant' mean an effect on competition that is more than trivial or de minimis, a 'material' effect or an 'exceptional' effect?"
"1. … the significant distortionsof
competition … must be evaluated by reference to the activity in question, as such, without such evaluation relating to any local market in particular.
2. The expression 'would lead to' is, for the purposesof
the second paragraph
of
art 4.5
of
the Sixth Directive, to be interpreted as encompassing not only actual competition, but also potential competition, provided that the possibility
of
a private operator entering the relevant market is real, and not purely hypothetical.
3. The word 'significant' is … to be understood as meaning that the actual or potential distortionsof
competition must be more than negligible."
Decision of
the FTT
"In setting parking charge levels factors that should be taken into account include:
Price elasticityof
parking demand;
Competition between areas; and
Incentives for the useof
off-street parking
The priceof
parking can be set to influence parking activity in order to serve policy objectives. The level and structure
of
prices can influence:
The levelof
usage, and hence the traffic generated;
The typeof
user; and
The lengthof
stay
.....
Pricing levels can also be set in order to:
Secure sufficient income to cover the costof
operating, maintaining and enforcing car parking facilities;
Raise general income, though this practice is not generally supported in Government Guidance;
Raise income for the improvementof
parking and other transport facilities; or
Maximise revenue, as is often the case with privately owned public car parks where there is no local authority control."
"LAs do not operate like private companies. They cannot choose (in most instances) what services they will provide, but are required by national government to provide certain services. They are not driven by profit, but by the desire to provide the best possible services they can and to produce particular outcomes for their local areas. They are therefore completely different from commercial entities, which decide which services they will provide and whose decisions are motivated by profit.
Each LA will produce policies tailored to achieve the economic, social and environmental well-beingof
their area and these will be set out in its Sustainable Community Plan."
The UT's decision
The appeal
" it must follow, if the RTRA is not a fiscal measure, that overall, and perhaps taking one year with another, the cost to the local authorityof
meeting its statutory obligation
of
providing sufficient offstreet parking and the revenue generated from the activity must be broadly equal."
"[258] … We note Mr Ghosh's argument that the alternative arrangement [viz. outsourcing arrangement] would not necessarily be less attractive financially to the commercial operator; we incline to the view that, even if that were so, an alteration, produced by the tax régime, in the identityof
the maker
of
a supply would in itself be a distortion
of
competition. We do not need to reach a concluded view on this, given our conclusion (below) that the effects
of
non-taxation upon pricing would in themselves amount to a more than negligible distortion
of
competition."
"[265] We do not in our view need to decide separately whether the additional degreeof
distortion to which we have found that non-taxation would lead in the areas
of
'outsourcing' and indirectly in the pattern
of
provision
of
off-street car parking would be significant in itself. We have concluded that competition would be significantly distorted in the area
of
pricing, for the reasons we have just stated, even if the additional distortion in these other areas did not exist. Its existence confirms us in the view that non-taxation would significantly distort competition."
Discussion
"the levelof
a charge must be related to the cost
of
provision. The maximum sum to be recovered must be the total cost
of
provision
of
the service being provided, although it may be possible to have differential rates within the overall scheme. The deliberate making
of
a profit would take the activity into the realm
of
trading."
Conclusion
Lord Justice Underhill:
Lord Justice David Richards: